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DISTRICT CLUSTER WORKING SESSION

• PERFORMANCE MANAGEMENT SYSTEMS

February 2006
LGSP is financed by USAID and is being
implemented under the technical guidance of
Research Triangle Institute, http//www.rti.org.
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Contents

• Legislative and policy context of performance
  management (PMS)
• Why performance management
• PMS concepts
• Good and bad indicators you be the judge
• PMS models
• Performance reviews and reporting
• Performance auditing
• Linking organisational and individual performance
  management
• Closure

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Legislative and Policy Context
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The Systems Act requires all municipalities to

• Develop a performance management system
• Set targets, monitor and review performance based
  on indicators linked to their IDP
• Publish an annual report on performance for the
  councillors, staff, the public and other spheres
  of government
• Incorporate and report on a set of general
  indicators prescribed nationally by the minister
  responsible for local government
• Have their annual performance report audited by
  the Auditor-General
• Involve the community in setting indicators and
  targets and reviewing municipal performance

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Municipal Planning and Performance Regulations

• Performance Management System entails a Framework
  that describes and represent how the
  municipalitys cycle and process of performance
  management, including measurement, review,
  reporting and improvement, will be conducted
• PM System must inter alia comply with the
  requirements of the Systems Act, relates to the
  municipalitys employee performance management
  processes and be linked to the municipalitys
  IDP.
• A municipality must
• - set key performance indicators (KPIs) including
  input, output and outcome indicators in
  consultation with communities.
• - annually review its KPIs
• - for each financial year set performance targets
• - measure and report on 9 nationally prescribed
  KPIs
• - report on performance to Council at least twice
  a year
• - as part of its internal audit process audit the
  results of performance measurement
• - annually appoint a performance audit committee
• - provide secretarial support to the said audit
  committee

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Municipal Finance Management Act

• The Municipal Finance Management Act contains
  various important provisions related to
  performance management. It requires all
  municipalities to
• Annually adopt a service delivery and budget
  implementation plan with service delivery targets
  and performance indicators.
• When considering and approving the annual budget
  set measurable performance targets for revenue
  from each source and for each vote in the budget.
• Compile an annual report which must amongst
  others include a Municipalitys performance
  report compiled in terms of the Systems Act.

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Why performance management?
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What gets measured gets done. If you dont
measure results,you cant tell success from
failure. If you cant reward success, you are
probably rewarding failure. If you cant see
success, you cant learn from it. If you cant
recognise failure, you cant correct it. If you
can demonstrate results, you can win public
support. Osborne L. Gaebler, 1992
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Do we know where we want to go? How will we
measure our progress along the way? How will we
know if we have arrived at our destination?
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Benefits of an Organisational PMS
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Benefits of an Organisational PMS

• Provides appropriate management information for
  informed decision-making.
• Manages expectations and ensuring increased
  accountability between the role-players within
  and external to the municipality.
• Provides early warning signals .
• Identifies major or systematic blockages and
  guides future planning.

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Benefits of an Organisational PMS

• Encourages the direction of resources
• Checking that the delivery is happening as
  planned.
• Promotes the efficient utilization of resources.
• Promotes the delivery of the envisaged quality of
  service.
• Assists municipalities in making timeous and
  appropriate adjustments in the delivery and
  management of resources.

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Benefits of an Organisational PMS

• Identifies capacity gaps in both human and
  non-human resources, assists in determining
  right-sizing requirements.
• Identifies communities and areas that lag behind
  others in terms of development and thus assists
  in spatial and sectoral integration.
• Assists municipalities in their developmental
  role/focus.

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Performance Management Concepts
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What is performance management

• DPLG defined performance management as a
  strategic approach to management, which equip
  leaders, managers, employees and stakeholders at
  different levels with a set of tools and
  techniques to regularly plan, continuously
  monitor, periodically measure and review
  performance of the organisation in terms of
  indicators and targets for efficiency,
  effectiveness and impact

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(No Transcript)
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What is performance measurement?

• Performance measurement is the use of indicators
  to show how the organisation is performing on its
  objectives
• It means setting clear objectives and indicators
  and gathering information to use these indicators
  to see how well the municipality is doing
• Review of performance against targets happens
  regularly
• Refines the Key Performance Areas (KPAs) of the
  Municipality to assist with monitoring and
  evaluation of KPAs

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Key Performance Areas (KPAs)

• 5KPAs were identified nationally, these are
• Infrastructure and services.
• Social and economic development.
• Institutional transformation.
• Democracy and governance and
• Financial management

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Indicators Targets
Priority B
Objective
Baseline
Target
Indicator
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What are objectives?

• Objectives need to be clear, concise and
  measurable
• It is useful to have a timeframe attached to
  objectives
• Objectives should be outcome and impact focused
• Objectives should indicate the scope and nature
  of desired change

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Examples of good objectives

• To provide every dwelling in the municipal area
  with a weekly door-to-door refuse collection
  service from July 2002
• To ensure that there is a health clinic, equipped
  to dispense chronic medication and providing
  reproductive health services, open for 12 hours a
  day, within 10 kilometers of every dwelling in
  the municipal area

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What are indicators

• Indicators are measures that tell us whether
  progress is being made in achieving our
  objectives
• An indicator is a statement with a quantitative
  value (number, percentage, ratio) that allows
  progress to be quantified
• Quantitative and qualitative

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What are indicators (cont)

• Indicators are important because they
• enable the review of objectives
• provide a common framework for measuring and
  reporting
• translate complex concepts into simple
  operational measurement variables
• help to provide feedback to organisation and
  staff
• help when comparing the municipality's
  performance to that of others

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Criteria for good indicators

• Measurable
• easy to calculate from data that can be generated
  speedily, easily at reasonable cost
• Specific
• measure only those dimensions that the
  municipally intends to measure
• Relevant
• measure those dimensions that enable measurement
  of progress on its objectives

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Criteria for good indicators

• Simple
• avoid combining too much in one indicator
• Reliable
• degree to which repeated measures under exactly
  the same conditions will produce the same results
• Minimises perverse consequences
• do not alter actions in an unintended manner

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Type of indicators

• Input indicators
• These are typically related to costs or inputs
  in terms of human resources. It measures what
  inputs have been made towards achieving a
  objective
• Process indicators
• These indicators describe process issues around
  an objective. They cover the activities and
  operations that converts inputs into outputs
• Output indicators
• These refers to the products produced by
  processing inputs for example the number of
  houses built or the number of electricity
  connections made
• Outcome indicators
• These measure the extent to which strategic
  goals or outcomes are being met. Outcomes are
  usually based on the results of different
  variables acting together

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Baseline Measurements

• Baseline measurements measure the status quo
  before a project or programme is implemented
• Baseline measurements should precede finalisation
  of targets
• Where am I starting from?

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What are targets?

• Targets are the planned level of performance or
  the milestones that are set for each indicator
• Targets are usually expressed in terms of
  quantity
• Targets need to be challenging, realistic,
  measurable and in line with the resources and
  capacity of the organisation
• SMART targets

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Targets (cont)

• Targets need to take into account seasonal or
  other fluctuations
• Targets should be set for a series of timeframes
  e.g. quarterly
• Example of targets
• Indicator Number of houses built
• Quarter 1 100 (high rainfall)
• Quarter 2 100 (builders holiday)
• Quarter 3 200
• Quarter 4 300

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National KPIs

• 9 KPIs
• Basic services
• Free basic services
• Capital budget
• Jobs created through LED initiatives
• Employment equity plan
• Workplace skills plan
• Finances (x3 KPIs)

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Application of Measures by Means of an
Appropriate Model
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What is a Performance Model?
A performance model can be defined as the
grouping together of indicators, often based on
the type of indicator into logical categories or
groups (often called perspectives), as a means to
enhance the ability of an organisation to manage
and analyse its performance
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Why do we need a model

• Balance
• Simplicity
• Mapping of inter-relationships
• Alignment to strategic planning methodology (IDP)

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Model 1 Spreadsheet/KPA Model
KPA Objective Indicator Type of indicator Target Q1 Target Q2 Target Q3 Target Q4




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Key Performance Areas Model
Outcome satisfaction with provision of basic
services
Output Number of LED projects in progress
Outcome Growth in Local Economy
Input Number of law enforcement officers
Output decrease in crime rates
Output households with access to basic services
Process Number of ward meetings held to discuss
the provision of basic services
Input of management that are from the
designated group
BASIC SERVICES
LED
SAFETY
EE
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Model 2 Municipal Scorecard
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Municipal Scorecard Model
BASIC SERVICES satisfaction with provision of
basic services
LED Number of LED projects in progress
LED Growth in Local Economy
SAFETY Number of law enforcement officers
EE of management that are from the designated
group
SAFETY decrease in crime rates
BASIC SERVICES households with access to basic
services
BASIC SERVICES Number of ward meetings held to
discuss the provision of basic services
INPUT (Resource Management Perspective)
PROCESS (Governance Perspective)
OUTPUT (Service Delivery Perspective)
OUTCOMES (Development Perspective)
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Municipal Scorecard Cause-Effect Hypothesis
4. and then will our combined efforts have the
desired developmental impact
3. then we will be able to render quality and
affordable services in a sustainable manner.
2. and if we involve all our stakeholders and
citizens as equal partners in development .
1. If we use our financial resources in an
efficient manner and if we invest in and
capacitate our staff ...
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Model 3 The Balanced Scorecard
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Balanced Scorecard as a PM ModelDeveloped in
1992 by Kaplan and Norton as a result of problems
experienced with only using financial indicators
Alignment and Communication
Measurement and Reporting
Enterprise-wide Strategic Management
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Model 3The Balanced Scorecard
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The Balanced Scorecard Adopted for the public
sector
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Balanced Scorecard Model
BASIC SERVICES Outcome satisfaction with
provision of basic services
LED Output Number of LED projects in progress
LED Outcome Growth in Local Economy
HR Input of budget spent on staff training
SAFETY Output decrease in crime rates
BASIC SERVICES Process Number of ward meetings
held to discuss the provision of basic services
BASIC SERVICES Output households with access to
basic services
FINANCE Input increase in rates revenue
Learning Growth Perspective ("To achieve my
vision, how must my organisation learn and
improve?)
Internal Perspective ("To satisfy my customers,
at which processes must I excel?)
Customer Perspective ("To achieve my vision, how
must I look to my customers?)
Financial Perspective ("If we succeed, how will
we look to our shareholders?)
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Performance reviews and reporting
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Individual Performance Management
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Performance management cycle
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Evaluation by Management Team and Portfolio
Committees Monthly
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Linking organisational and individual PMS
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Cascading the Strategy
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Auditing and Quality Control
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Role of Internal Audit Section of a municipality
(1)

• SECTION 165 OF THE MFMA
• All municipalities must have an internal audit
  section (may however be outsourced or shared with
  the District)
• SECTION 45 OF THE SYSTEMS ACT
• The results of a municipalities performance
  measurements must be audited
• (a) as part of the internal auditing processes
• (b) annually by the Auditor-General

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Role of Internal Audit (2)

• MUNICIPAL PLANNING AND PERFORMANCE REGULATIONS
• A municipality must develop and implement
  mechanisms, systems and processes for auditing
  the results of performance measurements as part
  of internal auditing process
• Any auditing must include an assessment of (a)
  the functionality of the PMS, (b) whether the PMS
  complies with the Act and ( c) the extent to
  which the performance measures are reliable in
  measuring performance on indicators
  (Regulations).
• Municipalitys internal auditors must (1) on a
  continuous basis audit the performance
  measurements of the municipality and (2) submit
  quarterly reports on audits to the MM and Audit
  Committee

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Role of Audit Committee (1)

• COMPOSITION
• Minimum of three members, the majority of which
  may not be employees
• No Councillor is allowed to serve on an Audit
  Committee (MFMA)
• At least one person must have experience in
  performance management (Regulations), MFMA only
  talks of appropriate experience.

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Role of Audit Committee (2)

• TERM OF OFFICE
• Council must appoint and budget for Audit
  Committee (Regulations annually, MFMA silent)
• RENUMERATION
• Public members may be remunerated taking into
  account the tariffs determined by the South
  African Institute of Chartered Accountants in
  consultation with the Auditor-General
  (Regulations).
• NUMBER OF MEETINGS
• Must meet at least four times during a financial
  year (Regulations twice p/a).
• A special meeting may be called by any member
  (Regulation)

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Role of Audit Committee (3)

• ROLE AND FUNCTION OF THE AUDIT COMMITTEE (Regs)
• Review the quarterly reports submitted to it by
  the Internal Audit Section
• Review the municipalitys PM System and make
  recommendations in this regard to Council
• At least twice a year submit an audit report to
  the Council
• ROLE AND FUNCTION (General)
• Could commission in-depth performance
  investigations where there is either continued
  poor performance, a lack of reliability in
  information provided or on an ad hoc basis

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Role of Audit Committee (4)

• ROLE AND FUNCTION (General continued)
• Must in reviewing performance management systems
  focus on economy, efficiency, effectiveness and
  impact in so far as the key performance
  indicators and targets set by the municipality
  are concerned.
• ACCESS TO INFORMATION/COMMUNICATION
• Regulations - Audit Committee may (1) communicate
  directly with the Council, MM or the internal and
  external auditors of the municipality, (2) access
  any municipal records needed to perform its
  duties, (3) request any relevant person to attend
  any of its meetings and to provide information
  requested and (4) investigate any matter it deems
  necessary for the performance of its duties and
  the exercise of its powers (MFMA only talks of
  access to financial and other relevant
  information).

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Role of Audit Committee (5)

• GENERAL
• Council must provide secretarial services to the
  Audit Committee (Regulations)
• Audit Committee may determine its own procedures
  after consultation with Exco (Regulations)

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RESOURCES

• Department of Provincial and Local Governments
  Guide on Performance Management (available at
  www.pimss.net)
• South African Local Government Associations
  Guide for individual performance contracts
• KwaZulu-Natal Best Practices Guidelines for
  Performance Management (available
  athttp//devplan.kzntl.gov.za/General/
  Guidelines/2003Jul21/Best_Practice_no_graphics_wit
  h_cover.pdf)
• www.balancedscorecard.org
• www.better management.com
• www.2GC.co.uk
• www.sustainablemeasures.com