November/December 2002
Measuring the Road to Improvement
by Connie Yew and Pamela Friedman
Establishing effective performance management with a clear focus
on business results can transform an organization. The Pennsylvania
Department of Transportation (PENNDOT) is living proof.
Beginning in 1997 under the leadership of Secretary Bradley L. Mallory,
PENNDOT set forth an action-oriented strategic agenda to improve business
results in a comprehensive, systematic manner. Performance measures
are essential to reaching that goal, and the measures must make a
difference to customers and stakeholders, drive behavior throughout
the organization, and be trackable and usable in decisionmaking, reporting,
and evaluation.
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Starting in 1997, PENNDOT Secretary Bradley L. Mallory guided
the organization's remarkable transformation by initiating
performance-based management.
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"PENNDOT and all State departments of transportation have the responsibility
to make communities better, safer places to live," says Secretary
Mallory. "Because our business is critically important to virtually
everyone, it is essential that we go the extra mile and implement
performance-based management."
PENNDOT owns and operates more than 64,372 kilometers (40,000 linear
miles) of highways, employs about 12,000 people, and administers an
annual budget exceeding $4 billion. Using performance-based management,
PENNDOT has achieved remarkable success. It has become a customer-driven
government organization that significantly improved the condition
of Pennsylvania highways, reversed years of decline in transit ridership,
doubled the level of investment in rail freight facilities, reengineered
almost 30 core business activities, and slashed red tape to merge
service delivery by the Commonwealth and local governments.
"If an organization wants to improve its service, there really is
no alternative other than to begin orienting the organization to run
based on performance measurements," says Secretary Mallory. "The improvements
are dramatic."
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Performance management is the secret to the significant improvement
achieved in the condition of Pennsylvania highways, such as
this rural road through rolling farmlands.
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Why Performance-Based Management?
In the 1970s, PENNDOT's transportation system virtually collapsed
after years of poor management and the approach of bankruptcy. "The
Commonwealth had no new construction, and almost no maintenance for
about 5 to 10 years," recalls Secretary Mallory. "Transportation conditions
in Pennsylvania were abysmal, and the public began to clamor for change."
Amid this atmosphere of adversity and necessity, the concept of performance-based
management emerged. After years of stagnation, there was hope that
measuring everything that the department did, and systematically improving
it over time, could achieve real progress. "In retrospect, going bankrupt
was a great fortune for PENNDOT," says Mallory. "It allowed our government
body to take dramatic action to really fix the problem."
In the late 1970s, PENNDOT adopted the national Malcolm Baldrige
quality award criteria, and an integrated approach to organizational
transformation began to take hold. The Baldrige Award, which emphasizes
performance measurement and analysis, is given by the President of
the United States to organizations that are judged to be outstanding
in seven key areas: leadership, strategic planning, customer and market
focus, information and analysis, human resource focus, process management,
and business results.
Although Baldrige awards cannot be issued to government organizations
(only to manufacturing, service, education, and health care organizations),
any organization can use the Baldrige framework to improve overall
performance. And that is exactly what PENNDOT did.
The Baldrige Performance Excellence Criteria
Leadership—how senior executives guide
the organization and how the organization practices good citizenship
Strategic planning—how the organization
sets strategic directions and determines key action plans
Customer and market focus—how it determines
expectations of customers and markets
Information and analysis—the management,
effective use, and analysis of data and information to support
key organizational processes and the organization's performance
management system.
Human resource focus—how the organization
enables its workforce to develop to its full potential
Process management—how key production,
delivery, and support processes are designed, managed, and improved.
Business results—the organization's
performance and improvement in its key business areas: customer
satisfaction, financial and marketplace performance, human resources,
supplier and partner performance, and operational performance,
as well as how the organization performs relative to competitors.
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Permeating All Ranks Of PENNDOT
Inspired by the tenets of Baldrige, PENNDOT launched a multiyear
phased effort to accomplish three major organizational shifts: (1)
develop a strategic agenda based on customer, stakeholder, and partner
input; (2) align organizational business plans with the agency agenda;
and (3) manage the organization's business plans with performance
measures.
The Strategic Management Committee (SMC), the executive body of PENNDOT,
ushered in these changes. The SMC—composed of the secretary,
the six deputy secretaries, executive officers, and the process owners
of primary business areas within PENNDOT—defined the department's
eight overarching objectives, or strategic focus areas:
- Maintenance First
- Quality of Life
- Mobility and Access
- Customer Focus
- Innovation and Technology
- Safety and Security
- Leadership at All Levels
- Relationship Building
These strategic focus areas are defined by a number of high-level
goals and strategic objectives. From the strategic objectives, hundreds
of performance measures have been identified at every level within
PENNDOT—from the organization as a whole to individual departments,
teams, and employees.
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Gary Hoffman, chief engineer at PENNDOT, notes that the new
management system succeeded because input and buy-in were
obtained from individuals at all levels of the organization.
Photo courtesy of Commonwealth Media Services.
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Although changes began from the top, they soon permeated all ranks
of the organization. "Once the executive staff agreed what the strategic
objectives should be, we solicited input from managers, supervisors,
and rank-and-file employees," says Gary Hoffman, chief engineer at
PENNDOT. By obtaining input from all levels of the organization, the
new performance-based management system had buy-in from the start.
Hoffman notes that the union also embraced the customer-focused Baldrige
philosophy. "Without the support of our union, the new management
approach could not have succeeded," says Hoffman.
To incorporate performance measurement and analysis strategically
into its management plan, PENNDOT conducted a series of workshops
and training sessions for all levels of employees. For department
leaders, the workshops provided training on how to use data to develop
strategic plans, create scorecards for alignment of goals and objectives,
and manage operations with scorecard and "dashboard" measures. (Dashboard
measures are intended to indicate short-term performance, just like
the gas or oil light indicators on the dashboard of a car.) Staff
members at all levels were taught the Baldrige philosophy, the big
picture organizational shift, and their personal role in it.
"The key is having a strategy in place with defined objectives and
measurements, so that everyone knows what's expected of them," says
Mike Ryan, deputy secretary for highway administration at PENNDOT.
Ryan likens performance-based management to a symphony: "Everybody
has a part to play, and if everyone plays their part well, the end
result is a nice sounding piece of music."
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"The key is a strategy with defined objectives and measurements,
so that everyone knows what's expected of them," says
Mike Ryan, deputy secretary for highway administration at
PENNDOT.
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Accountability
But setting the direction is not only internal. Numerous customer
surveys and feedback sessions brought a sharp customer focus to the
PENNDOT management approach. Today, PENNDOT prides itself on the fact
that its objectives are geared to the needs and wants of its customers.
As a result, performance measures are now part of an annual cycle
of strategic planning to create clear expectations and ensure accountability
for PENNDOT organizations, work units, and individuals. Clear objectives
and specific measures are set at the operational level for the short-term
(on an annual basis); at the tactical level for the mid-term (3- to
5-year timeframe); and at the strategic level for the long-term
(5- to 10-year timeframe).
To align measurement and business objectives from the short to the
long term, and achieve accountability, performance measurement reports
are used at various levels throughout the organization:
PENNDOT Balanced Scorecard (biannual reporting). At
the strategic level, the Balanced Scorecard targets performance effectiveness
over a 3- to 5-year timeframe. The Scorecard contains eight strategic
focus areas (such as quality of life) with 14 high-level goals (e.g.,
demonstration of sound environmental practices) and 23 strategic objectives.
Each high-level goal and strategic objective includes one or more
measures. For example, the internationally established ISO 14001 environmental
management standard is the measurement tool for the environmental
goal. Individuals or teams of mid- to upper-management staff act as
"leads" in tracking and reporting progress on the Scorecard measures
once every 6 months.
SMC Dashboard (monthly reporting). At the tactical
level, the SMC Dashboard targets performance effectiveness over a
1- to 3-year time span. The monthly Dashboard report is intended to
help the SMC in its decisionmaking. The Dashboard contains 14 key
measures, or indicators (e.g., permit cycle time, customer satisfaction,
program delivery, bridges, etc.), which focus on core business areas.
The key measures are in turn measured by 84 support measures, or subindicators.
Statistical Digest, Organizational, and Work Unit Performance
Reports (daily tracking). At the operational level
are the Statistical Digest, Organizational, and Work Unit performance
reports. The Statistical Digest is a 60-page compilation of select
fiscal measures, strategy-related measures, and deputy/executive office-
and bureau/district-focused objectives. Organizational and Work Unit
performance reports are developed, maintained, and distributed to
appropriate staff within each organization. Operational level measures
target performance for the next year or less, and may be directly
or indirectly aligned with the PENNDOT Scorecard, SMC Dashboard, core
business issues, special fiscal focuses, and organization-specific
measures.
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With Pennsylvania's snowy winters, motorists are concerned
that highways such as this one are cleared of snow quickly
with cost-effective use of taxpayer dollars.
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Secretary's Monthly Report Card (monthly reporting).
The Secretary's Monthly Report Card is a monthly release of one
performance measure, chosen by the PENNDOT Secretary, which addresses
an issue considered important to the public. Examples include road
smoothness, prudent management of taxpayer dollars, and efficient
snow removal.
Organizational Performance Review (biennial reporting).
Every 2 years, each bureau and district prepares an Organizational
Performance Review (OPR) to measure success against the PENNDOT Performance
Excellence Criteria (PPEC)—PENNDOT's agency-specific criteria
modeled after the Malcolm Baldrige criteria. The OPR contains the
bureau or district's description of how well it has succeeded against
the seven major Baldrige criteria. The OPR is reviewed by a panel
of trained, internal PPEC examiners, who provide formal feedback and
a description of the strengths and opportunities for improvement.
Self-Assessment Gap Analysis (ongoing). The Self-Assessment
Gap Analysis (SAGA) tool is now beginning to be used by PENNDOT county
maintenance offices (comprising two-thirds of its total workforce)
to bring PENNDOT Performance Excellence Criteria principles into the
day-to-day activities of PENNDOT's maintenance activities. County
employees identify and prioritize subjects requiring improvement ("gaps")
within their span of control, and work in teams to solve these issues.
Emphasis is placed on resolving these gaps within 90 days.
With an eye toward improving business results and customer satisfaction,
PENNDOT plans to continue to refine and strengthen its overall performance
measurement system. One of the areas for improvement is to ensure
that working units are using performance measures to run their day-to-day
operations through the SAGA process.
Performance Measures Mean Results
At the organizational level, the ultimate beneficiaries of PENNDOT's
performance management effort are the customers and end users of the
transportation system. "PENNDOT's performance-based management approach
has restored the public's confidence in the ability of government
to perform certain fundamental tasks," says Secretary Mallory.
In recent years, for example, PENNDOT has improved the ride quality
of the Commonwealth's roads significantly. The number of road miles
that measure more than 150 inches per mile on the roughness index
of ride quality was reduced to only 92 in 2001, down from 276 in 1995.
(The threshold value at which ride quality becomes unacceptable has
been established at 170 inches per mile.)
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The new management system has improved PENNDOT's ability
to perform fundamental tasks, such as improving the ride quality
of the Commonwealth's highways, even ones such as this road
that have lower traffic volume.
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Additionally, since implementation of the new performance management
plan, 3 of 11 districts within PENNDOT have received regional business
quality awards.
Inside PENNDOT, performance-based management has improved department-wide
communications and understanding, both across the districts and between
districts and the central office. "Everyone has a good understanding
of the big picture, where they fit into it, and how their individual
role is important in making the organization successful," says Hoffman.
According to employee surveys, the staff members have a more positive
outlook and a greater sense of commitment toward the department. "It's
been a real cultural change," he adds.
Secrets of Success
Based on PENNDOT's experience, successful strategic management takes
an extraordinary level of top leadership commitment. According to
Secretary Mallory, there are 10 important lessons to bear in mind
when planning to incorporate performance-based management.
- Adapt, don't adopt. When implementing a performance system,
management models need to be adapted to specific organizational
needs and circumstances, rather than adopting a "canned" model.
- User involvement adds time but also valuable buy-in. Solicit
input from people at all levels of the organization to gain the
buy-in that is critical to success.
- Beware of organization stovepipes and personal agendas.
In all organizations some people will resist change, especially
those who have been there for many years. Be ready for pushback.
- Market effective business practices, not management theory.
Business practice—and not theoretical abstracts—is
what is needed to build successful systems.
- In change management, you can never communicate enough. Because
messages will be understood and interpreted differently by different
people, the nature of change almost guarantees increased negative
reaction up front—and certainly increased stress levels. Be
prepared to refine your internal communications continually.
- The fundamentals of measuring are not common knowledge. No
matter how well you know your business, finding appropriate measurements
for all goals, both interim and final, is not easy. Be patient and
persistent.
- Even information overload doesn't deter some from refusing
to delegate less critical tasks. Be ruthless in delegation,
and beware of people who say they are too busy to perform certain
tasks; they are likely to refuse to delegate.
- There is an organizational bias toward internal control measures.
Because an organization exists to serve its customers, and not
itself, it must continually be reoriented from an internal bias
to an external focus. Let the customers drive the vehicle.
- Be prepared for different central office and field perspectives.
Perspectives of those in the field versus those in central offices
are radically different. When in doubt, it is wise to err on the
side of the field perspective, since field workers are more in tune
with customer needs and wants.
- To be accepted, measures must be relevant, understandable,
obtainable, valid, credible, timely, and user-friendly. These
criteria describe the ideal measure, though no such measure likely
exists. Understand the limitations of performance-based management.
Other State DOTs Practicing Performance Management
To one degree or another, performance management
is used in many States across the country in addition to Pennsylvania:
Florida DOT. The Florida DOT publishes
an Annual Performance Report to evaluate its progress
in achieving the goals and objectives included in the Florida
Transportation Plan.
New Mexico State Highway and Transportation
Department. The NMSHTDs mission is to advance transportation
systems that facilitate safety, stimulate economic development,
and help improve the quality of public life. The Compass,
published quarterly, is a tool for measuring how NMSHTD is living
up to those goals.
Kentucky Transportation Cabinet. The Kentucky
Transportation Cabinet has taken the FHWA Vital Few Strategic
Goals and married them to the Vital Few strategic initiatives
important to the State Cabinet, to form one joint strategic
plan to be gauged by performance measures. Both the Transportation
Cabinet and FHWA have common objectives to satisfy the same
goal, with the bottom-line performance measure being customer
satisfaction.
Washington State DOT. The Washington State
DOT has a quarterly report entitled Measures, Markers and
Mileposts (The Gray Notebook), targeted to the Washington
State Transportation Commission, department management, the
legislature, and the public. The report tracks a variety of
performance and accountability measures for quarterly review,
placing a strong emphasis on communication and agency transparency.
Included are regular updates of the key agency program areas,
special features on innovation, and a variety of department
activities. WSDOTs goal is to share even the most complex
agency programs and projects clearly and concisely in a format
that everyone can understand.
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Getting Serious About Progress
Although performance-based management is no magic wand for improving
organizational performance, it is clear that, combined with patience,
commitment, and lots of hard work, it is a viable—if not essential—tool
in managing for results and innovation. Over time, the benefits and
rewards of this management tool are being increasingly recognized
and reaped. While PENNDOT has adopted this approach wholeheartedly,
other State transportation organizations also are getting on the bandwagon.
From Florida to Kentucky, New Mexico to Washington, to some degree
or another, operational improvements and transportation goals are
being sought and achieved through this approach. If your organization
is serious about progress, performance-based management is where you
should be heading.
Connie Yew serves as a highway engineer in the Federal Highway
Administration's (FHWA) Office of Corporate Management, where she
has more than 19 years of professional experience. Yew works
with various program offices to develop, analyze, and report on key
agency performance measures. She also chairs several task groups,
including the FHWA-State Partnership Task Force to develop partnership
measures for the agency. She is leading an agency initiative to develop
a comprehensive strategy for obtaining and responding to customer
feedback through customer satisfaction surveys. She holds a bachelor's
degree in civil engineering from the University of Maryland and a
master's degree in public administration from The George Washington
University. She is a registered professional engineer in Maryland.
Pamela Friedman is a contract writer and contributing editor
for Public Roads magazine.
Special thanks to Steve Chizmar, PENNDOT, for assistance with
this article.
Other Articles in this issue:
The Scan of the Wild
Filling the Pipeline
TELUS
Measuring the Road to Improvement
Students Grab the Gold Ring
Digging into LTPP Pavement Data
Making It Happen the Fast Way
"Back to Basics" Saves Lives
A Decade of Achievement
Does Your Interchange Design Have You Going Around
in Circles?
From Small Beginnings Come Great Things