Achieving High Performance: Results-Based Government
Success in the New Economy requires speed, embracing change, innovation, risk-taking, and an impatience with the status quo—not characteristics typically found in government. Technology is changing constantly, and citizen expectations are rising in response. Slow moving, inflexible organizations will become either increasingly irrelevant or, worse, obstacles to the progress of the new economy.
For the most part, citizens couldn’t care less about government’s internal processes. They want results they can see and understand. In response, governments from Sunnyvale, California to Helsinki, Finland, are instituting comprehensive management and budgeting systems that emphasize accountability and real-world results. This trend, now more than a decade old, is sometimes called “results-based government” or the “performance movement.” Its three main objectives are to provide:
• Greater accountability for government services and the expenditure of tax dollars.
• A mechanism for better communicating to the public how their tax dollars are being used.
• Better tools for managers to set goals and performance objectives and then achieve them.
In other words, results-based governments identify what works and what doesn’t—which programs achieve results and which waste money—and set their budget and management priorities accordingly.
Governments have found many different paths to better performance. In the early 1990s, New Zealand instituted perhaps the most rigorous government accountability system in the world using contracts as the chief accountability tool. Written contracts between ministers and chief executives are used to allocate resources, maintain accountability, specify organizational responsibilities, and deliver services.
If agencies are going to be held strictly accountable for results, they will have to be freed from some burdensome rules and requirements to achieve these results. Great Britain’s “Next Steps” initiative reorganized hundreds of government functions as separate “executive agencies” within departments. These agencies were given greater freedom in spending, human resources, and other processes in return for meeting performance goals spelled out in contracts with their parent departments.
Until recently, most of the significant reforms in US public-sector performance management occurred at the state and local levels. The pioneer was Sunnyvale, California, which has used performance measurements to gauge the quality, quantity, and cost of its services for more than two decades. These indicators are tied to the city’s goals, policies, and action statements through a General Plan that is reviewed continually and revised by city managers.
New York City’s police department implemented a management-for-results approach in the mid-1990s. The city’s widely acclaimed Compstat model focuses on when, where, and how crimes occur and then concentrates police resources in those areas. Individual precincts, senior officers, and precinct captains are held accountable for results on a daily basis. The result: crime in New York City has fallen to its lowest levels since the 1960s.
In 1993, Congress passed the Government Performance and Results Act (GPRA), which required all federal agencies to develop strategic plans for their activities and indicators for measuring their outcomes by March 2000. With GPRA, the Federal government finally is following state and local governments in measuring the success or failure of government programs. In basic terms, the act asks agencies “to know where they are going, how they are going to get there, and how they will know if they are getting there.” It provides a framework for describing the results agencies and programs are trying to achieve and determining how well they are succeeding. In referring to GPRA, the US General Accounting Office (GAO) has said that the federal government is finally trying to “shift the focus of federal management and decision making away from a preoccupation with the activities that are undertaken—such as grants or inspections made—to a focus on the results of those activities—such as real gains in employability, safety, responsiveness, or environmental quality.”
Texas: A Leader in the Performance Movement
When the 1993 Legislature formally adopted a strategic planning and performance-based budgeting system, Texas became one of the first states to move fully to performance budgeting. Previously, state agencies requested funding by program areas, but the new system significantly altered the budget process, requiring agencies to request funding for strategies—the sums needed, in other words, to achieve agency goals and objectives. When the Legislature writes the state’s budget, these strategies serve as its building blocks; an agency’s total budget is simply the sum of the amounts appropriated for its various strategies.
Since 1993, the system has continued to expand and improve by adding initiatives such as a customer service component, and the integration of the state’s information resources plan with the statewide strategic plan. Even so, the Texas performance management system can be further improved and refined.
The state’s original performance management and budgeting system was simple and elegant in its design. However, since its introduction numerous additional restrictions and reporting requirements have begun to clog the system. As more and more resources are devoted to administrative and compliance functions, agencies are less able to deliver results. “In recent years, there has been an explosion in...additional forms, reporting requirements, and administrative burdens,” explains Ara Merjanian, Governor Bush’s point person for performance budgeting. “Unless we take a hard look at the administrative burdens of the system and the losses in flexibility, we risk not moving ahead to the next level of performance.”
The Balanced Scorecard
Charlotte, North Carolina was another pioneer in performance management. The city’s introduction of a comprehensive performance budgeting and management system in the early 1990s was heralded in national publications such as Governing magazine. However, in their new zeal to measure everything they could, city managers began to lose sight of some of the issues that city residents really cared about. Charlotte City Manager Pam Syfert explains:
Over the years, city staff measured everything from workload, to response time and cost per unit, to efficiency and effectiveness. One unintended result was information overload. There were lengthy reports that few people read.
To sharpen its focus on the results that really matter to Charlotte citizens, the city began implementing the “Balanced Scorecard” in 1994, a management innovation that has become increasingly popular with Fortune 500 companies (see Figure 5-1). The Balanced Scorecard is a management tool that focuses an organization’s strategies on four important perspectives:
• internal business processes
• employee learning and growth.
A business using the Balanced Scorecard method selects performance measures that can demonstrate its progress in all four of these areas. To these four areas, governments must add their statutory missions.
Charlotte was careful to make its “scorecard” fit its citizens’ needs. The most important perspective for them was their customers: Charlotte citizens. This perspective emphasized key city services. The financial objectives became the enablers for helping the city achieve the objectives for delivering its services and measured whether the city was delivering its services to its customers at a good price.
Charlotte has achieved dramatic results with the Balanced Scorecard. Planning and decision-making are approached with a much broader strategic perspective. Says Mayor Pat McCrory:
The balanced scorecard has helped me to communicate a strategic vision for the city to my constituents, the citizens. It also helps me when I have discussions with potential employers to locate here. It helps my city manager focus on things that will have the biggest impact on the city, and I see it helping people in departments think across organizational boundaries, to realize that they should not be a group of segregated departments.
Charlotte found that the Balanced Scorecard allowed them to create meaningful performance measures and discard less useful ones. A telling example occurred in the city’s police department. Historically, an important measure for the Charlotte Police Department was its response time for 911 calls. A departmental analysis, however, showed response time was crucial for less than one percent of these calls, and there was no relation between response times and the crime rate. The department then revised its measures to focus on perceptions of safety and more reliable measures of the crime rate. The Balanced Scorecard thus supported a shift of resources to crime prevention, rather than dealing with its consequences.
Closer to home, the Texas Education Agency (TEA) has begun implementing the Balanced Scorecard, while the State Auditor’s Office (SAO) also uses it. SAO now measures how much money it saves, how many of its projects provide useful information, what percentage of its customers believe the information is useful, and what percentage of employees believe the agency maintains a positive work environment.
Enhancing Human Capital: The Key to Improved Performance
Since taking office about two years ago, US Comptroller General David Walker, head of the GAO, has been saying that modern organizations must view their employees as assets whose value can be improved through investment. As the value of an employee increases, so does the organization’s performance and, therefore, its value to its clients and stakeholders. All human resource policies and practices should be assessed by the standard of how well they help the organization pursue its mission.
Walker also believes government, particularly the federal government, is in the midst of a human capital crisis. By this he means the government workforce is aging, and there is a shortage of talented young people prepared to fill the ranks of the retiring senior managers. Moreover, shortages of highly-skilled workers, such as information technology specialists, exist throughout government. Within five years, about 30 percent of all full-time federal employees will be eligible for retirement, and an additional 20 percent may seek early retirement. A recent Washington Post article noted that “While not all will bolt at once, the [federal] government seems assured of a huge talent drain at the start of the new century. And the losses will be heaviest at the top.”
Texas government is experiencing similar problems (see Figure 5-2). A strong economy and changing worker attitudes have made turnover—that is, the number of workers leaving state employment—very high. According to the SAO, nearly 18 percent of the state’s workforce left their jobs in fiscal 1999, and the turnover is much higher in some critical areas, such as human services, criminal justice, and information technology. The aging of the state workforce is compounding the problem. In 1999, the average age of employees in the US was 33, but the average age of Texas state employees was over 40.
Workplace changes driven by technology, demographics, and the labor market are affecting state government just as they affect the private sector. The state’s goal should be to manage these changes creatively and use them as a catalyst to improve the state’s workforce policies.
Unless the state begins to devote more attention to recruiting high-caliber employees and creating a culture in which the best and brightest will want to stay, it can expect major performance problems in the years ahead.
Strategies for Achieving Results-Based Government
Focus on Big-Picture Results in the Budget Process
The “big picture”—the things truly important to the average Texan—sometimes gets lost in Texas’ budget process.
Strategies in Brief
- Focus on Big-Picture Results in the Budget Process
- Use Partnerships to Deliver Results
- Make Results “Transparent” to the Public
- Give Agencies More Freedom in Exchange for Greater Accountability
- Reward Employees Who Produce Results
- Enhance the State’s Human Capital
- Eliminate Unnecessary Reporting Requirements and Red Tape
The legislative budget process tends to focus on individual agencies and specifically on agency strategies and performance measures. Agencies report their progress and this information is used to assess their performance. Because these performance assessments don’t extend beyond the level of individual agencies, assessments of progress toward statewide goals (and their related “benchmarks”) are difficult, if not impossible.
For example, while the Texas Parks and Wildlife Department (TPWD) can report the number of fingerlings (young fish) it stocks, the number of acres of public hunting lands it oversees, and the number of hunting and fishing licenses it sells, it would be difficult for the general public to understand the relationship between such indicators and the statewide benchmark to which they’re linked— “percent of Texas land conserved as public or private natural and wildlife areas.”
State law doesn’t yet provide a mechanism for evaluating progress toward statewide goals. If the legislative budget process placed greater emphasis on the state’s benchmarks (81 of them are contained in the most current statewide planning document, Vision Texas) and the measurement of progress toward these goals, the state’s budget decisions would focus attention on “the big picture” and the role each agency plays in achieving the benchmarks. It would also make it much easier for budget writers and policy analysts to uncover areas of duplication and overlap among agencies, as well as gaps in performance (see Figure 5-3).
ACTION:Amend the state’s strategic planning and performance budgeting system to include targets for statewide benchmarks.
Ideally, Texas should create a series of targets for its benchmarks to illustrate the state’s priorities and measure the progress toward its goals for specific, state-provided services, such as education or transportation. For example, if the state sets a priority to reduce the achievement gap between Anglo and minority students in public schools, then a benchmark could be created to measure the state’s progress toward that goal.
Moreover, such benchmark targets would help to complete Texas’ performance system. The Legislative Budget Board (LBB) has divided the state’s many services into 38 categories, such as public education instruction, transportation infrastructure, law enforcement, pollution prevention, and waste management. For each of these 38 service categories, the same benchmarks and targets could reflect how efficiently and effectively the state is providing those services.
The Governor’s office and LBB could refine these statewide benchmarks and service categories at the start of each budget cycle. Any desired changes could be included in the budget instructions under which each agency develops its Legislative Appropriations Request. As the system continues to evolve, the benchmarks could be tailored to reflect any changes in the state’s priorities and performance measurement system.
ACTION:Create government “benchmark partnerships” in Texas.
The Legislature should authorize pilot benchmark partnerships among agencies that share responsibilities in areas such as health and human services, public safety and criminal justice, and education. The statewide benchmarks and service categories could be used to serve as a basis for developing these partnerships. The Legislature then could more easily evaluate service delivery from a statewide perspective, instead of the piecemeal approach of reviewing each agency’s budget separately. For example, if five separate agencies have strategies tied to a health care benchmark, a small amount of their funding could be placed in an incentive pool to fund joint programs to reach the benchmark target.
ACTION:Select agencies of various sizes and functions to implement the Balanced Scorecard.
The Charlotte, North Carolina experience demonstrated how the Balanced Scorecard can help governments focus on “big-picture” results. The Legislature should consult with state agency heads to ensure their understanding and support of this concept and their willingness to work with the LBB and other relevant entities to complete successful implementation. As one criterion for selection, the Legislature should use the ability and willingness of the agency to absorb the associated costs—including the costs of software, if needed—to support the Balanced Scorecard, including license, training, and annual maintenance, within its existing or otherwise prevailing appropriations levels. The agencies should report their progress to the Legislature.
Using Partnerships to Deliver Results
The federal government had a problem—Federal Food and Nutrition Service (FNS) officials couldn’t figure out how, under their procurement rules, to deliver fresh produce to Indian tribes on remote reservations. The FNS found that some tribes didn’t receive fresh produce regularly because its procurement process could take up to five months between order and receipt.
The Department of Defense (DOD), however, had long ago figured out how to provide fresh fruit and vegetables to its military bases and installations. So the FNS entered into an interagency partnership with the DOD to use its expertise in warehousing and distribution to deliver fresh produce to Indian tribes on a regular schedule.
Performance partnerships, such as the one between DOD and FNS, are collaborative efforts among government agencies, businesses, or nonprofit organizations to achieve specific results in certain program areas. For example, the Atlanta East Area Office of the federal Department of Labor’s Occupational Safety and Health Administration has a partnership with Argonaut Insurance Company and Horizon Steel Erectors, Inc. to provide safety seminars and on-site risk assessments. One of these risk assessments helped a local company slash its accident costs per employee-hour by 96 percent.
Performance partnerships also can be formed between different levels of government. The Texas Natural Resource Conservation Commission (TNRCC) manages complex relationships with the federal and local governments and even with foreign countries to protect Texas’ natural resources. Through such partnerships, for instance, TNRCC has developed environmental plans in concert with the six Mexican states bordering Texas, New Mexico, Arizona, and California.
“We know that what happens in our border areas affects the states in Mexico that border Texas, and what is happening in Mexico affects Texas’ environment,” Randolph Wood, TNRCC’s deputy director of Policy and Regulatory Development told us at an e-Texas hearing. “Through this partnership we are able to work together to cut down on pollution and air contaminants.” Another collaborative project, the Border 21 initiative, involves a partnership between Mexico, Canada, and the US that allows TNRCC to monitor air quality and implement pollution prevention programs in the border region.
Targeted multiagency partnerships used in conjunction with statewide benchmarks would give budget writers a way of approaching their task from a coordinated, statewide program level instead of an agency-by-agency perspective. In this way, performance partnerships can help reduce the waste and duplication of effort inherent in fragmented governments like Texas has. As Robert Kaplan, co-author of The Balanced Scorecard, notes: “[B]y seeing in one place the total picture...you avoid the gaps that occur when individual departments construct their own strategies to accomplish a high-level objective.”
Make Results “Transparent” to the Public
Government cannot be held accountable unless it is open—“transparent”—so that the public can understand what government is doing and what the results of its actions are. Greater transparency generates greater political pressure for government agencies to perform, which in turn, can result in greater accountability and better results. Results achieved by Texas government—and those not achieved—should be made available in clear, user-friendly forms to a wide audience including the Legislature, citizens, the news media, the business community, and interest groups.
New technology is helping some government agencies make progress in this area. For example, instead of ordering a federal document or report from the Government Printing Office or writing a congressman and waiting several weeks, citizens can now find a considerable amount of governmental information on federal agency Web sites.
The federal Government Performance and Results Act (GPRA) constitutes a major step toward greater openness. GPRA reports are intended to provide Congress and the American people with up-to-date and accurate information that will help them assess how well their tax dollars are being spent. Most federal agencies have placed their GPRA reports on their Web sites, although in many cases the reports could be made easier to locate and more user-friendly.
Some states have been building the same sort of accountability and openness into their own budgeting and planning processes. Oregon has linked the goals of its individual state agencies to a set of carefully defined and measurable state benchmarks. Its Progress Board has produced three reports called Oregon Shines (1989), Oregon Shines II (1997), and Achieving the Oregon Shines Vision (1999). The 1999 report includes 92 individual state benchmarks measuring outcomes and performance indicators in broad categories, with data on subjects ranging from crime to skills development. The data show not only how the indicators have changed, but also provide targets for the future.
Another model for shedding more light on government results is the Texas public school district rating system, initiated in the early 1990s. Our nationally-acclaimed education accountability system publishes school-by-school test results on the Internet, so that parents can see exactly how their children’s schools are performing and how they compare to other schools (see Figure 5-4). By giving parents such information, the system allows them to make informed choices about their school alternatives. The system has demonstrated that when light is brought to bear on performance, performance improves.
New Financial Accountability System will Bring Greater Transparency to Texas School Finances
School property taxes have a highly visible effect on the pocketbooks of Texas homeowners, and they deserve to know how well school districts are managing their tax dollars. To this end, the 1999 Legislature asked the Comptroller’s office to assist the Commissioner of Education in developing a system to rate how well local school districts handle their financial resources.
The Comptroller’s office has been working with the Commissioner of Education, Texas Education Agency (TEA), and representatives of various school interest groups to develop a School District Financial Accountability Rating System. The system is intended to impose no additional reporting burdens on school districts, while at the same time generating easily understandable district financial ratings. The system will serve as an “early warning” indicator for school districts heading toward financial troubles, and highlight commendable financial practices in districts where administrators are working hard to maintain the public’s trust.
Yet it is not enough just to put budget information and performance data on the Internet. Information must be packaged in a user-friendly way. For instance, Connecticut has created a Web site designed to allow average citizens to understand arcana state debt financing. The site allows citizens to track every bond dollar the state has spent over a five-year period. The database, accessible to anyone with a personal computer, is updated monthly and can be searched by a number of different variables. Taxpayers can learn when and where bond money is spent, and why. Before this technology became available, such information could be obtained only by lengthy searches of obscure bond commission records.
Florida’s governor’s office has put a user-friendly version of its proposed state budget on the Internet, with indexes allowing budget information to be identified by functional area and agency. Florida’s “e-budget” also provides links to references and programs within its budget details (see Figure 5-5).
ACTION:Provide Texans with an online version of the General Appropriations Act to give the public access to information on appropriations and performance measures, organized by agency, statewide goals, benchmarks, and service categories.
State budget data are readily available by agency, goal, strategy, and functional area, but not by statewide goals or service categories. This makes it difficult to evaluate how state services are delivered and whether they are efficient or duplicative. As already noted, state budget data tends to focus on individual agency performance. While this focus is important, it is equally important to evaluate services and spending on a statewide basis. Tracking progress towards targets set for statewide benchmarks and categories of services could provide a way not only to identify areas of duplication in services, but more importantly, a way for Texas to answer the question, “how are we doing as a state?”
The General Appropriations Act details the amount of money appropriated for each agency for each two-year budget cycle. But members of the public, however, may be less interested in knowing how much money a specific agency received than how much money is spent to provide a specific service or achieve a statewide goal, regardless of the agencies involved. The Internet can provide the public with such spending information in an efficient and user-friendly manner.
No state has yet developed a comprehensive online system that can link its actual spending for any given program to a statewide goal, with built-in performance measurement data. If Texas implements this recommendation, it will lead the nation in the transparency of performance and budgeting information.
ACTION:Publish a statewide annual report on the Web illustrating progress toward specific statewide goals and benchmarks.
This annual report, released by the Governor’s Office of Budget and Planning and the LBB, should show all agencies that have budget strategies linked to the benchmark. In addition, the report should show the total funding the state has allocated to this benchmark from each statutory funding source. This report would provide the Legislature and taxpayers with a valuable tool to review the state’s progress toward its stated goals.
Give Agencies More Freedom in Exchange for Greater Accountability
The quest for improved government performance and efficiency often can be thwarted by well-intentioned but unnecessary obstacles. The statutes and regulations governing agencies’ internal structures and conduct inevitably have an impact—sometimes an adverse one—on their performance. “The cumulative effect of lots of the limitations imposed on agencies is that they limit their ability to manage for results,” Ara Merjanian told e-Texas. “It causes them to be focused less on results and more on administrative compliance.”
While it is essential to hold agencies accountable for their decisions, it is also important to grant agencies the freedom to achieve results. Legislative bodies should define what functions agency managers should accomplish, but grant these managers some flexibility in determining how they will accomplish these tasks. These are the principles behind “performance-based organizations,” a new way governments around the world are organizing their work.
Great Britain, New Zealand, Australia, and the US federal government have found that departments and agencies can achieve better results when their executives, managers, and employees are freed from unnecessary rules that impede their operations.
The United Kingdom’s “Next Steps” program, already mentioned, included a major initiative to grant governmental managers greater freedom of operation. Having concluded that its Civil Service was too unwieldy to manage as a single unit, the British government began to bundle various governmental activities into free-standing “Next Step” agencies to carry out specific tasks.
A chief executive leads each agency and usually reports to a cabinet minister. These executives negotiate key output, financial, and service quality targets, but have flexibility in certain areas intended to help them reach those targets. Under this system, cabinet ministers exercise policy and oversight functions and hold agency managers accountable for delivering services efficiently. By 1998, the U.K. had created 138 agencies that employed more than three-quarters of the nation’s domestic civil servants. The results have been favorable. For example, the Patent Office has cut the cost of some common expenses, such as supplies, real estate, and leases, by 39 percent. The Passport Office slashed the time needed to issue a passport from 3.5 weeks to 6.7 days, while reducing its operating costs by three percent annually.
Drawing on the success of the Next Steps agencies, as well as a similar concept introduced successfully in New Zealand, in 1996 the National Performance Review (NPR) put forward a proposal to convert certain US federal agencies and functions into “performance-based organizations” (PBOs) that would receive greater administrative latitude in exchange for meeting certain performance goals. President Clinton’s 1997 and 1998 budgets proposed several candidates for PBOs. The 1998 budget, for instance, proposed that nine organizational units or functions be converted into PBOs.
Congress, with support from the administration, included a provision converting the US Department of Education’s student financial aid office into a PBO in the Higher Education Amendments of 1998. The act’s provisions required the PBO’s chief operating officer to enter into an annual performance agreement with the Secretary of Education granting the financial aid office wide latitude in its management responsibilities, including flexibility in procurement and personnel rules. High performance could earn managers substantial bonuses, equal to as much as 50 percent of their base pay.
A January 1998 review of the state’s performance-based budgeting system by the Governor’s Executive Development Program suggests that the introduction of a concept like PBOs into Texas’ performance management system could improve state services. For example, the study found that “the best and most cost-effective way to encourage agencies and employees is through a system of positive reinforcements, with clear rewards for jobs well done. Incentives and rewards can be provided both to employees and to agencies.” The study developed incentive and reward recommendations in three categories—flexibility, recognition, and economic incentives.
Key Recommendations from the Governor’s Executive Development Program Report on Performance Management
The report recommended increasing managerial flexibility for high-performing agencies in a variety of ways, including:
• Allowing agencies to transfer funds and carry over a percentage of unspent balances at the end of the fiscal year.
• Allowing agencies to transfer appropriations between strategies.
• Exempting agencies from promotion and merit caps.
• Exempting agencies from travel caps.
• Granting agencies a percentage of payroll for additional employee compensation, to reward workers who exceed performance measures.
• Increasing the amount and/or frequency of merit pay that can be awarded by an agency that exceeds performance measures.
• Granting an exception from the merit/promotion/reclassification/exempt salary cap for agencies that exceed their performance measures.
• Permitting bonuses for agencies that exceed their performance measures.
Source: Positive Incentives and Rewards for Performance Based Budgeting, January 1998.
PBOs could be a useful tool in many situations. For example, the state’s Department of Information Resources must compete for high-tech workers in the booming Austin economy and cannot always pay the salaries that would attract the skilled personnel it needs. The State Office of Risk Management finds it difficult to control the state’s spending for workers’ compensation claims because of limitations on its administrative budget and travel expenses, even though greater spending on claims evaluation and processing would more than pay for itself. The state’s Department of Banking has not been able to meet its goals for bank inspections because of travel limitations.
ACTION:Create a statutory framework permitting state agencies to become High-Performance Organizations (HPOs).
Agency leadership could propose the designation of the agency for approval by the Legislative Budget Board (LBB) and Governor showing that it meets the Legislature’s criteria. Such HPOs would be able to exercise greater discretion and flexibility in return for accepting greater accountability for producing positive results.
The Legislature could begin this initiative by authorizing the designation of state agencies as HPOs. The agencies should meet 80 percent of their performance measure targets (100 percent of key targets) to be eligible for HPO status, but the Legislature also should provide criteria allowing agencies to participate if they can demonstrate that they are unable to meet performance measure targets as a direct result of restrictions or limitations that would not apply to a HPO.
Other characteristics that should be considered in designating HPOs include a clearly defined mission; measurable services; a good performance measurement system in place; a focus on external rather than internal customers; the ability to separate operations from policy-making; and predictable funding levels corresponding to the agency’s operations. If a discrete unit or units within an agency meet these criteria, the agency might propose that they be designated as HPOs.
Reward Employees Who Produce Results
One day in January 2000, Lorna Meyer, an administrative secretary in the Texas Department of Public Safety (DPS), finished her regular duties and began looking around the agency for additional work. She returned to her office with a stack of about 350 child support checks sent to DPS payroll by the Attorney General’s office for processing and the transmittal letters that needed mailing.
After about ten minutes, Lorna went to her supervisor with a suggestion on improving the work process. The suggestion was approved.
About five minutes later, Lorna returned to her supervisor with another suggestion: why not use the agency’s automated mailing machine to fold the letters? Again, suggestion approved. Lorna returned to her supervisor’s office two more times with additional suggestions. Now these letters are folded by the automated machine. The supervisor’s signature is printed on each letter, instead of stamped, and the computer is programmed to print a warrant number on each letter, eliminating the need for the numbers to be typed in by DPS employees.
Thanks to Lorna’s recommendations, the time needed to mail out child support checks was slashed from three days to three hours. DPS estimated a first-year net savings of more than $4,500 as a direct result of Ms. Meyer’s suggestions. Lorna was recognized by her supervisor in a special ceremony at DPS headquarters, and was issued a check for $452 through the State Employee Incentive Program (SEIP), which is administered by the Texas Incentive and Productivity Commission (TIPC).
TIPC has proven to be a good investment. Its employee involvement programs have saved Texas taxpayers more than $66 million—$34 for every dollar invested in the Commission. These savings have been generated through TIPC’s traditional suggestion system and its group incentive pay program. Both provide rewards for state employees who offer creative ideas for improving productivity and saving money.
The notion of creating incentives for performance and compensating those who perform well—and penalizing those who don’t—is a critical component of any results-based government. Over the past decade, governments around the world have employed a host of tools—performance bonuses, team performance pay, and the use of performance criteria in personnel reductions to link pay with the results achieved by workers and managers alike.
The City of Sunnyvale, California, for example, has linked a portion of its managers’ pay to departmental results. The State of Georgia has instituted a form of pay-for-performance, while in Denver the concept has been applied to teacher pay.
In Indianapolis, employees who meet agreed-upon performance measures are allowed to share in savings below the budget baseline. Typically, employees receive between 25 percent and 30 percent of the savings. Because this system uses the most recent performance and budget data as the starting point each year, the overall effect is to ratchet down budgets while maintaining or ratcheting up service levels.
At present, Texas’ pay system for state employees is largely disconnected from considerations of performance. Employees are paid largely according to their job titles, rather than for the results they produce. To improve performance, the state must link its pay with its performance management system. The state must offer more rewards for high performers to attract and retain a high-quality workforce.
ACTION:Link state employee performance to agency performance.
Under performance-based pay plans, employees and their supervisors are required to mutually define and agree on measurable job performance objectives that are linked to the organization’s broader goals and mission. Employees then are evaluated on how effectively they accomplish their objectives, and rewarded accordingly. Performance pay focuses employee attention on continual improvement, as well as their organization’s mission and goals; it creates an environment in which all employees understand what is expected of them and how they will be evaluated and compensated for their work.
The 1999 Texas Performance Review report Challenging the Status Quo recommended that merit increases be awarded only to state employees who meet appropriate performance standards. Such steps serve to highlight the contributions of employees and link their actions to their agencies’ key performance measures.
Two steps would bring the state closer to an effective pay for performance system. First, agencies should be required to adopt policies that ensure that individual performance expectations are linked to the agency’s strategic plan. Second, the state should form a task force of state agencies to assist in implementing this recommendation. The pay for performance task force should also be charged with:
•Sharing best practices;
•Evaluating the strengths and weaknesses of the current merit pay system and comparing it to leading performance pay systems; and
•Making further recommendations on strengthening pay for performance to the 2003 legislature.
ACTION:Allow state agencies to pay deserving employees one-time merit pay awards using a portion of the money the agency saves through employee participation in the State Employee Incentive Program.
With the present merit salary cap set at 1.7 percent of agencies’ classified personnel budgets, agencies can reach their caps before they fully recognize the achievements of their best and brightest. One-time merit pay awards funded by agency SEIP savings should not count against an agency’s merit salary cap.
This change would encourage increased participation in SEIP, and thus might allow agencies to generate additional savings within existing budgets.
Participating agencies would decide the extent to which SEIP-certified savings should be applied as one-time merit pay awards. This new authority could help improve morale, reduce employee turnover, and, as ideas are implemented, result in numerous improvements to state government.
Enhance the State’s Human Capital
Nearly everyone recognizes that leadership and consistent vision are essential to managing a large, complex organization. Most people also agree that people are the most important factor in determining the long-term success of an organization.
As was discussed earlier, with an aging workforce, a shortage in key skill sets such as technology workers, and difficulties competing against the private sector for talented young workers, Texas government is on the verge of facing a human capital crisis. Rather than viewing this as a reason for panic, it should be viewed as an opportunity to reshape the state workforce to meet the demands of the New Economy.
As baby boomers age and retire, younger workers are coming into organizations with new ideas about the workplace and how it should function. Many new employees no longer anticipate life-long career jobs. Their commitment to their employers is temporary and remains only as long as the arrangement benefits them. Such workers place less value on security and more on opportunities for personal growth and creativity. They generally feel more loyalty toward their immediate team members and their projects than to the organization as a whole.
A Harvard Business Review article recently noted that the most realistic approach to human resource management now is “based on the assumption that long-term, across-the-board loyalty is neither possible nor desirable.” The modern worker now is labeled the “free agent” with more employment options than ever before. The most important organizational assets are intellectual assets like the knowledge contained in the minds of workers, as well as in computer networks and databases. Explains Business Week in a special issue on the 21st Century Corporation:
In the Creative Economy, the most important intellectual property [is] the stuff inside employee’s heads. When assets were physical things like coal mines, shareholders truly owned them. But when the vital assets are people, there can be no true ownership. The best that corporations can do is create an environment that makes the best people want to stay.
In today’s labor market, the state must learn to redefine employee loyalty by performance rather than time served, and improve workers’ performance in ways that are most meaningful to workers for as long as they decide to stay. A 23-year old who comes into state government service now is quite different from the 23-year old who entered government service in 1975. State agencies and their human resource specialists should think about what a modern state workforce should look like, and what benefits they can offer employees to attract and retain them.
While Texas has serious problems with recruiting and retention, the state is in a good position to make positive changes. Many other states and countries with similar problems are burdened by rigid, archaic civil service systems. Because Texas is an at-will employer, the state can make fundamental changes quickly.
As we enter the 21st century, Texas must re-evaluate and modernize its employee policies and practices to close the gap that exists between our performance-based management framework and the need to manage our human resources more effectively.
ACTION:Texas state agencies should conduct strategic staffing analyses and develop total workforce plans.
The reduced number of workers entering the workforce compounded by the aging of the workforce has brought about a “war for talent.” Organizations are arming themselves with aggressive strategies around recruiting, quality training, and leadership development. Rooted in these elements are the critical tasks of workforce analysis and planning to make sure knowledge and skills—needed to achieve individual and organizational goals—are accounted for today and for the future.
Total workforce planning should include: 1) the commitment and involvement of the state’s leadership—within both the executive and legislative branches; 2) the development of short, medium, and long-term operational objectives in conjunction with the state’s strategic plan and peformance budgeting system; 3) an assessment of the workforce to determine the state’s existing human resource capacity to deliver the objectives outlined in the strategic plan; 4) after identifying the “gap” between future requirements and existing capacity, a strategy to close the human resource gap; and 5) the creation of an employee-focused, performance-driven culture compatible with the new world of work.
ACTION:Adopt innovative solutions to government human resource recruitment, posting, and hiring.
State agencies are facing serious challenges in recruiting, posting, screening, and hiring employees for a variety of reasons. Existing processes of advertising, screening, and hiring often take so long that viable candidates have accepted other positions by the time an offer is made. Further, existing processes usually don’t draw from large candidate pools. Also, applicants must complete paper applications for each job of interest and this may discourage individuals from considering positions for which they may qualify. A centralized mechanism to accept applications for all agencies does not exist, forcing potential applicants to visit or mail to a variety of locations. The private sector is using streamlined alternatives to build their workforces including the ability to post jobs, peruse resumes online, and make offers within very short time frames. Texas should work with the private sector to access larger candidate pools and speed its hiring process. By leveraging the resources spent statewide on an electronic solution, all agencies can improve recruitment and hiring benefits at a lower cost.
ACTION:Implement a formal telework program to reduce costs to Texas taxpayers, and improve air quality and traffic congestion in the metropolitan areas of Texas.
Texas should adopt a Telework Incentive Act to reduce state employee turnover, increase productivity and reduce air pollution. Telework, which is defined as working in an environment outside the traditional office one or more days per week, makes good business sense for state agencies, beginning with increased productivity and work quality. The option to telework provides a strong incentive in recruiting and retaining valued employees, improves morale and job satisfaction, and saves office and parking space. Employees who reduce commute time and stress may be able to balance work and family more easily and successfully. They appreciate working in a quiet, uninterrupted work environment with greater responsibility and trust from their employer. State agencies actually save money on leased space by placing full-time teleworkers in their homes, or by sharing leased space among part-time teleworkers.
Eliminate Unnecessary Reporting Requirements and Red Tape
Whether you’re a small businessperson trying to launch a new chain of stores, or a mid-level city manager buried under a mountain of reporting requirements, government red tape can be frustrating and time-consuming, and ultimately may impede your ability to do your real job.
If government were an elementary school math student it would get an A in addition and an F in subtraction. Government does a great job in adding new rules and requirements—for its employees and for businesses and citizens—but a lousy job in eliminating outdated and onerous rules and regulations.
Texas cities and counties, for example, must comply with numerous state reporting requirements. Some of the data required by these agencies are used to produce state reports to federal agencies. Because they are not required to coordinate their requests, different state agencies ask for the same or similar information in separate reports. Worse yet, different divisions within the same agency may require similar information.
Local governments file some reports only because they are required to do so by law. The requirements were imposed for valid reasons at the time they were created. However, the need for some of these reports no longer exists. The Texas County Road and Bridge Expenditures Yearly Report is filed with the Revenue Accounting Division of the State Comptroller’s office, and the County Lateral Road Account is filed with the Treasury Operations Division of the Comptroller’s office. These reports are not audited by the Comptroller and they are not used for any particular purpose. However, both reports must be filed, each by different county officials on different fiscal years, before the Comptroller may allocate funds to the county from the state’s County and Road District Highway Fund. Frequently, county officials think that they have fulfilled their obligations because the other official has already filed a road and bridge report with the Comptroller.
It is not uncommon for local governments to spend valuable resources on filing reports that will not even be reviewed by the state agency to which they are sent. Texas Regional Planning Commissions are required by rules of the Governor’s office to file reports with various state agencies. Some of these reports are on asset deletions, work programs, and salary schedules.
Of course, some reports are essential for financial reporting or regulatory accountability. In these cases, however, the method of reporting often requires labor-intensive manual processes. For example, Texas trial courts must file approximately 100 reports to more than 14 different state entities. The two most time-consuming reports for local courts and law enforcement are the Criminal History Reporting Form (submitted daily to DPS) and the monthly Report of Court Activity sent to the Texas Judicial Council.
ACTION:Streamline state and federal reporting requirements on local governments and make recommendations to the 2003 Legislature.
With coordination by a proposed Program Management Office at the Texas Department of Information Resources (DIR), a cross agency workgroup should begin the process of streamlining and reducing the reporting requirements placed on cities and counties and recommend opportunities for eliminating, consolidating, and otherwise modifying reports.
Results-Based Government Highlights
•Greater freedom coupled with increased accountability lead to better results.
•Don’t get so caught up in the minutia of performance measurement that you neglect “big picture” results citizens care about.
•Employee pay must be linked to performance.
•Enhancing the quality of the state’s workforce (its “human capital”) is critical to improving performance.
•To achieve higher performance, reduce the number of rules and requirements imposed on state agencies and local governments.