Review Of Performance Management Models In Nhs Accounting Essay

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The focus of performance management in the Public Sector is about delivering results; particularly around delivery of high quality services in safe environments.

On reviewing the various academic literatures on performance management models, they claim that whilst performance management practices are good in theory they are profoundly difficult to put into practice with any degree of success within the Public Sector.

This paper will seek to evaluate models and systems in respect of performance management; to discuss the pros and cons of these models and to understand the barriers to implementation of performance management practices within the Public Sector. At the end of this paper is a personal reflection on implementing a sound, reliable performance management system within the NHS, specifically in relation to managing variation within primary care medical services.

2. Performance management or measurement?

To successfully implement performance management systems within any organisation, it is necessary to understand what performance management means and its relationship to performance measurement.

Performance measurement is the process of quantifying the efficiency and effectiveness of action. It is the periodic measurement of progress toward explicit short and long term objectives and the reporting of the results to appropriate decision makers in an attempt to improve program performance (Neely et al, 1995).

Performance measurement is about measuring the performance, as opposed to performance management which is about responding to the "outcome" measure and using it in order to manage the performance.

It can be said that performance measurement contributes to the cycle of performance management but they are not a 'means to an end' in themselves.

To appropriately measure performance, it is necessary to measure key success factors, for instance, assessment of variations in performance or delivery activity, inputs and outputs and understanding past performance. Performance measurement can play an important role in focusing people and resources on particular aspects of a business. In many organisations, the things that are measured are considered important while the things not measured are generally considered of less importance (Waggoner et al, 1999).

It can be evidenced that many organisations have invested considerable resources to implementing appropriate measurement systems. Academic literature in respect of performance measurement emphasises the need to maintain relevant measures that continue to reflect the key success factors which are important to the business (Lynch and Cross, 1991).

However, it could be said that once a performance measurement system has been implemented within an organisation, little consideration is then given to their ongoing management. The required processes have not been implemented to manage the development of these performance management systems to ensure they continue to meet the organisation's values and objectives (Waggoner et al, 1999).

In reviewing performance management, it can be said that this is a series of management actions which include the setting of objectives (planning), the measurement of results and outcomes and using these measurements to assess and consider whether organisational goals and objectives have been met.

Performance management is also about exploring performance issues and making appropriate changes to improve both strategic and operational outcomes - to effect a change in order to make improvements. It could also be argued that performance management systems are unique to an organisation and require specific integration thus they can not be applied using the same values which have been used by others.

For true performance management systems to be successful they must be linked at both organisational and individual performer level; the success of the organisation is dependent on individual performance. This is where individual objective setting and performance appraisals are relevant.

According to Kaplan and Norton (1996), four different areas of management need to be aligned in order to link strategy with execution. These are Measures, Processes, People and Technology - these four areas form the basis of the Performance Management Models.

3. Barriers to successful performance management?

Measuring the success of public services is not without difficulty. Nationally imposed performance management frameworks and models create a stressful environment where managers are required to shift their focus at any given time and any potential 'long term gains' are lost as the organisation flexes to meet new priorities and objectives.

It has been said that the main barriers to successful implementation of performance management practices are as follows:-

Organisational culture;

Lack of 'working together' between strategic and operational departments in an organisation, and

The lack of integration among the various performance management tools available.

These possible 'barriers' are discussed in more detail below.

It is evident that Public Sector organisations have made significant investment in performance monitoring and measurement, however, little appears to be done with the results to improve organisational learning and to improve delivery of services.

Organisational Culture

It is said that the introduction of performance management practices is likely to be more effective in an organisation where the culture encourages achievement and responsibility within a supportive and trusting environment.

Within the NHS there is a focus on achievement, particularly in respect of the quality of NHS services being received by patients. However, whether there is sufficient level of trust available in which to discuss performance results, whether good or bad, is debatable.

Political Issues

It goes without saying that politics have a large part to play in any public sector organisation. Government actions, particularly around NHS health care services, are closely monitored, and the level of political involvement in setting strategic outcomes and budgets is high.

It could be assumed that once strategic directions and budgets have been set, there would be less political involvement following implementation at a local level of any health programme. However, in reality this is rarely the case and consequently the application of objective, logical and forward looking analysis that are the backbone of a good performance management cycle is difficult.

Review of Performance Management Models

This section will briefly review two key Performance Management Systems - the Balanced Scorecard and the Performance Prism; to understand their advantages and disadvantages, with the intention of providing a summary on the benefits of utilising either Performance Management System within the NHS.

The Balanced Scorecard

What is the Balanced Scorecard? "The balanced scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organisation, improve internal and external communications, and monitor organisational performance against strategic goals" (Direct Quote, Balanced Scorecard Institute). 

The Balanced Scorecard was developed by Kaplan and Norton to steer businesses beyond those traditional and reactive financial measures. It is known as a cause and effect business model (Ahn, 2001). The methodology of the Scorecard is that it breaks down the organisations vision and mission into strategic objectives that can be categorised into four different perspectives; financial, customer, internal business processes and learning and growth. According to the writers such an approach promotes and maintains a completely holistic viewpoint, where one affects the other and each should only be considered in view of the other perspectives. Johnsen (2001) states that it is argued to facilitate integration between departments, by improving communication, and by focusing the entire organisation on one key objective; the benefits of which promote a single and coherent business unit capable of working independently but equally towards one long term objective.

Criticism from Young and O'byrne (2001) suggest that one of the drawbacks of the Balance Scorecard approach is that businesses have tended to be overly focused on the means and by doing so loses sight of the end objective. When this fundamental feature is overlooked, the Scorecard becomes an excuse to defend the organisation's failure to perform. In reply Kaplan & Norton (1996, 1997) state that the business strategy defines a rationale of how value can be created to the shareholders in each four perspective by defining actions and identifying resources required to meet the overall objective, and therefore it's a fundamental part of the approach, and where it doesn't exist the model has simply not been applied correctly. In other words, strategic drift could occur and consequently strategies should be revisited regularly to assess the performance against the desired objectives.

Other critics including Gautreau and Kleiner (2001) have suggested that demand for new and innovative business models combined with a degree of veneration has raised expectations of what the scorecard can effectively deliver and as a result there is a danger of using the scorecard to replace a genuine systematic set of performance measures. In other words implementation of such a system should be done only where a systematic set of performance measures do not already exist.