Managing Performance By Setting Strategy

During the past decade, government at
every level has been called to account
for investments of taxpayer dollars in
IT initiatives and to document the
results produced. Several municipal
governments have revolutionized the way they
provide services to citizens by institutionalizing
performance management as a key focus of
government-citizen interactions. Several foreign
governments have also implemented performance-and results-based budgeting and
management systems.

And, of course, the federal
government has been in the thick of
the trend toward performance-based
management and accountability.
This trend has been both
constant and increasing in
intensity since passage
of the Government
Performance and
Results Act (GPRA)
in 1993.

The ensuing
management
reform initiatives of
the Clinton and Bush
administrations placed
further emphasis on the
delivery of quantifiable
results to citizens. Under
the Bush administration's
President's Management Agenda,
the concepts of performance and
results are central to each of the
five areas that make up the agenda.

With the issue of performance
occupying so prominent a place in
federal management reform, I'd like
to offer some observations on how
CIOs can adapt to the pressure of
performance-based management. In
this column, I address the challenge of
inculcating performance and results
considerations into the development
of organizational IT strategy. In a
subsequent column, I will address the
challenges of managing IT operations
using performance management tools
and techniques.

The Lay of the Land

It's important to understand the
planning environment in which federal
CIOs operate: It is one that is rich in
process but poor in information. GPRA
and the Clinger-Cohen Act of 1996
established requirements designed to
produce planning products that are
important to CIOs, including agency
strategic plans, IT strategic plans,
architecture and capital planning.
However, getting the information
needed to fully inform decision-making
is problematic for the federal CIO.

Most agencies do not accumulate
cost data related to the functions or
activities that the costs support. Even
fewer have more than an inkling of the
current performance levels achieved in
those functions and activities. That's one
reason why A-76 studies take a long
time. (Office of Management and Budget
Circular A-76 specifies how agencies
must conduct cost comparison studies
between an agency tender offer and
private sector offers.) Agency financial
data needs to be mapped to the
functions performed, and current and
baseline performance must be defined.

With these limitations in mind, I
propose that federal CIOs address the
following steps when establishing an IT
strategy that defines results and expected
performance:

• Align IT to mission. The CIO needs
to begin IT strategy development with
the agency's strategic plan as the starting
point. This plan will describe the
organization's mission goals and include
strategies for achieving them. The CIO
needs to identify a complementary goal
for how IT will be used to help achieve
each mission goal. If the mission goal is
enforcement of a set of statutes and
the outcome expected is successful
enforcement of those laws, the IT goal
might be to provide enforcement
organizations with information systems
that flag enforcement actions and
support enforcement decision-making.

• Describe needed performance. Once
the IT enablers of mission goals are
identified, the CIO needs to examine
in more depth how the enablers will
contribute to mission success and detail
the link between IT performance and
mission performance. A key result of
this step will be a definition of the level
of IT performance required. At this
point, the IT performance should be
specified in terms that can easily be
linked to—and seen as supportive
of—the mission goals.

To use the example above, the
required IT performance might be
described as the performance required
for each of the key desired attributes of
the enforcement information system:
quality, usability, availability and user
satisfaction. It might also include a
performance description of how IT will
contribute to effectively and efficiently
achieving desired mission outcomes.

• Develop the information foundation.
Most agencies do not have an information
base that lets them effectively manage
cost and performance. As a result,
the CIO may need to convert the
information obtained from the agency's
financial system, which is reported as
budget-oriented classes of expense, to
an activity or functional basis.

The good news is that the CIO can
do this with a reasonable resource
investment, using such tools as activity-based costing. Once the initial activity
mapping is completed, the actions
needed to periodically refresh the cost
data are quite modest.

The CIO also needs to take a close
look at the organization's current
performance level and define that
performance, as much as possible, in the
same context as that adopted by private
sector firms. This will let the CIO
benchmark organizational performance
against the best in class.

• Craft the enterprise strategy. At
this point, the CIO will have an
understanding of the mission and
business needs of the organization, the
underlying performance reference
points, and the current cost and
performance of the IT enterprise.
The enterprise architecture is the
contemporary tool to use in comparing
current and future performance by
business process and to examine
component parts to be used to deliver
on those needs. At this juncture, the
strategy should identify what is needed:
It should be calibrated to achieve
the necessary overall performance
requirements, not how each component
of that need will be satisfied.

• Study sourcing alternatives. One
might think of this step as high-level
capital planning. The CIO will examine
feasible implementation alternatives for
each component of the strategy. Some
may be established by policy or
directive—for example, your payroll
will be cross-serviced by another
organization.

Most components, however, will
require a sourcing decision. The
foundation of cost and performance
information the CIO has developed will
be essential here, since it will provide
the basis for economic analysis of the
alternatives and for benchmarking
performance.

• Implement the strategy. I will
leave most of my observations on
implementation and operational aspects
to my next column. But one that bears
mentioning at this point is that the CIO
needs to ensure that a serious project
management focus is placed on
implementing the strategy.

A strategy is only as good as its
weakest component. Each component
needs to be successfully implemented in
its own right, but dependencies across
components mean that the success
of the strategy is really a shared
responsibility.