Transportation Performance Management: Insight from Practitioners (2010)

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Performance management is a tool for diagnosing and solving (or avoiding) problems. In recent years, many DOTs have begun to recognize the need to support decisions—both large decisions about major projects or initiatives and smaller everyday decisions—with improved data and analysis. The combination of flat or declining revenues with equal or greater demand from customers for quality service has caused agencies to turn to new methods to help them get more with less. Performance management provides a framework that can help transportation agencies set realistic goals, focus on the most important challenges, and improve efficiency. All DOTs collect substantial amounts of data, and many DOTs also already calculate per- formance measures. In the last several years, however, there has been a shift from perfor- mance measurement to performance management as well as from reporting whatever data are on hand to carefully and strategically selecting measures, setting targets, reporting mea- sures, and using this information to shape decisions. This Guidebook considers the moment of decision-making and examines the practices several transportation agencies use to bring performance considerations into the process. It applies to a broad range of decisions, including the following: • Strategy decisions, such as: What is the focus of the agency? What are the key initia- tives that should be pursued over the next several years? What are the most pressing challenges? • Resource allocation decisions that address which division, office, business function, or projects should receive funding. • Operational decisions, such as: When to schedule maintenance? How to operate the facil- ities? How to manage the projects that are being developed? • Human resource decisions, such as: What are the skills needed for a given position? What divisions do not use their employees efficiently? What training should be provided to employees? The Guidebook provides a short primer (Chapter 2) on performance management and a focused and detailed set of insights (Chapters 3 through 6) that describes how other agencies bring performance management into the decision-making process. As trans- portation agencies tackle both major choices about strategies, projects, and programs as well as everyday decisions about operations and personnel, performance management can help ensure both that DOTs “do the right thing” (i.e., that they make the right invest- ments) and that DOTs “do things right” (i.e., that they efficiently use the limited resources they have). 1 S U M M A R Y Transportation Performance Management: Insight from Practitioners

What is Performance Management The conceptual model used within this Guidebook is of a three-part process that consists of strategic planning, performance management, and reporting. All three are closely linked and, in most agencies, it is difficult to pull them apart. And though no agency uses this exact structure, all of the agencies reviewed in this Guidebook used some formulation of these basic processes within their performance management programs. Figure S.1 presents the overall approach to performance management as captured by the research effort. Throughout the implementation of this process, there is a recognition that three basic considerations—customer needs and desires, engineering requirements and lim- itations, and fiscal limitations—shape each of the key processes. The basic elements of the proposed approach are described in the following paragraph: • Strategic planning involves identifying what an agency hopes to achieve. It includes setting visions, goals, and objectives and defining agency initiatives to improve system performance. It uses performance measures to help make these important decisions. • Performance management is the regular ongoing process of selecting measures, setting tar- gets, and using measures in decision-making. Though measures and targets are likely only set on a periodic basis (i.e., every year or every other year), their use in decision-making requires constant review of the data and methods used to determine performance. • Reporting is a key component in developing a culture of performance throughout the DOT. Frequent public reporting of results can produce numerous positive results, including: building credibility, accountability, and trust between the DOT and its constituencies; strengthening support for budget and program proposals; and promoting friendly competition and infor- mation sharing between districts and offices that experienced differing results. Why Should a Transportation Agency Care about Performance Management? Performance management is a concept of growing importance. More and more state leg- islatures are requiring performance measures to back up not only transportation decisions 2 Transportation Performance Management: Insight from Practitioners Figure S.1. Performance management structure. Customer Engineering Fiscal Strategic Planning Process Performance Management System Reporting (Internal and External) Initiatives Vision/Mission Goals Objectives Resource Allocation Resource Efficiency Select Measures Set Targets Evaluate System Use Measures in Decision-Making

but all governmental decisions. Increasingly, federal legislation, such as the American Rein- vestment and Recovery Act (ARRA), requires tracking the performance of governmental projects and programs. There is a growing consensus that the next Federal surface transporta- tion reauthorization will include national tracking of performance and specific performance management requirements to be implemented by states and metropolitan planning organi- zations and may even identify specific goals and targets. A recently proposed version of this legislation developed by the House Transportation and Infrastructure Committee includes many principles of performance management (including measuring performance, setting targets, requiring the planning process to support performance measurement, and others); and stakeholder positions (e.g., the American Association of State Highway and Transporta- tion Officials, the American Association of Metropolitan Planning Organizations, and others) are supportive of requirements to track and report performance of the transportation sys- tem, though the specifics of individual proposals vary significantly. This Guidebook can help a transportation agency develop the necessary organizational framework to be prepared for future performance management requirements. Beyond potential requirements, states are also facing greater challenges and less funding to address them. The combination of Federal and state requirements, aging infrastructure, and interest groups who pay close attention to how governments spend their tax dollars, have increased the need to program agency funds in ways that are effective (i.e., they get the job done) and efficient (i.e., they represent smart use of funding). The 2009 economic recession, which made it challenging for transportation agencies to even retain their staff, created additional chal- lenges. Performance management can help transportation agencies make the best use of their resources and provide evidence to state legislatures of the need for additional funding. Finally, system users are demanding more information. Changing technology and increased information accessibility have expanded the demand for information about transportation system performance and governmental activities generally. Performance management can provide agencies with valuable tools in communicating with the public and stakeholders. Having readily available data and information about the performance of both the agency and the transportation system can help the public and stakeholders understand the progress that agencies are making to address performance and the challenges that transportation agencies face. Insights to Successful Performance Management Every transportation agency is a unique combination of existing organizational structures, geographic and demographic circumstances, and history. It is not possible to develop a single model for how a transportation agency should be operated or to develop a simple perfor- mance management recipe that applies in every case. The insights in this Guidebook are not meant to be applied as a whole. Instead, the Guidebook provides a menu of approaches that individual agencies can adapt to their specific circumstances. The Guidebook is organized around four broad insights and numerous specific insights from transportation agencies that are implementing performance management initiatives. The following sections discuss each of the four broad insights. Use Performance Management to Help an Agency Focus When initiating a performance management system, it is vital to focus measurement efforts on the agency’s highest priorities. Successful performance management initiatives are typically born out of specific agency challenges, rather than an interest in improving management. Summary 3

These programs use an incremental, responsive, and transparent approach to build and grow their performance management systems. As performance management programs grow and evolve, agencies can use measures to identify and to diagnose additional challenges. The key insights from agencies that described how performance management helped them focus included the following: • Initiate a performance management program to identify and address or avoid a compelling problem. Performance management is not an end in itself, but a means to focus an agency on specific priorities. Although these priorities can be determined at multiple levels, the initial focus should be on broad agency goals. A performance management program will not sell itself on its own merits but instead needs to demonstrate how it can help an agency address specific challenges. State DOTs often note that they have a hard time keeping performance manage- ment on the agenda. Performance management itself should not be on the agenda but instead should be a means to help deliver results on whatever important challenges an agency faces. • As a program develops, use measures to diagnose problems. As an agency identifies key problem areas and desired outcomes, a detailed review of the underlying reasons for the prob- lems is needed. Some issues can be solved quickly with creative thinking by DOT staff, while others may be more severe and require a more comprehensive evaluation. Performance man- agement should help agencies understand the causal relationships between the decisions they make and the outcomes they see on the system. • Support performance management with a nimble strategic planning process. Strategic planning is the foundation of performance management. A nimble strategic planning process focuses an agency on a limited set of short-term outcomes tied to specific performance mea- sures. Strategic plans are less important than a process that identifies an agency’s most com- pelling problems and lays out a path to address them. Being comprehensive is less important than providing direction. • Use performance management to improve agency transparency. The goal of performance management is to tackle difficult problems and improve the agency, not to provide public rela- tions material. Agencies must work through resistance to present negative results and must recognize that performance measurement will not only highlight improvements but also may uncover chronic problems. As part of focusing the agency, it is important not to avoid these difficult challenges. Performance Management Must Engage with Employees Employees are the lifeblood of a transportation agency, and any new management initia- tive will only be successful if all levels of employees are included in the process. One focus of performance management is on improving the efficiency of transportation agency oper- ations. Efficient operations require employees to understand the challenges that the agency faces and the program that the agency is initiating to address those challenges. Performance management should ensure that all staff are accountable for system performance. The key insights from agencies that described how performance management helped them engage with employees included the following: • Senior management must support the program. Strong leadership from a DOT’s chief exec- utive or from senior management is almost always a defining factor in the success of any DOT’s performance management initiative. Although performance management cannot be accomplished solely through a simple top-down directive, agency leaders must set the tone and demonstrate that measuring performance and instituting a performance-based decision framework is going to be a priority at the agency. The most effective way to set the tone is to make regular use of performance data and reports. 4 Transportation Performance Management: Insight from Practitioners

• Hold staff accountable for agency performance. When employees understand that their job performance is gauged in part by the outcomes of appropriate performance measures, they are much more apt to see the “big picture” in their work and to find management strategies that influence results. A crucial component of performance-based management is cultivating an agency philosophy that stresses the idea that “we’re all in this together.” Increasingly trans- portation agencies are using system performance outcomes as one metric of employee per- formance. This helps staff understand the ultimate system outcomes to which they contribute. • Empower staff to take ownership of the program. Performance management programs must provide opportunities for individual staff to take action. Performance management’s focus on improved efficiency requires an environment where individual employees can have a positive impact on the way the agency operates. Employees should receive training, be provided access to performance data, and be encouraged to recommend and enact solutions. An agency’s most valuable resource is its personnel, and providing individual staff members with the informa- tion, the environment, and the confidence to take on challenges is the best strategy to encour- age creative problem solving and foster a culture of shared responsibility. • Employee challenges are inevitable. Performance management means changing the way an organization conducts business. As these programs are implemented and individual account- ability and responsibility is increased, resistance should be expected. DOTs have to find ways to find performance management champions willing to take on new responsibilities. Performance Management Requires a Customer Focus Performance management requires transportation agencies to think of the users of the transportation system as customers and to work to understand their perspective when devel- oping both transportation programs and the measures used to evaluate them. In an era of easily available information, an important component of a program is providing access to the public in terms that they can understand and addressing the issues that concern them. The key insights from agencies that described how performance management helped them provide a customer focus included the following: • Align performance targets with customer expectations. While DOTs have strong ideas and readily available data to define performance, defining customers’ expectations is often fuzzy. In the area of congestion, for example, customers may care generally about a combination of travel speed and trip reliability, but DOTs may lack good information about what customers believe constitutes a satisfactory speed or level of reliability. As a result, even with the right measures in place, DOTs often struggle to set performance targets that match customer expec- tations. If the agency sets its congestion targets too low, customer satisfaction may fall, but if it sets the targets too high, funds may be spent unnecessarily on achieving less congestion than customers care about. DOTs can address this challenge by making better use of feedback from customers to help set performance targets. • Learn how to better balance multiple constraints in decision-making. DOTs do not have the luxury of unlimited funding for transportation. Sound engineering principles, however, still dictate fundamentals that must guide the safe design, construction, and operation of every proj- ect. Not only must a DOT balance fiscal responsibility with good engineering judgment, but it must find ways to keep customers satisfied as well. Transportation agencies must use a broad perspective and understand when it is appropriate and safe to relax specific requirements that may not provide the service or investment that customers expect or need. • Build agency credibility via modest, customer-focused “quick fixes.” A DOT’s credibility with stakeholders is a precious asset. It is arguably as essential to building and maintaining transportation infrastructure as concrete, asphalt, and smart employees because it enables DOTs to work with the public, the business community, and legislative and governmental Summary 5

bodies to achieve strategic objectives like securing funds to meet critical transportation needs. Credibility is hard won and easily lost. Performance management can help DOTs identify low-cost/high-value solutions that quickly help boost or restore their credibility. Although agen- cies must tackle their most significant challenges, addressing larger problems may require first establishing credibility with stakeholders and the public by making investments that show sys- tem performance improvements. Sustain Performance Management by Building Constituencies Although the support of an agency’s CEO is often crucial to get a performance manage- ment program started, the true mark of a successful program is one that survives changes in political administrations and CEOs. Performance management programs that last typically have a wide range of supporters and data users, including legislatures, the public, interest groups, and others, in addition to the administration. Many transportation agencies that have successfully implemented performance management are able to pitch the usefulness of the program and data to new administrations who can set their own priorities, but continue to manage their programs using data and analytic techniques. Key insights from agencies that have sustained performance management included: • Senior management must work to institutionalize performance management. Performance management is often spearheaded by a CEO or senior manager who seeks to solve serious agencywide management challenges. DOTs sometimes find that the senior management lead- ership can also “brand” a performance management program with its champion’s identity. As a result, an incoming leader may be tempted to make his or her administrative mark by chart- ing a course away from performance management or restarting a program, setting back its development by several years. DOTs that have successfully carried performance management forward across administration changes report an ability to institutionalize performance man- agement in several ways. • Ensure many DOT managers and employees are involved in performance management. DOTs often rely on a small performance measurement work unit to perform day-to-day per- formance management functions and to act as a point-of-focus for the agency’s overall activ- ities. Such an office, however, may run the risk of creating a perception among other DOT staff that performance is not their responsibility. Most successful performance management programs build on bold leadership by engaging the next tier of leaders at the DOT to act as ambassadors and champions to the agency’s entire staff. Without this kind of engagement, a performance program is unlikely to outlast its leader. • Use performance management to build bridges with state legislators. Many state DOTs have developed performance management efforts in response to legislative mandates although a few have taken on performance management on their own initiative. However a program is established, the state legislature is an important audience for their performance results. Involvement by the state legislature, however, can be a double-edged sword. Some DOTs struggle to meet unwieldy performance mandates while others have found that an in-house performance management program can be an important tool for improving their relationship with the state legislature. Taking initiative to establish a performance management system and working with the legislature to define the requirements for performance reporting can help ensure a successful, long-lasting program. • Make performance management efforts visible to the public. Performance management programs have both internal and external audiences. Performance results are discussed inter- nally at management meetings and are also presented publicly in regular reports. The external audiences for these results can include business groups, legislators, the public, and advocacy groups. High external visibility helps hold DOT managers accountable and creates anticipa- 6 Transportation Performance Management: Insight from Practitioners

tion for results among key stakeholder groups. Once performance results begin to be reported and understood by news media and stakeholder groups, it becomes difficult to stop reporting performance. Implementation The performance management programs reviewed as part of this research each began in unique circumstances. Though there are clear common elements, there is no one single pattern of implementation that can be described in a guidebook. The patterns that individ- ual agencies followed may provide useful examples for an agency considering a performance management program, but it is likely that any agency reading this Guidebook will be inter- ested in a unique selection of the insights described. Four general implementation stages have been identified for a performance management initiative. In practice, few agencies have (or are likely to) approach performance management in a simple linear fashion. Many agencies already report measures or have pieces of a pro- gram in place. Regardless of where an agency finds itself within each of these steps, key ques- tions within each of the following four broad areas are likely to be useful in implementing a program: 1. Initiate. In this step, agencies define the need for performance management, its role within the organization, and who will be responsible for managing the effort. 2. Design. During the second step, an agency selects measures and targets, develops reporting mechanisms, and provides an overall approach for the program. 3. Execute. The next step in the process involves performing the mechanics of the performance management program. This step includes collecting and/or compiling data, calculating the measures, and generating and distributing reports. These activities represent a sustained effort that must be performed on a continuous basis throughout the life of the performance man- agement program. 4. Apply. The final step in the implementation model involves using the performance results to make better decisions. Similar to the Execute step, the “Apply” step represents a sustained long-term commitment. The main difference between these two steps is that using perfor- mance results requires agencies to address organizational, institutional, and cultural issues that go well beyond the logistical challenges of calculating them. The focus of this Guidebook is primarily on what happens in the last step—the applica- tion of a performance management program to actual decisions. The insights in this Guide- book can help improve decision-making, but agencies looking for a more fundamental primer on performance measurement may want to supplement this Guidebook with other resources. Several existing reports developed by NCHRP may be especially useful for initiating a new program, including the following: • NCHRP Report 446: A Guidebook for Performance-Based Transportation Planning provides an introductory primer to help agencies integrate performance measures into their long-range planning efforts and improve the development, implementation, and management of their transportation plans and programs to support agency goals and objectives. • NCHRP Report 55: Performance Measures and Targets for Transportation Asset Management reviews performance measures to support asset management and provides a framework for setting targets. • Strategic Performance Measures for State DOTs—A Handbook for CEOs and Executives provides a primer for state DOT executives considering implementing performance management within their agencies. It identifies the key building blocks to help link performance measure- ment to strategic planning. Summary 7

These are just a few reports that address performance management in transportation agencies. This Guidebook builds on this effort by delving more deeply into the decision- making process to help understand what it takes for measures to get used by transportation agencies on a day-to-day basis. The guidance reported here builds on these previous efforts by examining transportation agencies that have been relatively successful in implementing performance management programs. The review has produced a menu of insights that other agencies can draw from to implement their own programs. 8 Transportation Performance Management: Insight from Practitioners