KPIs must be selected top-down and measured using real-world data to get a clear view of performance.

The days of government departments defining their own performance targets without reference to the outside world are long gone. Government managers everywhere are expected to become more and more accountable. They have to meet increasingly demanding targets, defined from the point of view of the people their department or agency actually serves. They are also expected to monitor and demonstrate continuous progress.

Of course, we all give three cheers for such a philosophy. That is, if only we could answer the question, "where on earth do we start?" For in practice it is usually extremely difficult for public institutions to get a clear view of performance. Organisations need to measure not just linear progress but multidirectional cause-and-effect relationships that cross organisational and functional boundaries.

For profit-driven organisations, the market serves as the ultimate arbiter of success, because the paying customer and the beneficiary are generally one and the same. Customers who feel they are getting value for money will probably come back for more.

In public services things are some-what more complicated. There are usually at least two "customers" to satisfy:

• The paying customer (typically the taxpayer, as represented by the government through budget-holding departments and the Treasury) whose main concern is value for money
• The beneficiary, whose main concern is a successful outcome, usually regardless of cost.

Measuring Performance
Traditionally, government managers have tended to report on how a department's internal processes have coped with the incursions of the outside world (for example, "number of claims processed").

True, many government bodies have shifted their emphasis from measuring inputs ("how many hospital beds do we have?") to measuring outputs ("how many hip replacements do we perform?"). But these tend to be tactical, looking at the world from a producer's perspective. Many organisations have implemented quality improvements by measuring output trends, identifying process defects and taking corrective actions, but we may need to go further.

From a patient's point of view the real question is, "how has my quality of life improved as a result of clinical intervention?". From a crime victim's point of view the real question is "has the injustice I have suffered been remedied?" From the taxpayer's perspective the measure is likely to express - in some way - a return on the investment: "how far does my tax pound go in improving education/ health/law and order?" Increasingly the targets are imposed on departments by ministers acting as the champions of the paying customer and the consumer of services.

Given the size and complexity of government departments and statutory sector agencies, the diversity of the processes they perform, and the tangled interdependencies between functions and departments, getting a "customer-centric" view of performance is no easy matter. What is critical to success in meeting the goals and objectives? What needs to be measured? Can it be measured?Perhaps most vexing of all, where is the data that will enable you to measure it?

Managing with KPIs
Key performance indicators (KPIs) are indicators used to report progress towards delivery on factors identified as critical to the success of an organisation's goals and objectives. In a progressive environment, KPIs can also serve as tools for change, providing input into process management that will assist in bringing about sustainable performance improvements. Ideally, the identification of KPIs should help to identify the root causes of problems or deficiencies.

There are five elements that are essential to any KPI-based management system:

1. A statement of the appropriate objectives
2. KPIs that are measurable and tied into the overall strategic plan.
3. Programmes to achieve the objectives
4. Solid costing programmes and the accounting means and methods for getting good cost information
5. A preparedness to change management processes to focus on KPIs.

While everyone in the organisation has a role to play in performance improvement, to get the full value from a KPI management system the KPIs should be defined from a top-down, strategic perspective by managers with the power to promote change.

Moreover a top-down approach to information is required to achieve an integrated "customer-centric" view of performance. The information that must be brought together typically resides in several different places scattered across departmental and functional boundaries.

Consider, as a very high-level example, the government policy initiatives to reduce "social exclusion". Appropriate KPIs transcend the traditional departmental walls, embracing issues such as employment, housing, health, special needs, mobility and much else besides. The same individuals are likely to appear on several different databases, and information in any one of these only gives a partial view of an individual's predicament. Only by integrating and consolidating the information can you get meaningful answers to questions such as "what is the impact on employment of targeted investment in social housing?" When you answer questions like these can you make appropriate process adjustments that will improve service delivery.

IT Supported KPIs
So an integrated information strategy is an essential ingredient of KPI management - though this should not be interpreted as an opportunity to offload the "where on earth do we start?" question onto the IT function! Before you start creating integrated information hubs you must define your strategic business plan, followed by prioritised goals and measures and some of the initiatives that will help you to achieve these goals.

Without a firm grip on your IT strategy you will not know which KPIs are already measurable and available to provide solid baseline performance information. Consequently the senior government officials who authorise and appropriate funds won't see any evidence of return on investment. Without feedback and analytical reporting solutions, they won't see anything to convince them of a relationship between your initiatives and desired outcomes. It pays to have senior IT folk involved right at the start of the project.

Some tips on best practice
The trick is to stay with the "top-down" vision defined in the business strategy while keeping your feet firmly planted on solid ground. Here are some tips that will help you to stay on course:

• Refer to your business strategy and goals to prioritise and inform your choice of KPIs.
• Invest plenty of time in defining your informational requirements, identifying the sources of the raw data and integrating it.
• Involve senior IT staff and IT-aware domain specialists at an early stage to ensure that IT is driven by architecture, rather than developed on an ad hoc basis.
• Invest in software that is scalable and can handle large volumes of multi-source data. A KPI system will break down quickly unless the underlying system has powerful data-collection and integration functionality.
• Think strategic, start focused. Bear in mind the total breadth of the KPIs you need and don't use different technologies for different parts. You would be compounding your difficulties by adding new islands of data.
• Introduce solutions on a small scale first and then cascade throughout the organisation at a speed that users can accommodate. "Quick wins" promote further success.
• Exploit Internet technologies to achieve rapid cascading through the organisation. If possible, deliver analytical capabilities via the web. This will allow you to roll out solutions tailored to each manager's unique perspective without incurring high costs.
• Be sure that the KPI management system links the plan and objectives to the departmental budget. The solution is an opportunity to reduce the proportion of the time financial managers spend accessing and managing data.

Best Value
Best value is designed to deliver better quality services and value for money. It places a duty on local authorities to secure continuous improvement in local services. To support this, the Government has established a performance management framework which will enable best value authorities to assess and improve their services and ensure local people are better informed about the quality of the local service they are getting.

The indicators for local services are the best value performance indicators (BVPIs), they are designed to reflect the national interest in the range of local services: from education, social services and housing, through police and fire services to transport and leisure. These will form part of the KPIs that an authority will need to manage and use in planning improvements and best value reviews.

Continuous Impovement
No KPI-based management system is a "once-and-for-all" solution. KPIs must be constantly reviewed and where necessary changed to reflect new priorities. Our experience shows that balanced scorecards and similar solutions, if properly planned and implemented, form an excellent basis for discussions on strategic improvements in performance. Feedback loops can be implemented effectively, at both the operational and strategic level, ensuring the organisation learns from its experiences and becomes progressively more effective. Furthermore, by demonstrating the effect that initiatives and actions have on outcomes they can also motivate managers and staff at all levels.

Forward-looking managers are not interested in simply complying with a utilitarian vision that everything must be measured to prove its worth. Rather, they want to seize the opportunity to manage more proactively, where improved outcomes (meaning optimum customer service at least cost to the taxpayer) are measured and valued more than increased outputs.

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