1. 1 Commonwealth of Virginia Executive Branch Strategic Planning, Service Area Planning, and Performance-Based Budgeting Productivity Measurement: Cabinet Training July 30, 2008 Office of the Secretary of Finance Department of Planning and Budget

2. 2 Workshop Subject Matter Resources Don Darr, DPB Christopher Hewett, DPB John Ringer, DPB Gerry Ward, CoVF Facilitators John Wheatley & Jacqueline Anderson International Consulting Services, LLC (ICS)

3. 3 Productivity Measurement Overview Agency Requirements Important Dates Productivity Ratio Developing Productivity Measures How You Can Help Agenda

4. 4 Productivity measures represent the third component, along with agency key objectives and measures and the Management Scorecard, of Virginias outcome-driven performance management system. Productivity Measurement Agency Management Practices Effective & Efficient Agency Operations Virginias Performance Management System Performance & Productivity Measures Management Scorecard Agency Planning and Budgeting Outcome-Based Key Measures Linked to Long-Term Objectives Version 2.0 Approval Pending Key Measures Completed in 2006 Productivity Measures Due in 2008

5. 5 Productivity is a measure of the efficiency and effectiveness of an organization in serving its customers. It provides a basis for assessing how specified resources (inputs) are managed to produce acceptable outputs. Definition of Productivity

6. 6 Why Measure Productivity? The objective of productivity measurement is for organizations to focus attention on their use of resources by: measuring how productive they are, finding ways to optimize resource use, and finding ways to further increase efficiency in their operations, while maintaining or improving results.

7. 7 Develop one productivity measure… An agency can develop more than one measure, but the emphasis should be on doing one measure well. …that is tied to a key process, A key process produces the agencys most important service(s) or product(s) for customers and has a significant impact on customers, budget, or performance outcomes It is not an internal agency process. …and is cost-related. Example: cost per unit. Other types of productivity measures will be considered. Discuss other types with DPB budget analysts. What are agencies expected to do? Use the measure to identify ways to improve productivity and track the progress of your improvement initiatives.

8. 8 DateEvent June 2008Productivity measurement training was held for agencies. July 30, 2008Cabinet training August 1, 2008Agencies update all fourth quarter and FY 2008 performance measures. August 1, 2008Deadline for agency productivity measure entry into Virginia Performs (not available to the public) August 2008Cabinet and DPB review and feedback on proposed productivity measures August 29, 2008Agencies update their strategic plans to align with Chapter 879. Changes cannot be made to performance measures. September 2008Governors Office reviews and approves proposed productivity measures. October 1, 2008Productivity measures live (i.e., available to the public) on Virginia Performs October 1, 2008Agency data collection begins on approved productivity measures. January 31, 2009First data reporting on productivity measures is due. Important Dates

9. 9 A measure is: A management tool to assist in the decision making process An indicator used to determine the effect that strategies, initiatives and activities are having in accomplishing desired results Refresher: Definition of a Measure

10. 10 What are Productivity Measures? Productivity measures are typically a ratio of the volume of input to the volume of output. Single Factor Productivity Measure Relates a measure of output to a single measure of input such as labor costs Multifactor Productivity Measure Relates a measure of output to a bundle of inputs such as labor and capital Common Inputs Labor (e.g., hours, FTEs, costs) Materials (e.g., costs, units) Capital (e.g., equipment) Common Output Total number of items produced Examples: # of licenses issued, # of applications approved

11. 11 Basic Formulas for Calculating Productivity Input ÷ Output Fictional Example: Cost per unit Cost is the resource (input) Cost ÷ # of Units Total cost to issue drivers licenses ÷ # of drivers licenses issued during the same time period $250,000 ÷ 88,625 drivers licenses = $2.82 per license Output ÷ Input Fictional Example: Output per employee # of employees is the resource (input) # of Units processed ÷ # of FTEs needed to produce the output # of drivers licenses issued ÷ # of FTEs needed to produce the licenses 88,625 ÷ 26.5 FTEs = 3,344 licenses produced per FTE Cost-based productivity measures are preferred.

12. 12 Examples of Agency Productivity Measures Virginia DMV Cost to renew vehicle registration (by registration method) Numerator: Vehicle Registration Costs Denominator: Number of Registrations Processed Virginia DMAS Cost of processing/adjudicating a provider claim Numerator: (Payment to Fiscal Agent + DMAS Admin Costs) Denominator: Number of Claims Processed

13. 13 Suggested Steps for Developing & Implementing Productivity Measures 6 – Develop and refine required information about the measure(s). 7 – Gather the data for the measure(s) and do the calculation. 8 – Get agency and other internal approvals (e.g., secretary) and enter the data to Virginia Performs. 9 – Get secretary and Governors office approvals via DPB. 10 – Report and review the productivity measure(s) at regular intervals. 1 – Review source documents (e.g., strategic plan). 2 – Identify key/critical processes. 3 – Determine where efficiency is most critical in your agency. 4 – Research other states or organizations. 5 – Decide what productivity measure(s) to use. Use the measure(s) to stimulate improvement.

14. 14 Step 9: How You Can Help Review the productivity measures to ensure they meet the following criteria: Cost-based, if possible Linked to a key objective, measure or process, if possible Address a significant portion of the agencys budget or activities Can be used by the agency as a tool to optimize resources and identify improvement opportunities Approval Process: Work with your agencies and with DPB, as needed, to evaluate your agencies productivity measures. Notify DPB when you have completed your review and approval of your agencies productivity measures. DPB will facilitate the Governors Office approval of productivity measures. Other Things to Consider: Ensure agencies feel ownership for the measures. Encourage agencies to use the measures to stimulate improvements. Review the productivity measures at regular intervals with the agencies to track progress. DateEvent 8/1/08Agencies update all fourth quarter and FY 2008 performance measures. 8/1/08Deadline for agency productivity measure entry into Virginia Performs (not available to the public) Aug 08Cabinet and DPB review and feedback on proposed productivity measures. 8/29/08Agencies update their strategic plans to align with Chapter 879. Changes cannot be made to performance measures. Sep 08Governors Office reviews and approves proposed productivity measures. 10/1/08Productivity measures live (i.e., available to the public) on Virginia Performs 10/1/08Agency data collection begins on approved productivity measures. 1/31/09First data reporting on productivity measures is due. Important Dates

15. 15 Exercise: Case Study Information about two agencies will be provided by the facilitators. Please review the information and brainstorm ideas about how these agencies could measure productivity. Virginia Information Technologies Agency Virginia Department of Taxation

16. 16 Productivity measures are established within VA Performs by setting the Class to Productivity (measure type will become inactive once measure class is set to productivity).

17. 17 Where To Find Information on Productivity Measures Agency Productivity Measure Guidebook Agency Strategic Planning Handbook (update coming soon) DPB Analyst Thank You Lets Adjourn!