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

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

3. 3 Productivity Measurement Overview Important Dates Productivity Ratio Developing Productivity Measures Entering Productivity Data into Virginia Performs Productivity Measurement Challenges (Review, Questions, Feedback) 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 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 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 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 Steps 1 & 2 – Review source documents and Identify key/critical processes. SOURCE DOCUMENTS Strategic Plan Executive Progress Report section on productivity List of services and products Key objectives and key measures COOP Document Critical processes Armics Document Key internal processes PROCESSES Key/critical processes are those that produce the agency's most important services or products for customers. They have a significant impact on the agencys customers, budget or performance outcomes.

15. 15 Steps 3 & 4 – Determine where efficiency is most critical in your agency. Research how others are measuring productivity. STEP 3 – EFFICIENCY NEEDS Where do you most need to use resources wisely? What process has a significant budget impact? Measure what you can control or influence. STEP 4 - RESEARCH Professional associations Other governments (state, local, Federal, other countries) Academic studies Survey your staff for ideas. Be cautious about comparisons to other states and organizations.

16. 16 Steps 5 & 6 – Decide what productivity measure to use. Develop/refine required information about the measure. STEP 5 – DECIDE WHAT PRODUCTIVITY MEASURE(S) TO USE It should be a measure(s) that substantially affects your operation. Set up the mathematical formula. Define the output. What does it include/exclude? Define the input. What does it include/exclude? STEP 6 – DEVELOP AND REFINE REQUIRED INFORMATION ABOUT THE MEASURE(S). The required information is the same as what is needed for all non-key measures in your strategic and service area plans. Measure Name Measure Class – Select Productivity Measure Measure Type – Grayed Out Frequency – Quarterly, if possible Data Source & Calculation Method Baseline – If its a new measure. Target – Desired level of performance, if determined.

17. 17 Exercise A: 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. Set up a possible mathematical formula that could be used for the productivity measure. Virginia Information Technologies Agency Virginia Department of Taxation

18. 18 Exercise B: Productivity in Your Agency Work in small groups, with people from one or more agencies in addition to your own. Develop ideas about how your agency could measure productivity. Set up a possible mathematical formula that could be used for the productivity measure. Use this as an opportunity to share best practices and receive/provide different perspectives on productivity measurement.

19. 19 Steps 7-10 7 - Gather the data and do the calculation. Does it make sense? Is it useful? Will the information help you track progress in productivity improvements or identify opportunities for improvement? 8 - Get agency and other internal approvals (e.g., secretary) and enter the data to Virginia Performs. 9 - Get approvals. Within your agency At a Secretary level From the Governors Office via DPB 10 – Use the measure(s)! Gather/report data as scheduled. Examine the data to identify areas for improvement. Launch improvement initiatives. Celebrate improvements!

20. 20 Entering Productivity Data into Virginia Performs Access VA Performs via the Agency Login screen

21. 21 To reach the section where you enter productivity measures click on: Browse and Edit your active performance measures.

22. 22 To enter a new productivity measure click on: New Measure If you wish to edit an existing productivity measure click on the actual measure (productivity measures are tagged with a bullet containing a ). Productivity measures can be setup at either the Agency Level or Service Area Level.

23. 23 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). All fields on both this slide and the next are required. Remember to save the measure after you have made any changes to it. Important Deadlines August 1, 2008 -- Agencies enter productivity measures into VA Performs (not available to the public) January 31, 2009 -- Agencies report for the first time the results of their productivity measures; data covers second quarter of FY 2009

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25. 25 What questions, issues or concerns do you have in reference to the development of productivity measures? Challenges

26. 26 Where To Find Information on Productivity Measures Agency Productivity Measure Guidebook Agency Strategic Planning Handbook (coming soon) DPB Analyst Thank You Lets Adjourn!