Fact Sheet 4

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Fact Sheet:4

Improving future performance

1. Stage Two of a review is a key factor in establishing a strong framework to ensure that an Agency or NDPB has in place the necessary drivers to enable it to achieve continuous improvement in its performance until the time of the next review. A vital part of this is to establish an effective business planning framework, the building blocks of which are set out below.

An effective business planning framework

An effective business planning framework consists of five basic building blocks:

Bold aspirations – define and communicate a compelling and stretching aspiration for the future. It is critical that the aspirations are clear and consistent over time. Bold aspirations serve as the rationale for setting stretching targets and goals.

Long and short term targets – translate these aspirations into measurable long and short term targets against which performance and progress can be measured:

	long-term targets: specific three to five year targets linked to the aspirational aim and objectives (these are the targets which should feature in Public Service Agreements (PSAs) and will mainly be set at Departmental level, although some large Agencies and NDPBs may have responsibility for meeting particular targets in their Departmental PSA);
	short-term targets: annual targets, derived from the PSA targets and should be translated to the operational level. These must be quantifiable and measurable, or measure the completion of a specific task.

Ownership and accountability – every long and short term target must be ‘owned’. This can be done either individually or collectively (for example, by teams or other organisational units) but must result in specific responsibilities for delivering each target. Ultimately, individuals must feel accountable for delivery.

Rigorous performance review – establish a rigorous performance monitoring and review system. To be effective, performance reviews must exhibit the following characteristics:

	personal involvement for all managers including the most senior managers in the organisation;
	ultimately reports to Ministers; and
	be regular.

Reinforcement/incentives – ensure that reinforcing mechanisms are in place, encompassing an appropriate set of positive and negative incentives. That is, a consequence management system is needed with positive consequences for success and negative consequences for failure, however they might be defined.

2. This fact sheet sets out the types of questions which the review should consider asking to ensure, amongst other things, that the Agency or NDPB has the right business planning framework; the appropriate freedoms and flexibilities; and is subject to supportive governance and reporting arrangements in order to help it improve its performance in the future. Other work, for example, the results of an Agency or NDPB assessing itself using the European Foundation for Quality Management Excellence Model® and assessments carried out under the Charter Mark award scheme ¹, should also be drawn on where relevant.

3. Two other important factors in improving performance are taking full advantage of the scope for partnership working and making better use of new technology. These are considered in more detail in Fact Sheets 6 and 8 respectively.

4. Addressing the issues below may necessitate changes to Framework Documents/ Management Statements and/or Corporate and Business Plans.

Suitability of aims, objectives and targets

To what extent do they reflect:

	wider Government policies;
	the Minister’s policy objectives;
	the aims and objectives in the Departmental Public Service Agreement;
	the Department’s management strategy and plans; and
	customer and stakeholder needs?

	(For NDPBs) Do the aims and objectives reflect what is in legislation/Royal Charter/Memorandum and Articles of Association?
	Are the aims, objectives and targets comprehensive?
	Are systems in place to ensure that key targets are properly authorised by Ministers?
	Do the targets support the aims and objectives?
	Are the targets quantifiable and measurable?
	Are the key targets sufficiently stretching to drive continuous improvement?
	Is there sufficient continuity in the key targets between one year and the next?
	Does the Agency or NDPB have too many key targets?
	Are any additional/alternative key performance measures and targets needed?
	What is the balance between outcome and output related targets? Is the emphasis on achieving outcomes, where practicable, rather than on achieving output related targets?
	Does ownership for targets need to be properly established, either individually or collectively, to ensure that there are specific responsibilities for delivering each target?
	Does the Agency/NDPB need to develop additional internal targets to measure its performance?
	Does the Agency’s or NDPB’s performance monitoring and review system need to be made more rigorous and effective?
	Are effective information systems in place to measure performance against objectives and targets, which are robust but not unduly burdensome?
	Does the Agency or NDPB have an effective system in place for rewarding success and penalising failure?
	(For Agencies) To what extent does the Agency have its performance against key targets externally validated?
	Are adequate systems in place to ensure that the Agency/NDPB can identify customers’ requirements and monitor the extent to which they are met?
	Are there any significant differences between how well the Agency or NDPB thought it was serving its customers and what customers actually thought of its performance as reflected in the results of external consultation?

Future freedoms and flexibilities

	How might further delegations and freedoms help to improve efficiency and performance?
	Has the Agency or NDPB taken on its own pay and grading? If not, why not, and does it now need to? Are the current pay arrangements the most cost-effective way of recruiting and retaining staff?
	Does the pay system reward results and performance appropriately?
	Does the Agency or NDPB make the best use of non-pay incentives such as career break opportunities; improved working environment; flexible working; family-friendly working practices; and recognition in the form of national awards and honours etc?
	Are delegated authorities codified, clearly set out and understood by both the parent/sponsor department and the body itself?
	Are authorities delegated downwards within the body to the point where decisions can be taken most efficiently?

Training and development

	Are the Agency’s or NDPB’s staff sufficiently qualified to carry out the tasks allocated to it?
	Do staff need to be given more help to develop new skills?
	Do training systems need to be enhanced and made more appropriate?
	Does a more strategic approach need to be taken to personnel management?

Future governance and reporting arrangements

	(For Agencies) Are the respective roles of Ministers, the Permanent Secretary and the Chief Executive clearly defined? Do they need to be clarified?
	(For Agencies) If a Ministerial Advisory Board exists, can the way it advises Ministers be improved, and does it need to be more actively supported by the Department? Is its role clearly defined and understood? Does it have the appropriate mix of skills and experience among its membership. Does it need greater external representation? If a Ministerial Advisory Board does not exist, should one be established?
	(For Agencies) Where a Fraser figure exists, can he or she be better supported? Is such a figure needed in the future, especially where the Agency also has a Ministerial Advisory Board?
	(For NDPBs) Are the respective roles and responsibilities of the Chairman, Board members and the Chief Executive clearly defined? Has the Board got an appropriate mix of skills and experience among its membership? Is there a need to change its membership? Do changes need to be made to the body’s Code of Best Practice for Board Members? Are changes needed to the Audit Committee’s terms of reference and procedures?

	Are changes needed in the mechanisms by which Ministers and the Department receive information on the performance of the Agency or NDPB? In particular, does the system (including IT systems) for transmitting and processing such information facilitate timely and accurate exchange?
	Are there appropriate channels by which operational issues and policy formulation can inform each other in a timely and comprehensive manner? Does the parent/sponsor Department have a clear understanding of service delivery issues?
	Is the Agency’s or NDPB’s level of involvement in policy formulation appropriate? Does it need to have a greater involvement in this process?

Co-terminosity issues

	Does the Agency or NDPB operate through a local or regional structure? If not, would a local or regional structure help to improve the Agency’s or NDPB’s ability to deliver its functions or services in an effective manner?
	Do the boundaries of any existing local or regional structure need to be aligned with local authority boundaries and Government Office regions’ boundaries respectively?

Equal opportunities policies and diversity

	Is there an effective equal opportunities monitoring regime in place in relation to recruitment, appraisal, promotion and conditions of service of staff?
	(For Agencies) Does the approach to recruitment encourage diversity and contribute to achieving Departmental targets for the representation of women, ethnic minorities and people with disabilities?
	Do changes need to be made to personnel systems to ensure they comply with employment law and meet standards expected from a public sector employer?
	(For NDPBs) Are appointments to the Board consistent with Government commitments to the equal representation of women and men, pro rata representation of members of the ethnic minorities and increased representation of people with disabilities, on the basis of merit? Has the appointments profile contributed to meeting the departmental plan?

Management control and information systems

	Is the management control system an essential part of the corporate planning, budgeting and monitoring arrangements? In particular does it ensure that there is satisfactory management control of all operations undertaken by the body?
	Do the management accounts provide satisfactory information on the body’s outputs and performance against agreed targets, and so adequately support the management control system?
	Do the Internal Audit arrangements which apply to the Agency or NDPB meet with the requirements of the Government Internal Audit Manual? Does the parent/sponsor Department have a right of access so that its own internal auditors or other representatives can carry out any additional work required to provide assurance to the Department’s Accounting Officer on the exercise of his or her responsibilities in relation to the Agency or NDPB?

Reports and accounts

	Do the reports and accounts comply with the relevant Cabinet Office² and Treasury³ guidance?
	(For NDPBs) Do the annual reports and accounts provide a full description of the Board’s activities, state the extent to which key strategic objectives and agreed financial targets have been met, list the remuneration of Board members and senior staff?
	Do any changes need to be made in the accounts direction issued by the sponsor Department?

Financial regimes

	Does the body have the financial regime which would best help it to achieve its main aims and objectives and to improve the efficiency and effectiveness of its operations?
	Does the body have adequate systems of control for both current expenditure and capital projects?
	Will any changes have implications for the overall control of public expenditure and proper accountability to Parliament?
	Is there scope for the introduction of new financial regimes, for example to increase the proportion of expenditure financed from receipts, where this would lead to improved value for money?Resource Accounting Manual
	Could it charge for its services, either to members of the public, or to public sector customers or even sponsor departments?

Corporate and strategic planning

Does the body have a corporate plan?

Are there any weaknesses in the body’s corporate planning process e.g. in timing, assumptions, areas covered, target setting etc? Specifically, does the corporate plan:

	set clear aims and objectives;
	make realistic assumptions about the environment within which the body operates, including economic and political constraints as well as the potential for exploiting new opportunities;
	set specific performance targets for the different parts of the organisation;
	identify priorities amongst objectives and targets;
	use output and performance measures to review past performance and inform future planning strategies;
	draw up alternative strategies on the basis of different assumptions (i.e. using sensitivity analysis) and explaining the consequences for the various programmes and hence overall objectives; and
	incorporate an efficiency plan which describes how the body concerned proposes to achieve better value for money through contracting out, improved procurement policies, concentrating on case activities etc?

Does the body translate the first year of the corporate plan into an annual business plan with specific output and performance measures and targets?

Budgeting and resource planning

Does the body have a budgeting system which plans who will do what, by when and with what resources?

Does it monitor actual performance against plan and if so how frequently?

Does it enable remedial action to be taken in sufficient time when actual performance differs from plan? In addition:

	are all managers in the management line involved in setting and reviewing budgets;
	are budgets linked to the Departmental Public Service Agreement;
	are output and performance measures included so that an assessment can be made of what has been achieved compared with the objectives that have been set, in order that future plans are decided on the basis of that information; and
	have top management organised their work and that of their organisation so as to make clear the responsibilities for setting priorities, managing resources and reviewing performances?

For those bodies with commercial activities, is their pricing strategy assessed, and budgets set, in accordance with financial objectives agreed with the sponsor department? What rate of return has been set on capital employed? Does this need revising?

Footnotes

1 Further information on the EFQM Excellence Model® can be obtained from British Quality Foundation, 32–34 Great Peter Street, London SW1P 2QX. Information on how to apply the EFQM Excellence Model® to the UK public sector is available on the Internet.
Information on Charter Mark is available on the Internet at http://www.chartermark.gov.uk

2 Cabinet Office, Next Steps Agencies: Guidance on Annual Reports, October 1998 (Available on the Internet at http://www.cabinet-office.gov.uk/eeg/index/publications.htm).

3 HM Treasury, Resource Accounting Manual, 1998 (and as amended).