1 Commonwealth of Virginia Executive Branch Strategic Planning, Service Area Planning, and Performance-Based Budgeting Productivity Measurement June 2008.

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Commonwealth of VirginiaExecutive Branch Strategic Planning, Service AreaPlanning, and Performance-Based Budgeting

Productivity Measurement

June 2008

Office of the Secretary of FinanceDepartment of Planning and Budget

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Workshop Subject Matter Resources

Don Darr, DPB

Thomas Gates, SOTech

Christopher Hewett, DPB

John Ringer, DPB

Gerry Ward, CoVF

Facilitators

John Wheatley & Jacqueline Anderson

International Consulting Services, LLC (ICS)

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Productivity Measurement Overview

Important Dates

Productivity Ratio

Developing Productivity Measures

Entering Productivity Data into Virginia Performs

Productivity Measurement Challenges(Review, Questions, Feedback)

Agenda

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Productivity measures represent the third component, along with agency key objectives and measures and the Management Scorecard, of Virginia’s

outcome-driven performance management system.

Productivity Measurement

Agency Management

Practices

Effective & Efficient Agency

Operations

Virginia’s Performance Management

System

Performance & Productivity

Measures

Management Scorecard

Agency Planning and Budgeting

Outcome-Based Key Measures Linked to Long-Term

Objectives

Version “2.0” Approval Pending

Key Measures Completed in 2006

Productivity Measures Due in 2008

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Productivity is a measure of the efficiency and effectiveness of an

organization in serving its customers.

It provides a basis for assessing how specified resources (inputs) are

managed to produce acceptable outputs.

Definition of Productivity

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Why Measure Productivity?

The objective of productivity measurement is for organizations tofocus attention on their use of resources by:

measuring how productive they are,

finding ways to optimize resource use, and

finding ways to further increase efficiency in their operations,

while maintaining or improving results.

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Develop one productivity measure… An agency can develop more than one measure, butthe emphasis should be on doing one measure well.

…that is tied to a key process,A key process produces the agency’s most important service(s) or product(s) for

customers and has a significant impact on customers, budget, or performance outcomesIt is not an internal agency process.

…and is cost-related.Example: cost per unit.

Other types of productivity measures will be considered.Discuss other types with DPB budget analysts.

What are agencies expected to do?

Use the measure to identify ways to improve productivity and track the progress of your

improvement initiatives.

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Date Event

July 30, 2008 Cabinet training

August 1, 2008 Agencies update all fourth quarter and FY 2008 performance measures.

August 1, 2008 Deadline for agency productivity measure entry into Virginia Performs (not available to the public)

August 2008 Cabinet and DPB review and feedback on proposed productivity measures

September 2008 Governor’s Office reviews and approves proposed productivity measures

October 1, 2008 Productivity measures “live” (i.e., available to the public) on Virginia Performs

October 1, 2008 Agency data collection begins on approved productivity measures

January 31, 2009 First data reporting on productivity measures due

Important Dates

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A measure is:

A management tool to assist in the decision making process

An indicator used to determine the effect that strategies, initiatives and activities are having in accomplishing

desired results

Refresher: Definition of a Measure

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What are Productivity Measures?

Productivity measures are typically a ratio of the volume of input to the volume of output.

Single Factor Productivity Measure

Relates a measure of output to a single measure of input such as labor costs

Multifactor Productivity Measure

Relates a measure of output to a bundle of inputs such as labor and capital

Common Inputs

• Labor (e.g., hours, FTEs, costs)• Materials (e.g., costs, units)• Capital (e.g., equipment)

Common Output

• Total number of items produced• Examples: # of licenses issued, # of

applications approved

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Basic Formulas for Calculating Productivity

Input ÷ Output

Fictional Example: Cost per unit

Cost is the resource (input)

• Cost ÷ # of Units

• Total cost to issue drivers’ licenses ÷ # of drivers’ licenses issued during the same time period

• $250,000 ÷ 88,625 drivers’ licenses = $2.82 per license

Output ÷ Input

Fictional Example: Output per employee

# of employees is the resource (input)

• # of Units processed ÷ # of FTEs needed to produce the output

• # of drivers’ licenses issued ÷ # of FTEs needed to produce the licenses

• 88,625 ÷ 26.5 FTEs = 3,344 licenses produced per FTE

Cost-based productivity measures are preferred.

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Examples of Agency Productivity Measures

Virginia DMVCost to renew vehicle registration

(by registration method)

Numerator: Vehicle Registration Costs

Denominator: Number of Registrations Processed

Virginia DMASCost of processing/adjudicating a provider claim

Numerator: (Payment to Fiscal Agent + DMAS Admin Costs)

Denominator: Number of Claims Processed

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Suggested Steps for Developing & Implementing Productivity Measures

6 – Develop and refine required information about the measure(s).

7 – Gather the data for the measure(s) and do the calculation.

8 – Get agency and other internal approvals (e.g., secretary) and enter

the data to Virginia Performs.

9 – Get secretary and Governor’s office approvals via DPB.

10 – Report and review the productivity measure(s) at regular

intervals.

1 – Review source documents (e.g., strategic plan).

2 – Identify key/critical processes.

3 – Determine where efficiency is most critical in your agency.

4 – Research other states or organizations.

5 – Decide what productivity measure(s) to use.

Use the measure(s) to stimulate improvement.

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Steps 1 & 2 – Review source documents andIdentify key/critical processes.

SOURCE DOCUMENTS

Strategic Plan• Executive Progress Report

section on productivity• List of services and products• Key objectives and key

measures

COOP Document• Critical processes

Armics Document• Key internal processes

PROCESSES

Key/critical processes are those that produce the agency's most important services or products for customers.

They have a significant impact on the agency’s customers, budget or performance outcomes.

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Steps 3 & 4 – Determine where efficiency is most critical in your agency. Research how others are

measuring productivity.

STEP 3 – EFFICIENCY NEEDS

• Where do you most need to use resources wisely?

• What process has a significant budget impact?

• Measure what you can control or influence.

STEP 4 - RESEARCH

• Professional associations

• Other governments (state, local, Federal, other countries)

• Academic studies

• Survey your staff for ideas.

Be cautious about comparisons to other states

and organizations.

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Steps 5 & 6 – Decide what productivity measure to use. Develop/refine required information about the measure.

STEP 5 – DECIDE WHAT PRODUCTIVITY MEASURE(S) TO USE

• It should be a measure(s) that substantially affects your operation.

• Set up the mathematical formula.

• Define the output. What does it include/exclude?

• Define the input. What does it include/exclude?

STEP 6 – DEVELOP AND REFINE REQUIRED INFORMATION ABOUT THE MEASURE(S).

The required information is the same as what is needed for all non-key measures in your strategic and service area plans.

• Measure Name• Measure Class – Select Productivity

Measure• Measure Type – Grayed Out• Frequency – Quarterly, if possible• Data Source & Calculation Method• Baseline – If it’s a new measure.• Target – Desired level of

performance, if determined.

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Exercise A: Case Study

Information about two agencies will be provided by the facilitators.

Please review the information and brainstorm ideas about how these agencies could measure productivity.

Set up a possible mathematical formula that could be used for the productivity measure.

Virginia Information Technologies Agency

Virginia Department of Taxation

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Exercise B: Productivity in Your Agency

Work in small groups, with people from one or more agencies in addition to your own.

Develop ideas about how your agency could measure productivity.

Set up a possible mathematical formula that could be used for the productivity measure.

Use this as an opportunity to share best practices and receive/provide different perspectives on

productivity measurement.

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Steps 7-10

7 - Gather the data and do the calculation.• Does it make sense?• Is it useful?• Will the information help you track progress in productivity improvements

or identify opportunities for improvement?

8 - Get agency and other internal approvals (e.g., secretary) and enter the data to Virginia Performs.

9 - Get approvals.• Within your agency• At a Secretary level• From the Governor’s Office via DPB

10 – Use the measure(s)!• Gather/report data as scheduled.• Examine the data to identify areas for improvement.• Launch improvement initiatives.• Celebrate improvements!

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Entering Productivity Data into Virginia Performs

Access VA Performs via the Agency Login screen

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To reach the section where you enter productivity measures click on: Browse and Edit your active performance measures.

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To enter a new productivity measure click on: New Measure

If you wish to edit an existing productivity measure click on the actual measure(productivity measures are tagged with a bullet containing a ).

Productivity measures can be setup at either the Agency Level or Service Area Level.

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Productivity measures are established within VA Performs by setting the Class to Productivity(measure type will become inactive once measure class is set to productivity).

All fields on both this slide and the next are required.Remember to save the measure after you have made any changes to it.

Important Deadlines•August 1, 2008 -- Agencies enter productivity measures into VA Performs (not available to the public)•January 31, 2009 -- Agencies report for the first time the results of their productivity measures; data covers second quarter of FY 2009

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What questions, issues or concerns do you have in reference to the

development of productivity measures?

Challenges

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Where To Find Information on Productivity Measures

Agency Productivity Measure Guidebook

Agency Strategic Planning Handbook (coming soon)

DPB Analyst

Thank YouLet’s

Adjourn!