February 2005

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Guest Commentary

Lawrence E. Stone is the assessor of Santa Clara County and former mayor and councilmember of Sunnyvale, a city known for its pioneering role in the reinvention of government.

Whether you believe government is too big or too small, there is little dispute that government of any size can be more efficient and productive if we significantly alter the way government does business.

Yet few politicians seek public office on a platform of performance management. Instead, campaigns are littered with unfulfilled promises to improve schools, lower taxes, help the mentally ill, reduce traffic congestion, or whatever is the current hot issue. As Santa Clara County assessor, and previously as a city councilmember and mayor of Sunnyvale, the number one “plank” in all seven of my successful election campaigns has been a demand for “real” performance-based management and budgeting. The focus on performance comes from my background as a financial executive in private business, beginning on Wall Street and then as a partner in a San Francisco-based real estate investment and development company, where results were measured in terms of profits, successful projects completed, more customers, and new opportunities for expansion.

So, what exactly is performance management? Simply put, performance management and budgeting is a transparent system that links service levels directly with the budget, so that policy-makers can allocate resources according to desired service levels. For managers, employees and elected officials it means a clear direction about the mission and the performance measures for which they will be held accountable.

Achieving this type of broad sweeping change demands more than just a new “system.” It requires a quantifiable shift in an organization’s culture. That type of change begins with leadership from the top and is sustained only by the long-term commitment of all stakeholders. Everyone must be absolutely clear on what’s expected. The mission, purpose, standards, service objectives, and outcomes, must be clearly understood by both the elected officials and administrators.

Changing the organizational culture is a difficult and sometimes mystifying task, but it has been done. As a Sunnyvale city councilmember for 16 years, including two terms as mayor, I can attest to what can be accomplished. The City of Sunnyvale was one of the first governments to design and implement a comprehensive performance management, and budgeting system.

Sunnyvale proved that government can work, and work well, if there’s a strong consensus regarding organizational goals and systems, and the roles between elected policy-makers and the professional staff are clearly defined.

Our approach to performance management in Sunnyvale centered on what citizens consider the least interesting, driest policy document – the budget. Most of the time a government budget measures priorities by how much money is spent on things like people, paper clips, and property. Government budgets rarely define a specific level of service or an expected outcome. When we increase spending on education by 10%, we say, “Look how good we’re doing!”… but we don’t measure or budget our resources on whether kids are learning or not. In Sunnyvale we made the budget a genuine policy document.

We defined service levels, in terms of quantity, quality and cost. We built service levels into the annual budget to discipline the mayor and city council, guide staff, and inform the public. We established a desired outcome or level of service, and then priced its cost. If there wasn’t enough money to pay for that level of service, we changed the desired service level outcome. Too often, politicians demand a higher level of service than government can afford with the money available.

This fundamental switch on how we defined our business in Sunnyvale eventually triggered a culture change that had amazing ramifications over the past 25 years. For the first time, elected officials were explicitly required to define and approve the results they expected to achieve, taking into account the limited resources available.  Now, that's true policy-making.

Performance-based management takes time, and it’s very hard work. It took several years to convert the traditional budget from line items to service levels. There was resistance from both line staff and managers in the beginning. Today you couldn’t take it away from them.

Performance-based budgeting eventually took hold and today drives the organizational culture and mindset. One important result is that it keeps elected officials from micro managing the day-to-day business of the city, so long as staff delivers results. It empowers staff to try new ways to get the job done, as long as the goals for quantity, quality, and cost are met. If that means using expensive new technology it is okay, provided it results in increased productivity.

Unfortunately California and, to varying degrees county and local governments have fallen seriously behind when it comes to demanding accountability and performance. When Governor Schwarzenegger asked me to testify before the California Performance Review Commission (CPR), I outlined five things to consider as the state contemplates needed reforms:

“First, most public employees are very talented people who want to serve the public. In his book, Reinventing Government, David Osborne described the phenomenon of good people who work in bad systems. Time and again I have come up against institutional systems, traditions, and attitudes that get in the way and block the good intentions of staff and the productive use of their skills and talent. We need to eliminate the bad systems and focus on real reform that measures performance and holds public employees accountable.”

“Second, we must attack the existence of an overall organizational attitude pervasive in government that change is not only not possible, but that it actually is undesirable and counter productive. Although you can hear employees in the elevator or in the cafeteria complain about idiotic rules and procedures, there is also an air of resignation – ‘that’s the way it is and will always be.’ Nonsense!”

“Third, there is a remarkable absence of accountability based on establishing clear and practical performance objectives, and measuring and reporting results. Institutionalizing these measures and service levels directly into the budget is essential for success. In doing so, it allows employees to take reasonable risks and accept responsibility for continuous improvement.”

“Fourth, officials must focus on big, sweeping changes. Pilot projects and other attempts at piecemeal change have failed. We must also remember that the people funding these changes are politicians, like myself, with short attention spans, so along the way there must be quick wins and opportunities for success.”

“Fifth, stay focused and don’t attempt the un-workable. Too often, politicians get caught up in ideological solutions that are more ideology than solution.”

“Finally, I would urge the business leaders of California to support politicians who include performance management as a top priority, regardless of their partisan affiliation, and then hold them accountable after the election. We can and must do this to insure a strong future for California.”