Performance Measurement
March 16, 2015

Savings without reduced service

Cost savings in government programs and services used to be achieved simply by cutting budgets. But is there a way to find savings and eliminate inefficiencies without reducing service? And how do we measure efficiency in a public sector context?

Harvesting cost savings and increasing the efficiency of delivering government IT services was the key reason for the creation of Shared Services Canada. For SSC, one could argue that “effectiveness” is “economy and efficiency.” By their very nature, economy and efficiency metrics are largely quantitative, which raises the spectre of being accountable for very real and measurable results – or failures. Yet such services have historically been part of the “back office” and have not traditionally been subject to performance measurement or evaluation from a departmental perspective.

For SSC, a key challenge is the development of reliable performance information. This means merging 43 different departmental IT functions and establishing a single standardized set of metrics. Yet, while there are a wealth of private sector IT benchmarks – Cobalt, Gartner, Forester, for example – few public sector equivalents exist to determine what is a reasonable rate of efficiency (speed) and at what cost.

So what does “efficiency” mean in the public sector context? To better understand how the evaluation function should measure IT service efficiency at SSC, we launched a pilot project. The idea wasn’t to focus on picking a metric but to look at the underlying methodology. What is the most useful and meaningful way to measure efficiency in a government context? Do we measure speed alone? Or speed relative to cost? What are the issues and considerations such as level of effort, accuracy and relevance for SSC performance measurement and evaluation?

Given the broader government-wide drive for cost savings and efficiencies, a corollary objective was to share lessons learned to contribute to the broader dialogue on measuring efficiency.

The pilot project had five stages:

1. Review definitions and types of efficiency measurements;
2. Select an IT activity and undertake data collection;
3. Costing;
4. Test the methodology; and,
5. Analysis of results and lessons learned.

We examined a range of efficiency metrics from simple “speed regardless of cost” operational indicators to more complex allocative models that focus on outcomes. We selected “speed at X cost” as it is relevant to the SSC mandate as a service-based organization, it is a commonly used metric in the private sector, and the lessons learned can be applied to more complex methodologies.

What did we learn?

First, ensure a clear understanding of what is being measured and why: How will it inform decision-making?

Second, the methodology or how a metric is measured has an influence on the performance story. Measuring efficiency requires a solid understanding of the business environment and processes must be well understood and mapped to support analysis and costing. In addition, costing is a critical component of measuring efficiency and requires the greatest level of effort.

Third, understand the effort and resources before committing to a metric; do an environmental scan of current data collection to assess governance, resources, data gaps, frequency of measurement and alignment with performance management frameworks.

Finally, avoid the “so what?” Ensure there are benchmarks from the private sector or other departments and establish a baseline for measurement over time.

So what is the next step in the journey? Measuring for the sake of measuring is itself inefficient. Using efficiency metrics should lead to a better understanding of how we can work smarter. First developed in the manufacturing sector as Six Sigma, Lean government principles offer significant potential to map and measure the entire lifecycle to identify waste, drive continuous improvement, and change the way we work. A Lean approach integrates business process improvements – both formal and informal – with risk management and performance measurement. Lean aims to reduce low value actions and increase high-value actions to improve service standards – often at less cost.

The 8th Report of the Prime Minister’s Advisory Committee on the Public Service and Destination 2020 support the use of Lean business processes and the sharing of lessons learned on successful cases.

As with anything new, testing the theory, adjusting for the public sector context, assessing capacity and managing expectations will be instrumental. Such innovation will require senior leadership and support, seed funding for pilot projects, and an interdepartmental forum for sharing lessons learned.

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