Using Performance Management to Transform a Failing Organization: The Improvement Journey of North East Lincolnshire Council

Introduction

After several years of being assessed as performing poorly by the Audit Commission, in 2004 North East (NE) Lincolnshire was plunged fully into a performance crisis by a financial audit that uncovered serious accounting irregularities. Being monitored by the then Office of the Deputy Prime Minister, the council embarked on a far-reaching improvement journey. The journey began with the identification and implementation of 15 key projects that were deemed necessary to rebuilding the fabric of the organization and making the organization 'fit for purpose'. Extensive early efforts were also expended on improving business planning, in solving serious underlying data quality issues and in creating a culture where performance was reviewed regularly and carefully. With the 2009-12 council plan, the performance journey entered a new phase with the identification of five strategic aims with supporting priorities, measures and targets. These aims fully support community priorities that were identified by the council and its partners through extensive local consultation.

About North East Lincolnshire Council

Located on the east coast of England, North East (NE) Lincolnshire is a unitary local authority that includes the towns of Grimsby, Cleethorpes and Immingham. Formed as part of local government reorganization in 1996 and consisting of 15 electoral wards, about 159,000 people live in the borough within a mix of dense urban conurbations and dispersed rural communities. The area is historically best known for its fishing industry. The council, which has 5908 employees, is presently run under a Liberal Democrat and Conservative alliance with a leader and cabinet model of governance.

A Performance Crisis

NE Lincolnshire Council has been on a 'performance journey' since 2004. In that year the council was plunged into a 'performance crisis,' through a damning financial audit. But NE Lincolnshire's performance shortcomings had first been highlighted through a 2002 Comprehensive Performance Assessment (CP) undertaken by the Audit Commission. As a brief explanation, the CPA framework draws on a range of information such as performance indicators, assessments of corporate capacity, audit and inspection reports, and stakeholder opinions to reach a single judgement about the performance of a local government body. Through the CPA framework, direct performance comparisons can be made between one local authority and the other 353 throughout England. According to the CPA findings, in 2002 the council was judged as performing poorly (in the bottom 10% nationwide), while in both 2003 and 2004 it was judged as 'weak' (in the bottom 12%).

Financial Mismanagement

But it was the financial audit of 2004 that would prove both the low-point in the council's performance and catalyze the subsequent transformation efforts. "For several years the Audit Commission had expressed concerns about the financial management of the council," comments Beverley Compton, Deputy Director, Policy and Performance. "These concerns had not been addressed and in the financial audit of March 2004, the auditor identified serious accounting errors," she says. Most worryingly, it was realized that the council was planning to spend more money than it actually had, even when including what was in the general fund reserve. Indeed, the council had planned to spend £3 million of general fund reserves in 2003/4, but with only £1 million left, was not in a position to do so. The Auditor actually found that the council had been overspending its 2003/4 plans by an estimated £3.9 million. As a result the council issued a public interest report, which is a vehicle for exposing financial mismanagement within councils. From this the Office of the Deputy Prime Minister (ODPM) put the council into 'intervention', which is similar to the special measures approach to improving failing schools.

Job cuts

Being placed into intervention led to the resignation of the Chief Executive Officer and the Director of Finance. Moreover, to address the budgetary problems, the council was forced to make significant job cuts, which Compton, who joined the council from the Audit Commission in November 2004, says "led to a loss of organizational memory and a fear amongst staff that services would further deteriorate."

Fifteen Key Projects

Being in intervention meant that the council officials had to agree a framework with the ODPM that would describe the key actions to be taken to improve performance. Given the poor CPA ratings it was recognized that inadequate financial management was just one element of a wider problem around governance and management. Core to the agreed framework were fifteen key projects that were essentially focused on rebuilding the fabric of the organization or as Compton states: "creating organizational fitness for purpose." "This was the council's first attempt at prioritizing where it wanted to direct performance improvement efforts," she recalls. "And delivering to these projects was the main focus of the first 18 months of our performance improvement journey."

Housing project

Progress in implementing these projects was assessed on a monthly basis by the council and the ODPM monitoring board. Some of these early projects meant tough decisions had to be made. For instance, through one of these projects the council's housing stock was transferred from the council to local bodies, such as Housing Associations under Large Scale Voluntary Transfer (LSVT) provision. Although LSVT had been necessitated by the poor management of the housing service, it was a difficult decision for the elected councilors to make as they perceived providing housing as a key service. That the implementation of the transfer was completed within the project timeframe was a demonstration that the council really meant business.

Job evaluation

As another example the council completed a major job evaluation programme to ensure pay equality. The council had attempted job evaluation on two previous occasions, but had failed to make the change, earning itself a reputation of having plans, but failing to implement them. This early project completion was another demonstration that the executive directors and council's elected members could make tough decisions, stick to them and follow through with action - especially as implementing this project meant a reduction on pay for some members of staff.

Office Accommodation

As well as the recruitment of key employees (Chief Executive, Deputy Director roles and finance staff), a further project focused on the council's provision of office accommodation. "We had staff located in about 50 administrative buildings," recalls Compton. "It became evident that this was causing many problems. As examples, it made networking difficult and meant that people became very siloed in their work and thinking as they had little opportunity to understand what was happening elsewhere in the organization" she says, adding: "It was also very expensive to maintain so many buildings." Successful project completions mean that staff are now located in just five buildings. As well as saving considerable amounts of money and providing employees with significantly better office accommodation, the council has been able to introduce more integrated working, which as we explain later has become a key performance focus within the council, as well as more flexible working, hot-desking and home working. "We were beginning to challenge the organization to implement best practices wherever possible," comments Compton, adding that analysis shows that home-working significantly increases the productivity of benefit workers, as one example.

Improving Business Planning

While implementing the key projects, the council also focused attention onto resolving underlying performance problems. For instance, it was recognized that business planning was weak and a major obstacle to change. Through the establishment of a cross-council working group, a planning template was developed and a timescale was identified for the preparation of the first set of business plans, which were focused on improving performance by the inclusion of clear objectives with milestones.

Speed Dating

Amongst the innovations used to create robust plans was 'speed dating' through which managers from different services came together in brief session to discuss areas of work that could be completed together, or to share common/ cross cutting themes that could be integrated into their individual business plans. "As well as improving the planning process, this helped to build strong relationships within the council," says Compton.

Data Challenges

A further underlying problem within NE Lincolnshire Council that was constraining attempts at improvement was the quality of its performance data, as Compton recalls. "We had massive problems with data quality, to the extent that it was a source of interest to the Audit Commission who had commented on this as being a significant issue." There were myriad data challenges. These included that little data was held centrally which made it difficult to take a 'council-wide' view of performance. Moreover, the lack of valid data made it difficult to track the performance of the individual services. There was also a reliance on manual systems for data collection which resulted in poor quality data that further hampered decision making processes. Another problem was that the corporate performance management and improvement team (which now has eight members) had always checked the data for other. The team itself realized that responsibility for having the correct data was in the wrong place. Service managers had to own the data and use it to aid their performance improvement activities. A further key challenge was that performance management and data management were not seen as related, rather viewed as separate activities. The council's senior team realized that it had to instil the belief that good data management was an integral element of an overall performance management system.

Technology Changes

Overcoming the data challenge required both technological and behavioural changes. From a technology perspective, the council had, in 2003, already procured an IT system to support performance management and that would enable the centralization of data, but it had not been implemented. Championed by the Chief Executive, in 2005 the system was implemented and launched. The system enabled key plans to be mapped and, importantly, linked to key performance indicators and targets.

Behavioural Changes

From a behavioural viewpoint, the Chief Executive stated that everybody had to input the data on the same day each month so to allow for challenge and interpretation. To signal the seriousness of this initiative, the Chief Executive supported the zeroing of performance of those managers that failed to meet their data input deadlines. This meant that anybody who did not provide their performance data was automatically awarded a "below target performance" symbol in the report with a star denoting that the information had not been supplied. Moreover, staff training and new validation systems were introduced to ensure that data entry was right first rime. As a result of solving the data quality issues, performance reporting now clearly supports the decision-making processes with NE Lincolnshire Council. For example, all Directorates use this system to aid the preparation and presentation of corporate performance reports (the monthly and quarterly reports). Service areas can now get an accurate view of trends in their performance and quickly identify where corrective action might be required. Furthermore, directors, elected members, managers and the public are now able to see at a glance how the Council is progressing against its goal and targets. But perhaps most importantly the new performance management system enables the better capturing ofstakeholder data. "We now have good evidence-based data about the community and the key issues and problems that they face," says Compton. "And we now have one system for viewing what's happening in the organization. We have a 'whole council' picture, which is a long way from when we were when this journey started." based data about the community and the key issues and problems that they face," says Compton. "And we now have one system for viewing what's happening in the organization. We have a 'whole council' picture, which is a long way from when we were when this journey started."

Keep Informed: Information at your Fingertips

In addition to the performance management data a new interactive resource called 'informed' has been made available to everyone to provide key statistics about North East Lincolnshire through tables, reports, graphs and maps. This resource provides performance information and area profiles and is another key source of data and information to inform management decision making.

Performance Reporting

A lot of performance information is available in the organization and it is always tempting to just include everything leading to thick and complex performance reports. The council is making many efforts to reduce its lengthy performance reports into something that is more user friendly Examples include exception based reporting which is based on the corporate plan. The report has been reduced from the initial 30 pages to 6-8 pages.

Performance Reviews

A further area that challenged the organization was around performance reviews. As other performance management disciplines were being introduced though 2005 and 2006, the council was also focused on ensuring it instilled a culture of reviewing performance organization-wide. Although the new senior team had a strong focus on reviewing performance, this wasn't something that historically had been expected of lower level managers.

Performance clinics

Performance clinics were amongst the interventions deployed to alter this situation. These 'clinics' comprised of cross-organizational representatives who would come together to assess progress to key performance targets and to serve as a problem-solving forum. Compton provides this example of how the clinic operates. "Due to our financial crisis we had to take resource away from services such as street cleaning, as one example. This meant there was some erosion of the quality of the service," she says. "But when our financial situation began to stabilize money became available to reinvest in such services. The performance clinic worked to indentify the service reinvestment priorities and helped in the introduction of a performance culture in the organization." Performance Culture: Signpost for Success A further tool deployed to help create a performance culture was the 2006 launch of an internal document called 'Signpost for Success', which provides a step-by-step guide to 'the art of performance management within the council'. Emblazoned across the front page was the words 'performance, performance, performance,' which the Chief Executive chose as a new organizational mantra so to leave managers in no doubt as to what was expected of them going forward (see Figure 1).

Within the 'Signposts for Success' document are sections that considers the cycle of 'what is performance management', 'planning our improvement' (what the council is going to achieve and how), 'delivery' (how are we going to do it), 'monitoring and measuring performance' (how are we doing) and 'review and challenge' (what worked, what doesn't and actions to improve). This document was circulated widely among managers and other staff, and significant amounts of training were delivered so that these performance management disciplines became embedded into the organization.

Five Strategic Aims

With performance management disciplines taking hold organization-wide, with the publication of the 2009-12 council plan NE Lincolnshire Council took another large step on the performance management journey with the introduction of an integrated performance management framework that focuses attention on five strategic aims: - Improve the quality of the built and natural environment - Strengthen the local economy - Create a safer and more secure area - Improve health and well-being - Being a well-managed, top-performing council.

Capturing the views of the community

Before looking at these aims in more detail, it is important to note that they evolved from extensive consultations with the local community that the council carried out, along with local partner groups, during 2008 to uncover the biggest issues that affect the quality of life in the borough. "We engaged in a number of conversations with our local and strategic partners, which includes representatives from the public sector, private sector, voluntary sector and various other community groups to understand what the local priorities are," says Compton. "We also created neighborhood forums, which are held each month and chaired by an elected official, to discover what's bothering local people and what we can do to solve them." As further example, groups of council staff were taken out to talk directly with local community groups to better understand their priorities. The work of 2008 built on already existing approaches that the council had in place for capturing the concerns on the local community. For instance, as with all local authorities NE Lincolnshire used to be subjected to a centrally government run triennial survey of community satisfaction. "We realized that we couldn't wait for three years to get a view of what was happening locally," says Compton." So we ran the survey annually. We looked at community safety, leisure facilities, library facilities, street cleaning, etc. It followed exactly the government survey and gave us a benchmark as to how we were progressing over the three years and provided excellent insights from the community." Moreover, the council created a citizen panel of 1500 people, which comprises a proportionately higher representation from some of its more deprived communities. "We use that on a quarterly basis to test out views on the community," says Compton. "It provides a body of evidence to ensure what we are doing is fully aligned to their needs. For example, if we are to launch a new strategy we will use this panel to test the ideas and, if required, we will refine our goals based on the findings." Feedback from the citizen's panel is providing data-based evidence as to how the council is improving in the eyes of the community. For example 72% (906) members responded to the June 2007 wave of questions. The answers showed unequivocally that the council was improving, and against a range of indicators. As examples, satisfaction with external communication ' stood at 82%, compared to 64% in 2006 and 'overall satisfaction with the way the council runs things' was 85%, compared to 66% in 2006. But for a council looking to improve how it identifies and responds to community needs, perhaps the most telling statistic is that the panel reported that their ability to influence council decisions stood at 45%, a considerable increase on the 19% score of 2006.

Ten community priorities

With a deep understanding of community needs, Together with its partners, NE Lincolnshire Council signed an agreement with the central Government, known as Local Area Agreement 2, which places special emphasis on partners working together to tackle some of the most significant problems in the borough. The 'State of the Borough' report captures many of the challenges the region is facing (see Figure 2). Ten community priorities were identified: - Worklessness - Child and family - Sustainable transport and infrastructure - Sustainable business growth - Housing - Health inequalities - Violence - Substance misuse - Negative behavior - Support to vulnerable adults.

Strategic Aim Examples

The council's five strategic aims are fully aligned to these 10 priority areas. As shown in Figure 3, each aim comprises a set of key priorities. In turn these priorities are supported by key actions, milestones and measures, targets and due dates. For example, the strategic aim 'Improve the quality of the built and natural environment' is supported by the priority: 'we will provide a high quality environment for all'. This is supported by a number of actions, including 'increase participation in recycling to ensure than we recycle more of our waste,' the key measure/milestone is 'the percentage of waste sent for recycling, reuse or composting is increasing', with a target of 35% by March 2011 (see Figure 4). As another example, the strategic aim 'create a safer and more secure area,' is supported by the priority 'we will ensure that people feel safe at home and in the community.' In turn this is supported by a number of actions, including 'increase effective CCTV surveillance,' which has a key measure/milestone of 'CCTV introduced on buses' and a target of March 2011 for completion. Finally, the strategic aim 'Improve health and well-being' has as a supporting priority 'help people to fulfill their expectations of independent living,' which has the supporting action 'increase support to enable more people to remain independent in their own homes' which is measured by 'the number of people who are supported to maintain independent living increased' and the target of 98.5% by March 2001.

Integrated Working

The introduction of this strategic aims framework served as a trigger for a new way of working within NE Lincolnshire Council. "A new Chief Executive took office in 2008 and he is very keen to move theorganization away from a narrow service-based view of performance to one that is cross-organizational, that delivers an integrated approach to working and benefits from synergies and efficiencies" explains Compton. "For example, the Director of Child Services is the lead for the health and well-being strategic aim, which includes cross-cutting priorities. Delivering to these priorities requires a coordinated approach across many services and indeed partner bodies." But Compton continues that in creating strategic aims the organization has been careful to ensure

that this itself does not cause a narrowing of the performance view. "One of the dangers is that by focusing and reporting on a strategic aim the bigger, cross-council view is missed," she explains. "So just as we have aim discussions that look at the progress of priorities we also come together as a leadership team to look at what's happening across the five strategic aims so to get a whole council picture and identify how we can all contribute to driving overall performance forward."

Good News Week

Communication also plays a crucial role in driving performance forward. Amongst the many successful initiatives is 'good news week', through which staff submit their stories around performance improvement via an e-mail box. Each day during 'good news week' these stories are distributed organization-wide and even out to the community. This has proven to be very popular and had a positive impact on the organization." says Compton. The council is presently looking to build on the success of the initiative, which has been running for several years. "Good news week has proven an excellent way to collect lots of material on grass roots performance improvement," says Compton. "What we are now looking at is how to drill down further and find out exactly how the performance improvements came about, particularly looking at the linkages between decision-making processes, resources and outcomes. We can capture these electronically and in booklet format and it will enable us to understand and learn from our successes and share best practices." These success examples will be distributed internally amongst staff and promoted externally to the local community and other stakeholders. "They will serve as a readymade suite of case studies that document our successes in driving performance forward," says Compton.

Celebrating success

For an organization that emerged from crisis, an important component of the communication strategy has been the celebration of successes. After the CPA judgement was announced in late 2005 and awarded NE Lincolnshire 'no stars - not improving adequately' and so rated 'the worst authority in the country' the then Chief Executive made celebrations a priority. As the CPA model relies on historical data, this was essentially reporting on the council's performance during the financial crisis, and so was not reflective of the improvements that had been made during 2005. That said, the judgement still negatively impacted the morale of managers and staff alike. As a powerful demonstration of his commitment to celebrate success, the Chief Executive gave everyone a day off upon the achievement of the Corporate Investors in People Standard in 2006 (which essentially shows that the organization is investing in the training and development of its people and that this supports business goals). Similarly, when the council was judged through the CPA as '2 star - improving well' in 2006, employees were given another day's holiday. NE Lincolnshire Council was one of only three councils to improve so dramatically from 2005 to 2006.

Next Step Performance Improvement

NE Lincolnshire Council has clearly made excellent progress since beginning its performance improvement journey in 2004. "There is now a much clearer focus on what we are trying to achieve for the community and we have built a good body of evidence to show that we understand their priorities and that we are delivering to them," says Compton. "Throughout the organization, employees are much more aware of not just what we are doing but how they can individually contribute to performance improvement." She adds that there have also been significant improvements in the quality of management. "There's much more of an understanding around managing performance. Managers now recognize that this is part of their job." Although significant improvements have been made, the council's senior team is well aware that there is still some distance to travel on its performance journey. Indeed, a CPA rating of 2 still places the council in the lower levels of the local authority performance league table. There are many initiatives underway to take performance to the next level. For example, there is a programme in place to train 80 managers across the council in lean methodologies, which will enable the better identification and solving of process problems. The council is also working hard to develop better performance management in all of its partnerships and at all levels - strategic and operational. It is also striving to create a more trusting, open culture where the assumption is that people are capable of managing and will call on the corporate centre when they require help. Furthermore, it is looking at how service redesign options might drive efficiencies while enabling the council to maintain a strong customer focus. Also, a performance audit by the Advanced Performance Institute (API) in late 2008 highlighted the fact that the organization wasn't always measuring the right things. As a result, the council started its planning process earlier than usual in 2009 to allow more time for managers to identify the best measures to support their goals. Key Performance Questions (KPQs) have been used to enable a better understanding of which metrics to choose. For example what do we need to know? What is our best measure? Who needs to know it? What decisions would be based on this information?

Conclusion

In conclusion, Compton points to a number of key factors that have contributed to the performance improvements made so far. She says it was critical that elected officials supported performance improvement initiatives and were able to make tough decisions and stick with them. Equally important was getting the unswerving commitment of the then newly appointed Chief executive. "He was relentless in sending messages about the need to improving performance and back this with action. He was prepared to chair performance clinics and ensured that the data issues were addressed. Basically, he made sure that performance improvement was on everybody's agenda and radar." Chief Executive commitment also impacts another of Compton's critical success factors - paying attention to change management. "Change is difficult and oftentimes people don't understand why they have to change," she says. 'If we don't send consistent messages throughout the organization about what we are doing, why we are doing it and what we expect from staff, then change would not happen. And these messages have to be reinforced at every level and all of the time." As a final success factor she highlights the importance of creating a culture of constant review where performance improvement is part and parcel of everyone's job. "We've made great strides in a relatively short period of time," concludes Compton. "But we know that we have to continue the journey and make further significant improvements and we now have the culture and the momentum to make this happen."

Bernard Marr is a globally regognized big data and analytics expert. He is a best-selling business author, keynote speaker and consultant in strategy, performance management, analytics, KPIs and big data. He helps companies to better manage, measure, report and analyse performance.
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