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Principles

Guidance

People involved

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Types of performance measure

There are three main types of measure:

• economy measures express the relationship between resources and inputs (the costs of inputs)

• efficiency measures express the relationship between inputs and outputs (how well the process performs with the given inputs)

• effectiveness measures express the relationship between outputs and outcomes (how the process contributes to business, strategic, organisational or policy goals).

• A balanced performance framework may have to include measures of all three types.

• Focusing on one type of measure may lead to bias or gaps in coverage, for example focusing purely on economy neglects the wider concept of value for money.

• Effectiveness measures are often necessarily subjective. This is not a reason to exclude them; avoid a focus on outputs simply because they are easier to quantify.

Choosing measures

The performance measures you choose, at whatever level, should be:

• focused

• reliable

• worthwhile

• balanced

• avoiding perverse incentives

• ready for change.

• Focused: exclude measures that are interesting but not directly relevant. Make sure everyone involved agrees that the measurements are going to be useful

• Reliable: the information you gather must be accurate, as you will base your management decisions upon it.

• Worthwhile: remember that measurements and analysis have resource implications - the benefit of each measure must be in proportion to the effort required to take it. Existing information sources should be considered before new ones are created.

• Balanced: choose measures for all important areas, and at all levels - costs, output volumes, efficiency, quality, progress towards strategic aims - even if the measures have to be subjective.

• Avoiding perverse incentives: that is, those that encourage behaviour that exists to meet a target rather than to improve. For example, measuring the quantity of letters answered but not the usefulness of the responses may not produce a better service.

• ready for change: measures that are relevant both before and after a radical change are useful in judging its success; those that focus on temporary aspects, or those that may change, are less useful.