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Measuring the road to improvement: performance-based management at the Pennsylvania Department of Transportation represents progress at its best.

Establishing effective performance management with a clear focus on business results can transform an organization. The Pennsylvania Department of Transportation (PENNDOT) is living proof.

Beginning in 1997 under the leadership of Secretary Bradley L. Mallory, PENNDOT set forth an action-oriented strategic agenda to improve business results in a comprehensive, systematic manner. Performance measures are essential to reaching that goal, and the measures must make a difference to customers and stakeholders, drive behavior throughout the organization, and be trackable and usable in decisionmaking, reporting, and evaluation.

"PENNDOT and all State departments of transportation have the responsibility to make communities better, safer places to live," says Secretary Mallory. "Because our business is critically important to virtually everyone, it is essential that we go the extra mile and implement performance-based management."

PENNDOT owns and operates more than 64,372 kilometers (40,000 linear miles) of highways, employs about 12,000 people, and administers an annual budget exceeding $4 billion. Using performance-based management, PENNDOT has achieved remarkable success. It has become a customer-driven government organization that significantly improved the condition of Pennsylvania highways, reversed years of decline in transit ridership, doubled the level of investment in rail freight facilities, reengineered almost 30 core business activities, and slashed red tape to merge service delivery by the Commonwealth and local governments.

"If an organization wants to improve its service, there really is no alternative other than to begin orienting the organization to run based on performance measurements," says Secretary Mallory. "The improvements are dramatic."

Why Performance-Based Management?

In the 1970s, PENNDOT's transportation system virtually collapsed after years of poor management and the approach of bankruptcy. "The Commonwealth had no new construction, and almost no maintenance for about 5 to 10 years," recalls Secretary Mallory. "Transportation conditions in Pennsylvania were abysmal, and the public began to clamor for change."

Amid this atmosphere of adversity and necessity, the concept of performance-based management emerged. After years of stagnation, there was hope that measuring everything that the department did, and systematically improving it over time, could achieve real progress. "In retrospect, going bankrupt was a great fortune for PENNDOT," says Mallory. "It allowed our government body to take dramatic action to really fix the problem."

In the late 1970s, PENNDOT adopted the national Malcolm Baldrige quality award criteria, and an integrated approach to organizational transformation began to take hold. The Baldrige Award, which emphasizes performance measurement and analysis, is given by the President of the United States to organizations that are judged to be outstanding in seven key areas: leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results.

Although Baldrige awards cannot be issued to government organizations (only to manufacturing, service, education, and health care organizations), any organization can use the Baldrige framework to improve overall performance. And that is exactly what PENNDOT did.

Permeating All Ranks Of PENNDOT

Inspired by the tenets of Baldrige, PENNDOT launched a multiyear phased effort to accomplish three major organizational shifts: (1) develop a strategic agenda based on customer, stakeholder, and partner input; (2) align organizational business plans with the agency agenda; and (3) manage the organization's business plans with performance measures.

The Strategic Management Committee (SMC), the executive body of PENNDOT, ushered in these changes. The SMC-composed of the secretary, the six deputy secretaries, executive officers, and the process owners of primary business areas within PENNDOT--defined the department's eight overarching objectives, or strategic focus areas:

* Maintenance First

* Quality of Life

* Mobility and Access

* Customer Focus

* Innovation and Technology

* Safety and Security

* Leadership at All Levels

* Relationship Building

These strategic focus areas are defined by a number of high-level goals and strategic objectives. From the strategic objectives, hundreds of performance measures have been identified at every level within PENNDOT--form the organization as a whole to individual departments, teams, and employees.

Although changes began from the top, they soon permeated all ranks of the organization. "Once the executive staff agreed what the strategic objectives should be, we solicited input from managers, supervisors, and rank-and-file employees," says Gary Hoffman, chief engineer at PENNDOT. By obtaining input from all levels of the organization, the new performance-based management system had buy-in from the start. Hoffman notes that the union also embraced the customer-focused Baldrige philosophy. "Without the support of our union, the new management approach could not have succeeded," says Hoffman.

To incorporate performance measurement and analysis strategically into its management plan, PENNDOT conducted a series of workshops and training sessions for all levels of employees. For department leaders, the workshops provided training on how to use data to develop strategic plans, create scorecards for alignment of goals and objectives, and manage operations with scorecard and "dashboard" measures. (Dashboard measures are intended to indicate short-term performance, just like the gas or oil light indicators on the dashboard of a car.) Staff members at all levels were taught the Baldrige philosophy, the big picture organizational shift, and their personal role in it.

"The key is having a strategy in place with defined objectives and measurements, so that everyone knows what's expected of them," says Mike Ryan, deputy secretary for highway administration at PENNDOT. Ryan likens performance-based management to a symphony: "Everybody has a part to play, and if everyone plays their part well, the end result is a nice sounding piece of music."


But setting the direction is not only internal. Numerous customer surveys and feedback sessions brought a sharp customer focus to the PENNDOT management approach. Today, PENNDOT prides itself on the fact that its objectives are geared to the needs and wants of its customers.

As a result, performance measures are now part of an annual cycle of strategic planning to create clear expectations and ensure accountability for PENNDOT organizations, work units, and individuals. Clear objectives and specific measures are set at the operational level for the short-term (on an annual basis); at the tactical level for the mid-term (3- to 5-year timeframe); and at the strategic level for the long-term (5- to 10-year timeframe).

To align measurement and business objectives from the short to the long term, and achieve accountability, performance measurement reports are used at various levels throughout the organization:

PENNDOT Balanced Scorecard (biannual reporting). At the strategic level, the Balanced Scorecard targets performance effectiveness over a 3- to 5-year timeframe. The Scorecard contains eight strategic focus areas (such as quality of life) with 14 high-level goals (e.g., demonstration of sound environmental practices) and 23 strategic objectives. Each high-level goal and strategic objective includes one or more measures. For example, the internationally established ISO 14001 environmental management standard is the measurement tool for the environmental goal. Individuals or teams of mid- to upper-management staff act as "leads" in tracking and reporting progress on the Scorecard measures once every 6 months.

SMC Dashboard (monthly reporting). At the tactical level, the SMC Dashboard targets performance effectiveness over a 1- to 3-year time span. The monthly Dashboard report is intended to help the SMC in its decisionmaking. The Dashboard contains 14 key measures, or indicators (e.g., permit cycle time, customer satisfaction, program delivery, bridges, etc.), which focus on core business areas. The key measures are in turn measured by 84 support measures, or subindicators.

Statistical Digest, Organizational, and Work Unit Performance Reports (daily tracking). At the operational level are the Statistical Digest, Organizational, and Work Unit performance reports. The Statistical Digest is a 60-page compilation of select fiscal measures, strategy-related measures, and deputy/executive office and bureau/district-focused objectives. Organizational and Work Unit performance reports are developed, maintained, and distributed to appropriate staff within each organization. Operational level measures target performance for the next year or less, and may be directly or indirectly aligned with the PENNDOT Scorecard, SMC Dashboard, core business issues, special fiscal focuses, and organization-specific measures.

Secretary's Monthly Report Card (monthly reporting). The Secretary's Monthly Report Card is a monthly release of one performance measure, chosen by the PENNDOT Secretary, which addresses an issue considered important to the public. Examples include road smoothness, prudent management of taxpayer dollars, and efficient snow removal.

Organizational Performance Review (biennial reporting). Every 2 years, each bureau and district prepares an Organizational Performance Review (OPR) to measure success against the PENNDOT Performance Excellence Criteria (PPEC)--PENNDOT's agency-specific criteria modeled after the Malcolm Baldrige criteria. The OPR contains the bureau or district's description of how well it has succeeded against the seven major Baldrige criteria. The OPR is reviewed by a panel of trained, internal PPEC examiners, who provide formal feedback and a description of the strengths and opportunities for improvement.

Self-Assessment Gap Analysis (ongoing). The Self-Assessment Gap Analysis (SAGA) tool is now beginning to be used by PENNDOT county maintenance offices (comprising two-thirds of its total workforce) to bring PENNDOT Performance Excellence Criteria principles into the day-to-day activities of PENNDOT's maintenance activities. County employees identify and prioritize subjects requiring improvement ("gaps") within their span of control, and work in teams to solve these issues. Emphasis is placed on resolving these gaps within 90 days.

With an eye toward improving business results and customer satisfaction, PENNDOT plans to continue to refine and strengthen its overall performance measurement system. One of the areas for improvement is to ensure that working units are using performance measures to run their day-to-day operations through the SAGA process.

Performance Measures Mean Results

At the organizational level, the ultimate beneficiaries of PENNDOT's performance management effort are the customers and end users of the transportation system. "PENNDOT's performance-based management approach has restored the public's confidence in the ability of government to perform certain fundamental tasks," says Secretary Mallory.

In recent years, for example, PENNDOT has improved the ride quality of the Commonwealth's roads significantly. The number of road miles that measure more than 150 inches per mile on the roughness index of ride quality was reduced to only 92 in 2001, down from 276 in 1995. (The threshold value at which ride quality becomes unacceptable has been established at 170 inches per mile.)

Additionally, since implementation of the new performance management plan, 3 of 11 districts within PENNDOT have received regional business quality awards.

Inside PENNDOT, performance based management has improved department-wide communications and understanding, both across the districts and between districts and the central office. "Everyone has a good understanding of the big picture, where they fit into it, and how their individual role is important in making the organization successful," says Hoffman. According to employee surveys, the staff members have a more positive outlook and a greater sense of commitment toward the department. "It's been a real cultural change," he adds.

Secrets of Success

Based on PENNDOT's experience, successful strategic management takes an extraordinary level of top leadership commitment. According to Secretary Mallory, there are 10 important lessons to bear in mind when planning to incorporate performance-based management.

1. Adapt, don't adopt. When implementing a performance system, management models need to be adapted to specific organizational needs and circumstances, rather than adopting a "canned" model.

2. User involvement adds time but also valuable buy-in. Solicit input from people at all levels of the organization to gain the buy in that is critical to success.

3. Beware of organization stovepipes and personal agendas. In all organizations some people will resist change, especially those who have been there for many years. Be ready for pushback.

4. Market effective business practices, not management theory. Business practice-and not theoretical abstracts--is what is needed to build successful systems.

5. In change management, you can never communicate enough. Because messages will be understood and interpreted differently by different people, the nature of change almost guarantees increased negative reaction up front--and certainly increased stress levels. Be prepared to refine your internal communications continually.

6. The fundamentals of measuring are not common knowledge. No matter how well you know your business, finding appropriate measurements for all goals, both interim and final, is not easy. Be patient and persistent.

7. Even information overload doesn't deter some from refusing to delegate less critical tasks. Be ruthless in delegation, and beware of people who say they are too busy to perform certain tasks; they are likely to refuse to delegate.

8. There is an organizational bias toward internal control measures. Because an organization exists to serve its customers, and not itself, it must continually be reoriented from an internal bias to an external focus. Let the customers drive the vehicle.

9. Be prepared for different central office and field perspectives. Perspectives of those in the field versus those in central offices are radically different. When in doubt, it is wise to err on the side of the field perspective, since field workers are more in tune with customer needs and wants.

10. To be accepted, measures must be relevant, understandable, obtainable, valid, credible, timely and user-friendly. These criteria describe the ideal measure, though no such measure likely exists. Understand the limitations of performance-based management.

Getting Serious About Progress

Although performance-based management is no magic wand for improving organizational performance, it is clear that, combined with patience, commitment, and lots of hard work, it is a viable--if not essential--tool in managing for results and innovation. Over time, the benefits and rewards of this management tool are being increasingly recognized and reaped. While PENNDOT has adopted this approach wholeheartedly, other State transportation organizations also are getting on the bandwagon. From Florida to Kentucky New Mexico to Washington, to some degree or another, operational improvements and transportation goals are being sought and achieved through this approach. If your organization is serious about progress, performance-based management is where you should be heading.

RELATED ARTICLE: The Baldrige Performance Excellence Criteria

Leadership--how senior executives guide the organization and how the organization practices good citizenship

Strategic planning--how the organization sets strategic directions and determines key action plans

Customer and market focus--how it determines expectations of customers and markets

Information and analysis--the management, effective use, and analysis of data and information to support key organizational processes and the organization's performance management system

Human resource focus--how the organization enables its workforce to develop to its full potential

Process management--how key production, delivery, and support processes are designed, managed, and improved

Business results--the organization's performance and improvement in its key business areas: customer satisfaction, financial and marketplace performance, human resources, supplier and partner performance, and operational performance, as well as how the organization performs relative to competitors

Other State DOTs Practicing Performance Management

To one degree or another, performance management is used in many States across the country in addition to Pennsylvania:

Florida DOT. The Florida DOT publishes an Annual Performance Report to evaluate its progress in achieving the goals and objectives included in the Florida Transportation Plan.

New Mexico State Highway and Transportation Department. The NMSHTD's mission is to advance transportation systems that facilitate safety, stimulate economic development, and help improve the quality of public life. The Compass, published quarterly, is a tool for measuring how NMSHTD is living up to those goals.

Kentucky Transportation Cabinet. The Kentucky Transportation Cabinet has taken the FHWA Vital Few Strategic Goals and married them to the Vital Few strategic initiatives important to the State Cabinet, to form one joint strategic plan to be gauged by performance measures. Both the Transportation Cabinet and FHWA have common objectives to satisfy the same goal, with the bottom-line performance measure being customer satisfaction.

Washington State DOT. The Washington State DOT has a quarterly report entitled Measures, Markers and Mileposts (The Gray Notebook), targeted to the Washington State Transportation Commission, department management, the legislature, and the public. The report tracks a variety of performance and accountability measures for quarterly review, placing a strong emphasis on communication and agency transparency. Included are regular updates of the key agency program areas, special features on innovation, and a variety of department activities. WSDOT's goal is to share even the most complex agency programs and projects clearly and concisely in a format that everyone can understand.

Connie Yew serves as a highway engineer in the Federal Highway Administration's (FHWA) Office of Corporate Management, where she has more than 19 years of professional experience. Yew works with various program offices to develop, analyze, and report on key agency performance measures. She also chairs several task groups, including the FHWA-State Partnership Task Force to develop partnership measures for the agency. She is leading an agency initiative to develop a comprehensive strategy for obtaining and responding to customer feedback through customer satisfaction surveys. She holds a bachelor's degree in civil engineering from the University of Maryland and a master's degree in public administration from The George Washington University. She is a registered professional engineer in Maryland.

Pamela Friedman is a contract writer and contributing editor for PUBLIC ROADS magazine.

Special thanks to Steve Chizmar, PENNDOT for assistance with this article.
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Author:Yew, Connie; Friedman, Pamela
Publication:Public Roads
Date:Nov 1, 2002
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