Issues in performance measurement

Issues in Performance Measurement
Submitted by :
Manish Sharma(15733002)
Saurabh Meena(15733005)

Introduction
• According to Shields and Young,( 1989; Cavalluzzo and Ittner,( 2004)
there are 2 types of Performance issues
Organizational Issues
Technical Issues

Organizational Issues
• Organizational culture and beliefs
• Top management Support
• Decision-making authority.
• Training

Technical Issues
• Selecting and interpreting performance measures.
• Information system capabilities.

Six Common Issues
• Have outcomes that are extremely difficult to measure
• Program is one of many contributors to the desired outcome
• Results that will not be achieved for many years
• The program relates to deterrence or prevention of specific behavior
• Program has multiple purposes and finding can be used for a range of activities
• Purpose of the program is administrative or process oriented

1. Outcomes that are extremely difficult to measure
• Some programs have outcomes that are very difficult to measure.
For Example
Programs designed to address foreign policy objectives
Programs related to health and safety
Training programs in companies
• The scope of problem can be defined by
By focusing on why a program is important
 what makes it difficult to measure

• Reason for difficulty in measuring:
Unclear purpose of program
Undefined beneficiary
Difference in view of stakeholder and program managers
Unavailability of data
• This issue can be reexamined by:
Asking WHY?
Why it is important that the program receive funding?
 Why are program operations important?
 Why does the program do what it does?
 If the program were fabulously successful, what problem would it solve? • How would
you know?
For Example: to support an international coalition ask
• Why is the success of that coalition important?
• What role does the program play in achieving that goal?

2. Program is one of many contributors to the desired
outcome
• Various levels of organization contribute to achieving same level of organization.
For example- To measure customer satisfaction Director, Department, Manager, Staff need
to be involved in program.
Problems-:
• Contribution of different level of organization may have various advantages. It can also
lead to disagreement and can prevent from realizing performance synergies &
collaboration.
• This happens when various department and employee fail to control or compile their
activities to create peak performance for the organization's program.
• Sometimes Organizations call it “Silo Thinking ”.

What to Do….?
• To reduce this, its important to allow data & information flow across the organization.
• Programs should be able to develop activity-specific performance goals that support the
broader outcome.
• Program may seek to claim responsibility for the entire outcome and output. Sometimes
small role in overall activity.

3. Results that will not be achieved for many years
• In some programs the outcome may come after long time
• For Example
Hydrogen Technology
Mars mission of NASA and ISRO
Big Construction Projects
• The scope of problem can be addressed by
Defining the specific short- and medium term steps or milestones to accomplish the
long-term outcome goals
 Steps should be meaningful, measurable, and linked to the outcome goal.
For example: NASA defined spacecraft missions, which provide one level of measures to assess
program effectiveness: mission success. Further, within each Mars mission, the program
develops technologies; builds, launches, and operates robotic spacecraft; and performs research
using the spacecraft instruments

• Tracking process-oriented measures, such as the extent to which programs make
decisions based on competitive review
For Example: Research programs can have many uncertainties, including their expected
outcomes. Such programs may rely, in part, on process measures, such as the extent to
which the program uses merit-based competitive review in making awards.
• Developing measures to reflect meaningful external validation of the quality and value of
the program’s research.
• Demonstrating performance in terms of the broad portfolio of the efforts within the
program.
For Example: Expert independent evaluators might also help determine if the process of
choosing appropriate long-term investments is fair, open and promises higher expected
payoffs in exchange for higher levels of risk.

4. The program relates to deterrence or prevention of
specific behavior
• Reasons for difficulty
Requires consideration of what would happen in the absence of the
deterrence program.
Difficult to isolate the impact of the individual program on behavior that
may be affected by multiple other factors.
Example of Program: Coast Guard drug interdiction, Department of Labor/Office of
Federal Contract Compliance , Nuclear Regulatory Commission’s Inspection and
Performance Assessment Program, Safety program for workers in companies,

• If performance measures reflect a continuum from lower-level outputs to
higher level outcome measures
Choose measures that are far enough along the continuum that they tie to the ultimate
strategic goal as well as to the program’s activity
some measures may create perverse incentives if they do not reach the correct
balance between output and outcome
For Example: A useful measure for the Coast Guard drug interdiction program could be the total
volume of drugs entering the United States which can be contrasted with drug seizure rate
• Establishing deterrence targets :
For some programs, deterring a majority of the negative outcome is appropriate.
For other programs, most, if not all, of the negative outcome must be avoided.
The target should reflect consideration of the maximization of net benefits
For Example: For programs in which non-compliance is not life-threatening, and for which
compliance is historically low, short-term targets that demonstrate forward progress toward the
acceptable long-range goal may make sense

• Programs where failure is not an option
Here negative outcome can be catastrophic (including programs to prevent
terrorism or nuclear accidents)
Traditional outcome measurement might lead to an “all-or-nothing” goal
As long as the negative outcome is prevented, the program might be
considered successful, regardless of the costs incurred.
Proxy measures can be used to determine the good functioning of deterrence
process and should be closely tied to the outcome.
For Example: Outcome goals for the Nuclear Regulatory Commission (no nuclear reactor
accidents, no deaths from acute radiation exposures from nuclear reactors, no
exposure events at reactors, and no radiological sabotage ) and annual (no more than
one precursor event per year, no statistically significant adverse industry trends in
safety performance, and no overexposures exceeding applicable regulatory limits.) both
are necessary for effectiveness of the program.

5. Program has multiple purposes and finding can be
used for a range of activities
• Some programs may be designed to address both multiple objective or support a broad
range of activities.
For example-:
• Outcomes are measurement of work performed that makes a difference to the
organization, in keeping and achieving the strategic organization & department objective.
• Performance Outcomes are more important than work output, outcomes are benefits or
changes the results from the work being performed.

Establish performance goals for Block Grant Level
• Many block grant program provide resources to various levels of organization to focus on
specific program area like- job training, marketing, working capital, appraisal program and
so on.
• System or board could be developed that uses performance measures and standards t
promote “joint accountability” for results. With this program target can be set at the
department level, and aggregated up to organization target.

6. Purpose of the program is administrative or
process oriented
• Many programs in organizations are administrative or process oriented in nature and
present no. of problems when it comes to measuring performance.
• Establish criteria to determine the key business process.
For Example-: Use the appropriate measurement for impact on customer, sales, profits
and so on.
Benchmarking can be used intermediate outcomes like ROI, Sales and son on.

What to Do…?
• Ensure that their performance measurement are measuring the right things so the
management can create desired results or outcomes.
• Issue must be balanced between output and outcomes.
• For larger administrative efforts, consideration can give ultimate outcomes.

Other Issues
• Cost of data collection
• Assuring appropriate comparisons to other operations
• Data quality
• Extrapolating from partial coverage
• Matching measures to their purposes
• Understanding extraneous influences in the data
• Conflicts with other measuring programs - which is "right"
• Timeliness of data for measures
• Use of measures in allocation of funding
• Liability for action (or lack thereof) based on measurement results
• Responsibility for measures for which there may be limited control
• Benchmarking and targets

Issues in performance measurement

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