Magazine article Government Finance Review

Measuring Efficiency Efficiently

Magazine article Government Finance Review

Measuring Efficiency Efficiently

Article excerpt

Where are the efficiency and productivity measures? I don't see any." I heard this critique a few weeks ago when discussing with a friend the City of Boston's newly posted quarterly performance reports, dubbed Boston About Results. He was right. There weren't any. My friend's expectation that he would see efficiency measures in the report, and his frustration that he did not, are not unusual. As more and more governments move to measure accomplishments and associated outputs, activities, and costs, many face mounting pressure to produce efficiency and productivity measures which show "units of output or outcome per unit of input" for every program.

President Bush's Management Agenda Scorecard, for example, required every federal program to produce at least one efficiency metric to earn a top score. State budget directives have similarly mandated agencies to measure efficiency. And performance management trainers frequently instruct class participants to include efficiency measures among the family of indicators every program should collect.

The irony is that requiring programs to produce efficiency measures can itself be inefficient. Programs faced with an efficiency measurement mandate often waste money on calculations that reveal little about ways to improve.

That is not to suggest that agencies should not pay attention to efficiency or that efficiency measures are never useful. Au contraire. Government organizations should measure their costs and constantly look for opportunities to use resources more wisely, but not by making every program produce classic unit-cost measures each reporting period. Agencies are likely to find far more savings if they conduct occasional, discrete cost analyses of specific programs and processes.

Before we blindly increase the burden on governments of producing efficiency measures we must ask ourselves: What additional insights can we gain from efficiency or productivity measures? And how can we avoid the trap of requiring agencies to produce efficiency measures that they do not find useful? Ali too often, agencies may be tempted to game the measures or produce junky data for the sake of fulfilling a requirement.

A number of common problems impede use of efficiency indicators. Knowing "dollars spent per incident per time period," for example, imparts little useable insight when the seriousness and complexity of the incidents or tasks (such as fires, crimes, or reviewed permits) varies significantly across time. To make the measure comparable across time periods, the agency would need to create a "seriousness" or "complexity" index, code the event for its relative import, and continually train coders to assure comparability of ratings across people and time--a costly undertaking.

Efficiency indicators can also mislead when new program approaches are introduced. Consider a situation where public safety officials adopt an effective new tire prevention practice which successfully reduces the number of fires. Fewer fires would drive up an efficiency indicator of "dollars spent per fire per time period," implying inefficiency despite the adoption of a more effective, and likely more efficient, practice. Government agencies using cameras to complement on-site inspections could encounter a similar problem. Texas used aerial photographs of tanks to detect gas plumes that it would never have found through inspections, while Massachusetts used aerial photographs to discover construction in protected wetlands that its inspectors had missed. …

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