Targeting and reporting performance; Based on the Finnish experience

1. Targeting and reporting performance;Based on the Finnish experience The 4th Public Management Summer Institute Heikki Joustie

2. Basic conceptual framework • Outcomes – societal impacts • Outputs – operational results • Performance agreements • Negotiation parts

3. Division of roles in the public administration machinery • Keeping responsibilities clear normally requires hierarchal division of work between tiers of government. • Targeting outcomes is predominantly political issue – sector specific approach to be done by ministries , departments or cabinets close to the political decision making • Targeting outputs is something to be negotiated and agreed between policy level actors and operative units – government agencies or similar

4. Distinguishing outcomes and outputs • Outcomes mean normally policy level targeting for societal impacts derived from Government Programs or other high level political line drawings • Outputs mean operational targets for public service delivery like - amount of services provided in fixed time period - improvement in production efficiency (cost-efficiency) - keeping or improving the quality standard

5. Societal impacts - outcomes • Political targets are often challenging to be based on clear indicators like “diminishing open unemployment by 50%” • One actor – Ministry of Labour - can very seldom alone achieve broad outcome targets without co-operation from other ministries and social actors • Political responsibility is often sector specific, in this case the Minister of labour, while problems tend to be widely horizontal

6. Operational results - outputs • The playground of outputs is efficiency (cost benefit thinking) rather than effectiveness (political goals) • It looks like quite easy to produce different type of output indicators for all kind of administrative actions – too easy • More difficult is to select the most important ones • “You get what you measure”.

7. Performance negotiations • Parts of negotiations are Ministry, represented by highest permanent officials and Agency, representedby Director General • Preliminary discussions take place during the fiscal year by budget and substance experts of both organisations. • In large organisations discussions normally take place between agency top management and regional/local units aswel.

8. Documents of performance management • four year financial frameworks • annual state budgets • agreements • reports • statements

9. Key documents 1 • Four year running plan for budgetary frames and performance targets • This plan gives ground for yearly budget and performance negotiation exercise • Planning is conducted by each ministry concerning it’s domain. The plan consists of resources and annotated performance targets for four years. • The resource part of the plan will be accepted by Government, co-ordinated and presented by the Ministry of Finance • The plan is introduced to the Parliament for discussion but not for decision

10. Key documents 2 • The annual State Budget, where the performance targets are presented to the Parliament in hierarchical manner 1. Main title – societal impact targets for each ministerial domain (outcome level) 2. Chapter – policy specific outcome targets 3.Budget line– agency specific output targets

11. Key documents 3 • Performance agreements between ministries and operative actors, government agencies - Drafted early Spring together with parties - Conducted and signed early Autumn after the budget bill has been forwarded to the parliament - Amended after budget decisions if needed - Published in common database with free entry for everybody

12. Key documents 4 • Yearly performance reports in connection with the final accounts of the fiscal year - Different report from every agency which has been a partner of an agreement (output level) - Ministry report concerning it’s whole domain (outcomes) - Government report to the Parliament (outcomes from the political accountability point of view)

13. Key documents 5 • Every ministry is obliged annually to issue a statement upon all of the performance reports in it’s domain. • In the statement the ministry gives it’s opinion concerning actions needed because of the rate of the fulfilment of targets. • All the statements are published in the same database where the agreements can be found aswel.

14. Parliamentary discussions • Government report of total performance is handled together with the report of State Audit Office in the Parliament’s Audit and Control Committee annually. • The House adopts it’s opinion on the basis of committee proposal.

15. The use of indicators • In the Finnish performance management system each ministry can freely opt the indicators it uses, • in targeting the activities both for outcome and output levels and • to be followed in reporting Indicators are required to be based on measurement or in systematic evaluation.

16. Hierarchy of indicators • The basic hierarchy is seen in the budget book: - Main title level – verbal targeting for societal impacts is acceptable but indicators are desired - Chapter level (outcomes) and budget line level (outputs) are required to be based on figure form indicators

17. Accountability 1 • Non achievement in outcomes causes predominantly political discussion in the Government and it normally causes new and more effective policy formulation. • In case of non achieved outcome targets the more broad political responsibility issue is discussed and decided in the parliament. • The threshold for dramatic moves is rather high. The majority government normally gets release in parliamentary discussions.

18. Accountability 2 • Poor performance on the operative action – in the agency – causes corrective action depending on the circumstances. • Results will be analysed and corrective actions formulated in the discussions between the agreement partners. • If the reason is bad management, changes in management are one possible option used every now and then.

19. Topical issue – productivity enhancement • Government Action Programme for Productivity 2003 – • Evaluation of all public service production structures and processes • Less use of labour intensive processes – more use of self service and modern IT • Cut of personnel by 14.500 in years 2007-2015

20. Targeting productivity in performance agreements • Productivity enhancement is an obligatory part of each performance agreement • The Government has decided individual cross border targets for each ministry • The ministry is responsible to organise the development work for changes needed for improved productivity • The “line ministry” can normally keep half of the yield – the other half will be reallocated by the MoF

21. Shared services approach • The Mof has started many horizontal activities to raise productivity in supportive services • agency premises • public purchasing • use of IT • HR- and economic administration The results are quite promising so far

22. HR- and economic administration as a source of productivity raise • Total use of labour appr. 7500 personnel working years • Reform of proceedings and structures: - 1000 to Service Centres - 4000 in agencies - cut of 2500 - target timing 2006-2011

23. The performance prism Societal impact targets (outcomes) Societal impacts: outcomes Societal effectiveness ACCOUNTABILITY Operational performance: outputs How operations and use of finances have influenced the societal impacts MANAGEMENT BY RESULTS • Operational efficiency • economy • productivity • profitability • cost-recovery rate • Outputs and quality management • commodities and public goods • service ability and quality Operational results (outputs) Human resources development