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Performance measurement: an essential management tool.

In 2001, GFOA's Committee on Governmental Budgeting and Fiscal Policy formed the Subcommittee on Performance Management to articulate a performance management initiative for the association. Drawing on their own collective expertise, advisors to the Budget Committee, and the recommended practices of the National Advisory Council on State and Local Budgeting, the subcommittee developed a plan that was presented to the GFOA Executive Board and adopted with revisions in March 2001. The purpose of the initiative was to formalize GFOA's commitment to promoting the integration of performance measurement into the budget and strategic planning processes.

To reinforce the initiative, GFOA allocated staff resources, provided training opportunities, promoted collaboration with other organizations, and expanded the importance of performance measurement in the Distinguished Budget Presentation Awards Program. Another natural result of the initiative was the subcommittee's revision of a 1994 recommended practice on performance measurement. The revised recommended practice, "Performance Management: Using Performance Measurement for Management Decision-Making" was adopted by the GFOA Executive Board in February 2002. (1) This article summarizes the guidance contained in this recommended practice and describes how one local government has put it to work.


The intent of the revised recommended practice is to change management's focus from merely reporting performance measures to actually making decisions based on those measures. When linked to a government's mission and short- and long-term goals and objectives, performance measures can become useful management tools in the budget and strategic planning processes.

As stated in the introduction (background) of the recommended practice, state and local governments should develop and manage services, programs, and resources as efficiently and effectively as possible. When linked to a government's mission, goals, and objectives, performance measurement can be used to identify financial and program results, evaluate past resource decisions, and guide future decisions about resource allocation and service delivery.

"[GFOA] recommends that program and service performance measures be developed and used as an important component of the long-term strategic planning and decision-making process which should be linked to governmental budgeting," the practice reads. Governments should measure program outcomes and provide for resource allocation comparisons over time. Performance measures should be limited to a number and degree of complexity that can provide meaningful assessment of key programs, and they should be designed to motivate staff to contribute toward improvement.

For governments in the early stages of incorporating performance measures into their planning processes, the recommended practice suggests some steps to take toward this goal. It also provides some essential guidance on advanced performance measure development. For example, "[governments] should develop multiyear series of efficiency indicators to measure the efficiency of service delivery within programs" and "[governments] should develop multiyear series of quality or outcome indicators to measure the effectiveness of service delivery (are accomplishments being met?) within programs." Governments should use this information in resource allocation decisions and report the extent to which program goals have been accomplished. Regional performance measurement initiatives should adopt common definitions of key efficiency and effectiveness measures to allow intergovernmental comparisons.

The recommended practice concludes by recognizing that the value of any performance measurement program lies in positive behavioral change. "GFOA urges governments to recognize that establishing a receptive climate for performance measurement is as important as the measurements themselves."


GFOA's recommended practice on performance management has proven very beneficial to the City of Hurst, Texas. It outlines the reasons and benefits for using performance management as a decision-making tool, which led Hurst to adopt performance measurement as an essential component of its budget and strategic planning processes. Performance measures are no longer considered information items or nice additions to the city's action plans. While some input measures are documented in the annual budget, the emphasis now is on efficiency, effectiveness, and outcome measures. Hurst's city manager has established a receptive climate for performance measurement, and he expects all strategic plans submitted as part of the annual budget process to document ways to measure progress. Performance measures that influence resource allocation decisions will soon become the norm instead of the exception.

Hurst will soon begin a review of all existing performance measures to determine which ones are most relevant to the city's mission statement and can be accurately and reliably recorded. The city anticipates that the 300-plus measures reported in the budget document will be substantially reduced. Hurst has engaged a consultant to develop a program whereby the city manager can easily access selected performance measures and monitor their progress using "red light/green light" indicators. This program will enhance the efforts to limit performance measures to a number and degree of complexity that can provide meaningful assessment of key programs.

Hurst has also joined 14 other cities in an effort initiated by the local council of governments to adopt common definitions of key efficiency and effectiveness measures in order to facilitate intergovernmental comparison. Since June 2001, representatives of these cities have met to develop service-specific performance measures and a methodology for capturing and comparing performance data. The cities have been collecting performance measures in five major service areas using a Web-based data collection template for each area. From the best practice benchmarking reviews that result from this project, cities will learn about efficient service delivery methods and the cost of service delivery. The project will equip participants with ideas and approaches that will help them continuously improve service delivery and stretch limited resources.


GFOA's initiative to promote the use of performance management in state and local government will be successful to the extent that senior management, including finance officials, support and lead such efforts in their jurisdictions. The recently revised recommended practice, "Performance Management: Using Performance Measurement for Management Decision-Making," provides useful guidance for establishing performance management as an essential component of budgeting and strategic planning. Performance measures can also be used for improving daily operations and for regional benchmarking. In the end, performance management should provide the decision-making tools necessary for managers to enhance service delivery, accomplish program goals, and make the most efficient use of limited public resources.


(1.) The recommended practice can be found on GFOA's Web site at rp/budget/budget-performance-management.pdf.

ANITA THETFORD is director of finance for the City of Hurst, Texas. She is a member of GFOA's Committee on Governmental Budgeting and Fiscal Policy, and is chair of the Subcommittee on Performance Management.
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Title Annotation:Best Practices
Author:Thetford, Anita
Publication:Government Finance Review
Geographic Code:1USA
Date:Jun 1, 2004
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