Good Performance Reporting… Now for Good Arguing

By: Kenneth A. Smith, Ph.D., CPA

Kenneth A. Smith, Ph.D., CPA, a founding member of AGA’s Mid-Willamette Valley Chapter, is an
assistant professor of accounting, Willamette University.

When it comes to performance reporting, I think we need to argue more often, more fairly and more openly. There are many benefits from engaging in argument (done right), but also some traps to avoid—but, yes, my key point is that we need more arguing…especially about the link between performance reporting and performance managing.

My fear is we simply do not know the HOW near as much as we know the WHAT. In this quarter’s (Summer 2008) Journal of Government Financial Management, my colleagues and I show that state agencies in Oregon are the best performance reporters (using AGA guidelines), but do we really know HOW they got there? We also know that different states are better at performing (using Governing Magazine rankings), but HOW do they do it? We know that there are numerous fads and large scale change initiatives every few years (see Ken Miller’s April column), but do we know HOW to say “yes” or “no” to the right ones for us?

My colleague Fred Thompson promotes the use of “Ethical Argumentation,” and I completely agree. He often says we need to focus on “WHAT is right, rather than WHO is right.” The nine guidelines for this approach reduce the likelihood of bad outcomes from arguing unfairly, without an open mind or too infrequently.

1. Practice inquiry before advocacy. Be open to a variety of points of view before you embrace any one of them.

2. Know your subject [do your homework].

3. Be honest about what you know and do not know [do not invent].

4. Try to tell the truth as you perceive it [do not lie or distort].

5. Do not oversimplify.

6. Acknowledge possible weaknesses in your position. Be honest about your own ambivalence or uncertainty.

7. Avoid irrelevant emotional appeals or diversionary tactics.

8. Appeal to the best motives of your fellows, not their worst.

9. Be prepared to lose if winning means doing psychological harm to others and demeaning yourself in the bargain.

Fred also promotes the idea of a “clinical” model of education. My reading of Fred’s article is that we need to proactively merge the views from academics and practitioners. Our approach to management needs to include evidence tempered by practice…and practice informed by theory and evidence. We are going to try the “clinical” model here at our campus in a performance measurement & management training on July 17. Wish us luck and I’ll post my observations afterwards.

So my call is a call to action. That each manager, analyst, elected official, accountant, academic and consultant takes a few steps back. Pick up a piece of paper—or better yet write a response to this blog—and write out three things regarding a proposition about performance reporting, such as the ones below:
1) What I KNOW
2) HOW I know it and
3) WHO disagrees with me.
The next step is to engage in a learning activity (called an ethical argument) with that person…we have to engage the other person because ideas, theories and observations cannot engage in an interactive discussion.

PROPOSITION #1 External performance reporting is necessary for accountability purposes.
PROPOSITION #2 External performance reporting is necessary for effective performance management.
PROPOSITION #3 External performance reporting is a colossal waste of time, no one reads them and neither managers nor elected officials use them.
PROPOSITION #4 External performance reporting is extremely risky because the media will only focus on the bad news.

Try the clinical approach tempered with ethical argumentation and let others know on what points you come to agreement and those that remain unresolved. Those unresolved ones are worth our time to engage in a broader discussion. However, I prefer the term argument to discussion—because I want to know which IDEAS and APPROACHES ultimately win—and have no interest in which person provides the conclusive insights.

I’m happy to share my 3 items (What I KNOW, HOW I know it, and WHO disagrees with me) on the 4 propositions—or any others—as long as you post something and agree to follow the nine guidelines for ethical argumentation.

Won’t you PLEASE argue with me?

TOMORROW: William Clements, Ph.D., Dean, School of Graduate Studies Norwich University on "The Norwich University MPA and CGFM”

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Comments

[Michael Jacobson]

Ken: I like your approach and would suggest that all four propositions are in some ways true and not even necessarily contradictory.

Reporting is necessarily for accountability, even if no one reads it. Recent focus groups we held about performance reports felt that just reporting the actual number (rather than a symbol or stoplight color) was in itself a form of accountability and they were happy to know we did it even if they weren't going to be looking at it over breakfast everyday.

Part of why they don't read it is because it is often dense, unattractive, and rarely pithy or approachable. Not sure that the GASB guidelines actually help in this regard as they are more focused on the quality of the data and thoroughness than crafting a well designed and easy to use report or dashboard.

By putting the data "out there" to the public raises its visbility to internal audiences (at least in the preperation and review stage) and can thus support performance management. This is becasue you need to be familiar with what your issues are in order to fix them and thinking about how this data will play in the public sphere focuses attention of deficits or areas that may not look so good from an outside perspective.

The media don't really care about performance except where measures are "in the red" but the fact that the government is putting those data in the public eye reduces the threat of the information through open acknowledgement of the self-described weakness. Our communications staff are well aware of the issues presented on our performance site and have an explanation and story to address each of these concerns.

[Ken Smith]

I said I would provide my 3 items if others posted - so let me do that for Prop 1.

What I KNOW
I know that many citizens and stakeholders are disenchanted with government. They do not understand which agency or jurisdiction provides services, and they believe inefficiencies and ineffectiveness are the norm. Thus, I conclude that external performance reporting is NECESSARY for accountability purposes.

HOW I know it
I have read numerous surveys, talked with bunches of government managers and heard various speakers at conferences. Barbara Cohn Berman is a leading expert - check out her November 2007 presentation (both slides and spoken text) at the PPMRN website
http://ppmrn.rutgers.edu/GeneralContent.aspx?Id=18&PId=9pingli@!&PId=9

WHO disagrees with me
I'm not sure. Perhaps many elected officials feel they were elected to "know" the citizen view. Perhaps management/staff people feel they are the experts and external reporting is not required (or at least not to citizens - maybe only to other professionals with the capacity to appreciate their work). Perhaps anyone who feels threatened (or "fear" as Bob Behn calls it) - especially if the information is inaccurate or misleading.

And ddisch was kind enough to respond to this strongly worded Proposition calling it "objectionable" ((Note: it was intentionally stated in very strong terms in order to create argument...not an "argument for argument sake", but because this is an honest view of mine and I know it is not shared by all))

ddisch proposes we change "necessary" to "builds credibility". I try to follow guidelines #7 "irrelevant emotional appeals" and #9 "willing to lose" - so I need to be careful if this is truly a critical item to fight about - or if I am willing to "soften" my language.

Our article in the Journal shows that only 3 states score better than 67% (see Figure 1). No wonder the citizens and stakeholders have such low views of government. I sense a strong connection between low external performance reporting quality and weak citizen viewpoints.

At this point - the evidence persuades me that performance reporting occurs too infrequently and at too low of a quality to get softer. I'll STICK WITH NECESSARY, but per guidelines #1 "open mind" and #6 "possible weaknesses" - I remain open to new information that can change my views.

[Ken Smith]

Thanks Phil for making the 1st post - and also Lee and ddisch for joining in. I'll try to "model" some of the nine steps below.

Regarding Prop 1 - did you notice that Lee restated it to "accountability is not fully met by financial reporting alone"? The original was "External performance reporting is necessary for accountability purposes".

The 4th guideline includes "do not distort" - is this a distortion? I'm going to abide by guideline #8 ("appeal to best motives of your fellows") and assume this was Lee's extension of the 1st guideline "practice inquiry before advocacy" where Lee is indrectly inquiring about what I actually meant by "accountability".

Indeed, Lee is correct in assuming that I used accountability from a financial or accounting viewpoint similar to what GASB did in Concepts Statement No. 2

((Disclaimer - Lee and I have known each other for 15 years and have "ethically argued" on numerous occasions...we don't always agree....and she doesn't always "win" - though I prefer my closing words "provide the conclusive insights" to the term "win". She and I are much better off because we keep track of how many times we jointly come to agreement rather than how many times either of us "won"))

[ddisch]

PROPOSITION #1 External performance reporting is necessary for accountability purposes.
I find the word 'necessary' objectionable, maybe substitute 'builds credibility'

PROPOSITION #2 External performance reporting is necessary for effective performance management.
See Prop. #1

PROPOSITION #3 External performance reporting is a colossal waste of time, no one reads them and neither managers nor elected officials use them.
The thought almost breaks my heart -

PROPOSITION #4 External performance reporting is extremely risky because the media will only focus on the bad news.
I don't agree or disagree on this. But if there is media focus - maybe it's needed. In the case of this proposition, I see opportunity. In Greek tragedy - the hero overcomes, providing lessons for everyday life. Sometimes laying out the truth may be risky, but it's credibly transparent. That same transparency further builds opportunities and avenues for constructive input and support, which may also be provided by the media.

I agree with the two propositions posted by Phil Candreva. My
viewpoint however is from the flip side and may be considered
Proposition 5A and 6A.

Proposition 5A: The information from those INSIDE an organization for
those outside (e.g., oversight bodies, legislatures, citizens) is
important to justify and support their activities, missions and goals.

Are performance measures really important to these bodies? Are they
valued? Are they correctly conveyed in a way that is valuable to each
of these groups? Are they clear, concise and are they truly serving a
purpose? Does the organization need to re-think what it does in terms
of value? Will an organization receive constructive input from the
external groups, based on what they convey as their performance metrics,
that is usable for performance organizations to re-formulate strategic
planning?

Proposition 6A: The nature of the decisions made internally to the
organizations (related to matters of governance, policy direction, or
legislative proposals) probably should not completely differ from
decisions concerning implementation of policy.

The questions here would be who and how do these performance measures
serve the public and does this simply mean reactive implementation based
on the squeaky wheel at any given time? An organization cannot
continually modify itself, it needs some stability. At the same
time, an organization has to take into account how best to meet public
expectations. This creates a conundrum – I’ll leave that for others
to provide their comments.

[Lee Schiffel]

I agree with Phil's propositions (5 & 6) that performance measures are used internally for decision making and that external users need different information. However, I do not believe that these differing needs preclude the use of performance measures by both internal and external users.

PROPOSITION #7 Different measures are needed for different purposes.

Perhaps there is some subset of internal performance information that is appropriate to share with the public and some subset that should be retained internally. However, I agree with Ken's PROPOSITION #1 -- accountability is not fulls met by financial reporting alone. The budget provides an understanding of how the organization intends to spend their funds and the annual report (CAFR) indicates how the money was actually spent. Neither of these allows the public to assess the efficiency or effectiveness of the municipality's actions. Only performance measures provide this vital information. (I acknowledge that there are many in public administration that would disagree with my position on the public reporting of performance measures and would like to more fully understand their position.)

[Phil Candreva]

Ken - What an important blog, I hope it gathers an audience.

Allow me to add a proposition or two in response to the four in your posting. Specifically, all of yours address external reporting of performance information. Performance management is an internal activity as much, if not more, than an external one.

WHAT DO I KNOW.
Proposition 5: The information needs of those outside the organization (e.g., oversight bodies, legislatures, citizens) differs from the information needs of the managers inside the organization.

HOW DO I KNOW IT & WHAT DO I KNOW #2:
Proposition 6: The nature of the decisions made external to the organization (related to matters of governance, policy direction, or legislative proposals) differs from the nature of the decisions made internal to the organizaiton (matters concerning implementation of policy and delivery of services).

I would cite Flury & Schedler's article "Political versus Managerial Use of Cost and Performance Accounting" in the Sep 2006 Public Money & Management as another reason How I Know.

I do not know who disagrees with me, but I hope s/he shows up! I love a good ethical argument.