IMPACT OF EFFECTIVE
PERFORMANCE MANAGEMENT
By: Daniel J de Lange- Director Finance AND Corporate
Services and CFO
Email: ddelange@sbdm.co.za
082 557 2064
Disclaimer(reputational risk)
Anything that I say during this presentation is my opinion and not necessarily
the opinion of IMFO or my Employer
Some of the situations that I mention may or may not be true and the
identities of any parties involved have been disguised.
WHY?
• Why are so many municipalities receiving qualified
,disclaimer ,and adverse audit opinions?
• Why are so many municipalities experiencing cash flow
problems and are unable to meet their financial
commitments?
• Why are so many municipalities underspending on their MIG
grants?
• Why is the staff turnover at senior management level so high
and why is it taking so long to finalise disciplinary cases ?
• Why does the irregular expenditure reported at local
government level run into billions of rands?
What are the root causes of these issues?
AG Audit Focus Areas(risk management
focus areas)
• LEADERSHIP
• FINANCIAL AND PERFORMANCE
MANAGEMENT
• GOVERNANCE
LEADERSHIP framework
•
•
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Provide effective leadership based on a culture of honesty, ethical business practices and good
governance, protecting and enhancing the best interests of the entity
• Exercise oversight responsibility regarding financial and
performance reporting and compliance and related internal
controls
• Implement effective HR management to ensure that adequate
and sufficiently skilled resources are in place and that
performance is monitored
•
Establish and communicate policies and procedures to enable and support understanding and
execution of internal control objectives, processes, and responsibilities
•
Develop and monitor the implementation of action plans to address internal control
deficiencies
•
Establish an IT governance that supports and enables the business, delivers value and improves
performance
FINANCIAL AND PERFORMANCE
MANAGEMENT
• Implement proper record keeping in a timely manner to ensure that
complete, relevant and accurate information is accessible and available
to support financial and performance reporting
•
• Implement controls over daily and monthly processing and reconciling
of transactions
•
• Prepare regular, accurate and complete financial and performance
reports that are supported and evidenced by reliable information
•
• Review and monitor compliance with applicable laws and regulations
•
• Design and implement formal controls over IT systems to ensure the
reliability of the systems and the availability, accuracy and protection of
information
GOVERNANCE
• Implement appropriate risk management activities to ensure that
regular risk assessments, including consideration of IT risks and fraud
prevention, are conducted and that a risk strategy to address the risks is
developed and monitored
• Ensure that there is an adequately resourced and functioning internal
audit unit that identifies internal control deficiencies and recommends
corrective action effectively
• Ensure that the audit committee promotes accountability and service
delivery through evaluating and monitoring responses to risks and
providing oversight over the effectiveness of the internal control
environment including financial and performance reporting and
compliance with laws and regulations
•
• “IF YOU HAVE NOT ESTABLISHED A
PERFORMANCE MANAGEMENT UNIT IN
THE MM’S OFFICE AND AN EFFECTIVE
PERFORMANCE MANAGEMENT SYSTEM
THERE CAN BE NO EFFECTIVE
MONITORING AND EVALUATION OF
PERFORMANCE ,RESULTING IN POOR
SERVICE DELIVERY STANDARDS AND POOR
FINANCIAL MANAGEMENT“
INTRODUCING PERFORMANCE
MANAGEMENT
• Performance Management is an ongoing, continuous process of
communicating and clarifying job responsibilities, priorities and performance
expectations in order to ensure mutual understanding between employer
and employee.
• It is a philosophy which values and encourages employee development
through a style of management which provides feedback and fosters
teamwork.
• It emphasizes communication and focuses on adding value to the
organization by promoting improved job performance and encouraging skill
development.
• Performance management involves clarifying the job duties, defining
performance standards, and documenting, evaluating and discussing
performance with each employee
Legislative and Regulatory Framework
The function of performance management and its use by officials is
regulated by the following legislation:
• The white paper on local Government (1998).
• The Municipal Systems Act (32/2000).
• The Municipal planning and performance Regulations (2001).
• The Municipal Finance Act (56/2003).
• The Municipal Performance Regulations for Municipal Managers and
Managers Directly Accountable to Municipal Managers (2006).
• Appointment and conditions of employment of senior managers(2014)
What are the Objectives of the
Performance Management System?
Beyond the fulfilling legislative requirements, the following objectives
provide benefits for all stakeholders to the process:• Increased certainty of job roles.
• Increased communication across the institution.
• Facilitation of decision making through the clarification of goals and
priorities.
• Provision of early warning signals highlighting under-performance so
that timely intervention can steer performance back on track.
• Continuous assessment of the performance of the municipality so as to
highlight areas requiring improvement.
• Creation of a culture of the municipality amongst all officials including
recognizing excellent performance and correcting poor performance.
• Assist in building a teamwork approach
Five Dysfunctions of a Team
(Management Team or any
other team)
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Absence of trust
Fear of conflict
Lack of commitment
Avoidance of accountability
Inattention to results(need for achievement and measuring results)
There is a need to hire people capable of being strong team players,
that fit into the corporate culture and are committed to achieving the
municipality’s development goals
• A functional cohesive team is an advantages and an asset for any
organization
Principles Governing the Performance
Management System
To ensure that a fair PMS is implemented, the following principles must be
maintained at all times:SIMPLICITY
The system must be simple, user friendly and easy to operate .
POLITICALLY DRIVEN
As the IDP is a political document, so must the PMS be politically
driven.
TRANSPARENCY AND ACCOUNTABILITY
The process must remain open and transparent
INTERGRATION
The system is intertwined with all areas of the institution and
must therefore be integrated into other processes in the
municipality
OBJECTIVITY
Performance management must be founded on objectivity and
credibility.
Levels of Performance Management
INDIVIDUAL LEVEL
PERFORMANCE
AGREEMENT
OPERATIONAL
LEVEL
SDBIP /
DEPARTMENTAL
SCORECARD
STRATEGIC LEVEL
IDP
EMPLOYEE
PERFORMANCE
DEPARTMENTAL
PERFORMANCE
ORGANISATIONAL
PERFORMANCE
Levels of Performance Management
INDIVIDUAL LEVEL
PERFORMANCE
AGREEMENT
OPERATIONAL
LEVEL
SDBIP /
DEPARTMENTAL
SCORECARD
STRATEGIC LEVEL
IDP
EMPLOYEE
PERFORMANCE
DEPARTMENTAL
PERFORMANCE
ORGANISATIONAL
PERFORMANCE
Organisational – Individual
Performance Link
EMPLOYEE
PERFORMANCE
ORGANISATIONAL
PERFORMANCE
PLANNING, IMPLEMENTATION, MONITORING,
REVIEWING, REPORTING
Two Essential Parts
• Performance Indicator – what it is we are measuring
• Performance Target – what performance we are trying to achieve
Characteristics of Performance
Indicators*
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•
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Measurable
Relevant
Objective
Precise
* Reg 9 (1) (b)
practical and realistic
measure efficiency, effectiveness, quality and impact
commensurate with available resources
commensurate with capacity
consistent with IDP priorities and objectives
* Reg 12 (1)
Mandatory Performance Indicators*
• % of households with access to basic services
• % of households earning less than R1100 with access to basic
services
• % of capital budget
• No of jobs created through economic development initiatives
• No of people from employment equity target groups in three highest
levels of management
• % of budget spent on workplace skill plan
• 3 financial ratios dealing with debt
* Reg 10
Challenges
•
•
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Low quality IDPs (compliance rather than municipality’s strategy)
Some municipalities not developing quality SDBIP
Misalignment between IDP priorities and PAs
Municipalities not conducting quarterly reviews
PERFORMANCE MANAGEMENT NOT ROLLED OUT TO LOWER LEVELS
In some provinces section 57 managers continue to receive performance
bonus without performance assessments or annual performance reports
being submitted
• PM not appreciated as a tool to enable municipalities to deliver on
developmental mandate
Challenges
(Cont)
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Planned targets not achieved;
Key Performance Indicators(KPI’s) not consistent with the approved annual
performance report;
Changes made to the SDBIP without being approved by Council;
KPI’s and targets not “SMART”; simple ,measurable , accurate and realistic
targets
Reliability of reported performance information not sufficient;
Indicators does not relate logically to strategic goals;
No processes and systems in place to produce the KPI;
No evidence available to substantiate performance;
Challenges
(Cont)
• Management does not monitor the data assurance procedures in place
such as data collection, processing and monitoring procedures.
• Compliance with legislation eg submission and signing of performance
management docs by due dates.
• No trained/specialised performance management person in position. It
is usually “IDP/PMS Manager” and hence PMS is neglected and focus
only on IDP. This has become a critical position now that AG will start
focussing on performance. The right calibre of person with good
management skills and strong leadership that could report regularly and
objectively on performance and that can introduce a PMS system.
Challenges
(cont)
• Political and Administrative leadership and oversight is key. MM and
Mayor/Mayoral Committee
• Evidence files are not complete at municipalities –verifying info, keeping files
central per dept etc. AG…
• Electronic tools are not used effectively as data is not populated on time some municipalities think an electronic tool is a performance management
system.
• PMS Managers are not sent for training in KPI Development, M&E etc so that
they could transfer the knowledge gained.
Challenges
(cont)
•
The placement of the PMU in the organisation is important. It should be placed
in the MM’s office as the authority for performance must come from MM and
also legislation state that the Mayor is responsible for ensuring a PMS System is
in place and delegated to MM.
• The establishment of PMS Forums is very valuable for a District as in our
case where knowledge are shared etc.
• Performance Regulation 2006 for MM and Directors Guidelines for
implementation
• Planning for performance is a major challenge, hence our KPI and targets,
budgets are skewed
Obligations to ensure collective
performance
Organisation
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Enabling environment to facilitate effective
performance
Clarify development objectives and
performance expectations
Regularly review employee and provide
feedback on performance
Access to skills development and capacity
building (PDP)
Work collaboratively with employee to solve
problems that may impact on performance
Delegate powers required by employee to
enable to meet performance objectives
Make available necessary resources required
to enable employee to perform
Individual
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•
•
•
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Buys into and participates in the
PM system
Understanding of strategic
intent (IDP)
Work collaboratively with
employer to solve problems
that may impact on
performance
Commits to fulfilling their part
in enabling the institution to
deliver on mandate
Fulfills commitment i.t.o
performance agreement
Creative Problem Solving Solutions
• DEALING WITH THE ROOT CAUSE OF THE PROBLEM AND NOT THE
SYMPTOMS OF THE PROBLEM
• Root cause analysis (RCA) is defined as the identification of why an issue
occurred vs. only identifying or reporting the issue itself.
• In this context, an issue is defined as a problem, error, instance of
noncompliance, or missed opportunity.
• Root cause analysis benefits the organization by identifying the
underlying cause(s) of an issue. This approach provides a long-term
perspective for the improvement of business processes. Without the
performance of an effective root cause analysis and the appropriate
remediation activities, an issue may have a higher probability to reoccur.
Root cause analysis helps prevent additional rework and proactively
addresses future recurrences of the issues.
General Process for Performing a RCA
1. Define the problem.
2. Gather data/evidence.
3. Ask why and identify the true root cause associated with the
defined problem.
4. Identify corrective action(s) that will prevent recurrence of the
problem.
5. Implement the corrective action(s).
6. Observe the corrective actions to ensure
7. If necessary, re-examine the RCA.
Concluding Remarks
• Good performing individuals =Good performing institutions
• A Performance review is an opportunity to identify root causes
of poor performance and to take appropriate action to improve
performance
• Need to appreciate the value of PM in fulfilling our legal
mandate
• Critical relationship between organizational performance and
individual performance
• PM policy framework need to also outline process and
procedures for managing individual performance
• Do not be afraid to introduce to introduce new creative
approaches to improve decision making and problem solving
• Deal with the root causes of the problems not
the symptoms
• “Lets sharpen the saw” Steven Covey
Thank you for your attention