strategic defence performance management

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Abstract: Strategic defence performance management has a very important role in .... They also have the property that they directly measure the degree to which.
STRATEGIC DEFENCE PERFORMANCE MANAGEMENT 1

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Dejan Stojković , Ljupča Stojanović Ministry of Defence, Republic of Serbia, [email protected] 2 Ministry of the Interior, Republic of Serbia

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Abstract: Strategic defence performance management has a very important role in an overall process of defence system management. This paper presents results of an analysis of many different approaches and explains main features of strategic defence performance management. The paper can be useful for defence and public management practitioners and researchers. Keywords: defence, performance, management, balanced scorecard.1. introduction In a performance-oriented era, organizational efficiency and effectiveness plays a central role no matter the industry or sector involved. Performance management is an ongoing, systematic approach to improving results. The performance aspects in the defence sector started to be viewed and considered with primary interest in the last ten-fifteen years. The fundamental benefit of performance management is that it enables defence systems to provide better results for the public and a higher level of national and international security. One of the performance management concepts with increased adoption in the defence sector is the Balanced Scorecard. United States Army, UK Ministry of Defence or Canadian Department of National Defence, are amongst the recognized implementers of performance architectures based on Balanced Scorecard.

2. PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR Performance management within public sector organisations has always been a difficult and controversial area. However, with continuing pressures for accountability and value for money it is one which requires appropriate management attention. Accountability demands on the public sector increase every year. Public sector organizations are carefully examined by legislators and the public and compelled to do more with less funding. Those organizations must strive to find new ways to improve their performance and satisfy public needs with constrained resources. Performance management in the public sector is an ongoing, systematic approach to improving results through evidence-based decision making, continuous organizational learning, and a focus on accountability for performance. Performance management is integrated into all aspects of an organization‘s management and policy-making processes, transforming an organization‘s practices so it is focused on achieving improved results for the public (National Performance Management Advisory Commission, 2010). Performance management within public sector organisations cannot take place in isolation. It needs to be incorporated into general organizational management system (Figure 1).

Strategic direction

Strategies & plans

Vision, mission, priorities and goals

The key initiatives and actions planned

Performance management Managing of progress in achieving goals

Figure 1: Performance management within general organizational management system (Accounts Commission for Scotland, 1998)

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The key metric for public sector organizations‘ performance is not financial, but rather mission effectiveness. However, mission effectiveness is not a definite and static issue. Usually, organizations have a general mission, which includes many specific sub-missions. At any given time, some sub-missions may be more important for the public than others may. The establishment of priorities among organizational sub-missions is an ongoing strategic planning responsibility. There are significant differences between public and private sector organizations. The only clear similarity between the two is in the desire for ―customer satisfaction‖, but even here, there is a difference, because the definition of ―customer‖ is different in the two cases. Some of similarities and differences between public and private sector organizations are given in Table 1 (Arveson, P., 1999). Table 1: Similarities and differences between public and private sector organizations Feature

Public Sector

Private Sector

General Strategic Goal General Financial Goals

Desired Outcome Stakeholders Budget Priorities Defined by:

mission effectiveness cost reduction; efficiency accountability to public; integrity; fairness customer satisfaction taxpayers; inspectors; legislators leadership; legislators; planners

Justification for secrecy

national security

Key Success Factors

best management practices sameness; economies of scale standardized technology

competitiveness profit; growth; market share innovation; creativity; good will; recognition customer satisfaction stockholders; owners; market customer demand protection of intellectual capital; proprietary knowledge growth rate; earnings; market share uniqueness advanced technology

Values

Performance management implementation should help public sector organizations to address the performance challenges they face. Some of them are listed below. Satisfy stakeholders’ needs and expectations. Performance management involves setting objectives and targets that are in accordance with stakeholders‘ needs and expectations. It focuses the organizations‘ resources and efforts toward achieving results that will provide appropriate benefit to their stakeholders. Results improvement within resource constraints. Public sector organizations are constantly challenged to provide high-quality services and improved outcomes within limited resources. Performance management addresses this challenge by promoting the application of effective and efficient approaches and by encouraging a culture of continuous improvement in order to get the best results for the least amount of resources. Commitment to better serve the public. In an era of complexity and rapid environment changes, it is necessary to engage all public employees, not just top officials and managers, in finding ways to better serve the public. All public employees should be committed to provide the best service to the public. The need to gain and keep the public’s trust and confidence. Performance management improves accountability and supports confidence in public sector organizations not only by enhancing organizations‘ ability to communicate performance information but also by giving organizations the right tools for improving results. Performance management in the public sector organizations should be based on following principles (National Performance Management Advisory Commission, 2010):  A results focus permeates strategies, processes, the organizational culture, and decisions;  Information, measures, goals, priorities, and activities are relevant to the priorities and well-being of the public organizations and the community;  Information related to performance, decisions, regulations, and processes is transparent — easy to access, use, and understand;  Goals, programs, activities, and resources are aligned with priorities and desired results; 210

  

Decisions and processes are driven by timely, accurate, and meaningful data; Practices are sustainable over time and across organizational changes; Performance management transforms the organization, its management, and the policymaking process.

Performance management uses evidence from measurement to support planning, funding, and operations within the public sector organizations. Better information enables elected officials and managers to recognize success, identify problem areas, and respond with appropriate actions in order to provide better services to the public.

3. DEFENCE PERFORMANCE MANAGEMENT Performance management plays very important role in developing of defence capabilities that are necessary for protection of national security and national interests. Defence performance management is an ongoing and iterative process. Figure 2 presents circular-flow model of defence performance management (Angelis, D., Webb, N., 2009).

Threat Outcomes

Strategy

Outputs

Forces

Activities

Budget

Inputs

Funds Organization

Figure 2: Circular-flow of defence performance management Beginning at the top with threats, responsible governmental body develops defence policies and strategies based on an assessment of the threat environment. The next step is developing of plan for forces needed to implement the policies and strategies and prepare budgets for personnel, equipment, and other inputs needed to provide defence activities. Once appropriations are enacted, different types of funds flow to organizations through different apportionments. Each defence organization provides inputs (personnel, materials, infrastructure, etc.) needed to undertake its own activities and missions. Activities combine and engage the inputs to produce outputs. Efficiency as the quality of being able to do a task successfully, without wasting time, money or energy is reflected in the ―inputs to activities to outputs‖ part of the model. Rather than focusing on budgeting processes, efficiency requires understanding the outputs, including the ability to measure outputs and assign them to the inputs used to generate them. Efficiency answers the question, are we doing things right? Effectiveness comes from the ―outputs to outcomes‖ part of the model. It describes how well the defence outputs performed relative to the strategies or high-level goals that the organization set out to achieve. Effectiveness also answers the question, are we doing the right things? Outcomes are results, consequences, effects, or impacts of direct importance to stakeholders. Outcomes depend on the generated output and on the interaction of the output with the environment and the 211

interpretation of stakeholders as to the success of that interaction. For example, reaching the goal of providing national security could be measured by how members of the public feel about whether they are ―safe‖, whether ―we are winning the battle‖, or ―how many attacks occur daily‖. Clearly, there are many measures, each with some utility for a particular audience and none fully measuring the „success‖ of the goal of providing national security (Angelis, D., Webb, N., 2009). Desirable metrics flow from the goals and show whether the defence is effective and efficient. Developing useful measures requires some understanding of types and characteristics of good measures. There are three different types of performance measures: natural measures, constructed measures, and proxy measures (Keeney, R., Gregory, R., 2005). Natural measures are in general use and have a common interpretation. Most natural measures can be counted or physically measured. They also have the property that they directly measure the degree to which a performance target is met. For instance, if the objective is to minimize cost, then we can directly measure how well we achieve that objective in dollars, because the dollar is a natural measure for cost. Often, particularly in the public sector, it is difficult to find a suitable natural measure. In such cases, we might use a proxy measure, that is, one that is related to the performance target but does not measure it directly. For instance, if we want to measure personnel safety, we might use the number of accidents as a proxy measure. In many cases, there is no clear understanding of how defence performance should be measured, so it might be necessary to use a constructed measure, one that describes different levels of achievement and assigns a numerical value to each level. To assess, for instance, a safety hazard, a simple constructed scale might be: 5 - Fatal injury; 4 - Permanent disabling injury; 3 - Disabling injury; 2 - Injury causing time off work and 1 - First aid only. Constructed scales involve some degree of subjectivity; therefore, each level must be carefully described to reduce ambiguity. Finding the right measures requires careful consideration of many parameters. In addition, the measures should have some properties. Keeney and Gregory suggest following five desirable properties to keep in mind as we develop measures (Keeney, R., Gregory, R., 2005): 1. Unambiguous - The relationship between the measure and the performance target should be clear and easy to interpret; 2. Comprehensive - All possible levels of performance are covered by the measure; 3. Direct - The measure should directly reflect the desired performance; 4. Operational - The data being used to measure performance is available or can be obtained with a reasonable amount of cost and effort; 5. Understandable - Everyone agrees on what is being measured and how it will be measured. The development and selection of defence performance measures are complex and difficult tasks. Measuring performance in the defence sector generally requires the use of proxies to substitute for direct measures of outcomes and/or constructed measures related to desired outcomes and may require similar measures of outputs. Good measures provide decision makers with useful information while encouraging desirable behaviour that contributes to the achievement of goals and objectives.

4. DEFENCE BALANCED SCORECARD The key to any successful organization is its ability to create and sustain value production today and into the future. The use of the balanced scorecard can play a vital role in helping organizations achieve that goal. Initially proposed as a performance measurement system, the Balanced Scorecard concept evolved over time to a more comprehensive performance management system, to finally be transformed in a strategic management system for managing organizational performance and presenting a more ―balanced‖ view of organizational performance. The balanced scorecard is a strategic planning and performance management system that is broadly applicable to organisations regardless of size or type. It is widely used across sectors and increasingly in the public sector. 212

The balanced scorecard is used by strategic decision makers to make the right decisions about their business. It provides a method of aligning business activities to the vision and strategy of the organisation, monitoring organisational performance against strategic objectives and, in the process, improves internal and external communication. Performance management in many ministries of defence is based on the balanced scorecard approach. Ministries of defence adapted the original Kaplan and Norton balanced scorecard model so that it better serves their requirements. The balanced scorecard enables the defence management to monitor performance, both current and forecast, in pursuit of strategic objectives. The UK Ministry of Defence applied the balanced scorecard for many years. At the beginning, the scorecard had the four perspectives of Purpose, Resources, Enabling Processes and Future. In 2009, they made same adjustment and replaced Purpose with Outputs perspective (Figure 3). The perspectives cover the whole of the defence principal areas of business. Performance against each of the objectives is assessed on a quarterly basis. OUTPUTS Are we fit for the challenges of today and ready for the tasks of tomorrow? A. Current Operations: Succeed in operations and Military Tasks today. B. Readiness: Be prepared for Military Tasks as defined in Defence Strategic Guidance, in particular, contingent operations. C. Policy Contribution & Security Cooperation: Global and regional reduction in conflict and its impact, and more effective international institutions; and Countering Terrorism: Prevent and Pursue. D. Reputation: Enhance our reputation amongst our own people and externally.

RESOURCES Are we using and developing our resources to best effect? E. Personnel: Provide sufficient, capable and motivated Service and Civilian personnel to meet the requirements of Defence. F. Finance and Value for Money: Maximise our outputs within allocated financial resources.

To deliver security for the people of the UK and the Overseas Territories by defending them, including against terrorism, and to act as a force for good by strengthening international peace and stability

ENABLING PROCESSES Are we effective and responsible? G. Estate Management: Maintain and develop estate of the right capability, size and quality. H. Military Equipment Procurement: Equip and support our people for operations now and in the future. I. Infrastructure Procurement: Invest in strategic infrastructure to support defence outputs. J. Security and Business Continuity:

FUTURE Are we building for the future?

Enable secure and resilient operational capability.

M. Future Capabilities: Develop the capabilities required to meet the tasks of tomorrow.

K. Safety: A safe environment for our people. L. Sustainable Development: Embed sustainable development principles into all areas of Defence business.

N. Change: Develop flexible and efficient organisation and processes to support Defence. O. Future Personnel: Deliver the personnel plans to meet the needs of current and future tasks.

Figure 3: UK Defence scorecard (UK Ministry of Defence, 2009) In 2010, the UK Ministry of Defence decided to manage defence performance through the new Defence Performance framework. Quarterly, a Performance and Risk Report is produced in order to show progress in implementing the Defence Board Strategic Objectives from the plan. Annually, on the rolling basis, Sub Strategies owners and Top Level Budget holders report on implementation of their Sub Strategies. Strategic Performance Risk Report is produced as well, in order to enable the Defence Board to evaluate and adjust Strategy (UK Ministry of Defence, 2010).

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One of the key characteristics of the Canadian Department of National Defence (DND) Performance Management framework is the Balanced Scorecard. The Balanced Scorecard includes following four perspectives: Shape future defence and security outcomes; Deliver defence outputs; Manage program resources, and Professional, effective and sustainable defence team. For each perspective, key strategic objectives are established and the cause and effect linkages are established between them in the Strategy Map (Figure 4). Key performance Indicators are identified under each perspective, linking the strategic goals with the Defence Task and Change initiatives (Gillis, 2004).

Defend Canada and Canadian Interests and Values while Contributing to International Peace and Security

Perspective

Shape Future Defence and Security Outcomes

Strategic Objectives Success in Commitments

Relevant & Credible Forces

Strategic Relationships

Defence & Security Framework

Readiness Deliver defence outputs

Deployability

Sustainibility

Advice

Manage program resources

Professional, effective & sustainable defence team

Enhance Modern Management

Promote Wellness & Health

Capability

Optimize Resource Utilization

Promote Continuous Learning

Build Effective Partnerships

Foster Leadership & Inclusiveness

Recruit & Retain

Figure 4: Canadian Defence Strategy Map (Gillis, 2004) The Ministry of Defence of the Republic of Serbia is developing own strategic performance management system which purpose is to support accomplishment of strategic objectives and development of an entire defence system. Major strategic performance indicators and metrics are defined through the planning, programming, budgeting and execution process that is introduced in 2008. The Serbian Defence System recognized a balanced scorecard as a useful tool for strategic performance management, but a process of strategy map development is not over. Strategic defence objectives are defined into Long-term defence system development plan that is adopted by National Assembly in 2011. The basic orientation is to develop defence capabilities through performing task within main capability inputs: doctrine; organization; training; material; personnel; leadership; facility; and interoperability.

6. CONCLUSION Defence performance management is an ongoing and iterative process that requires a sustained effort. It is a constantly evolving process that supports producing appropriate results for the institutions and the public. Strategic performance management plays very important role in developing of defence capabilities that are necessary for protection of national security and national interests. The development and selection of

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defence performance measures are crucial issues for providing decision makers with useful information while encouraging desirable behaviour that contributes to the achievement of goals and objectives. The balanced scorecard is a strategic management system that enables defence institutions to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic defence performance and results.

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