Improving Performance Measurement for Government Sector Organizations

The first step in improving performance is Performance Measurement. While Dr. Deming did not actually say “If you can’t measure it, you can’t manage it”, he strongly emphasized the importance of metrics whenever possible. The Association of Government Accountants(AGA) defines performance measurement as an expression of how well an entity has performed in relation to a baseline such as established goals. The Government Performance and Results Act (GPRA) of 1993 provides guidance and standards on evaluating and reporting performance. Private sector guidance and standards such as the Sarbanes-Oxley Act (SOX) of 2002, and its government sector equivalents – the Office of Management and Budget (OMB) requirements provide frameworks to meet accountability requirements and evaluate and report performance.

Government agencies and public services organizations performance measurements may not be the same as the profitability and productivity measurements used by for-profit private sector organizations. However, there are many ways for government and public services managers to demonstrate Stewardship and Accountability in the use of tax payer resources to provide critical services and report performance.

The AGA “Public Attitudes toward Government Accountability and Transparency 2008 to 2010” report exposed significant public concerns about lack of trust and transparency from the government such as: (1) An obligation to report and explain the sources and use of funds, and (2) Responsibility to the public for spending.

Government and public services financial managers have made significant improvements in accountability and transparency since 2010. Yet the perception remains that some organizations are not a good steward of public funds.

What changes in Stewardship and Accountability should tax payers expect from managers in the use of tax payer resources to provide critical services?

How do these managers adjust to the “new normal” – continuous budget cuts and provide improved accountability and transparency?

How can agency managers reconcile a focus on supporting their missions with improved financial management?

Private sector Chief Financial Officers (CFOs) and their Financial Management Teams (FMTs), work within an evolving “profit, cost and loss” environment as well as standards and guidance such as SOX that presents significant incentives to function in an efficient and effective manner. Lack of “profits” and in some rare-cases lack of “cost” objectives should not stop government and public services managers and their FMTs from going beyond the requirements of existing standards such as the CFO Act, GPRA and OMB to execute their missions and improve public trust through Accountability and Transparency.

Below are eight (8) performance improvement suggestions to consider:

  1. Alignment of policies and procedures with agency objectives and strategy: Unlike private-sector CFO’s, government and public services managers have minimal input to the policies mandated by congress through legislation. Even more challenging, these FMTs might have to deal with frequently changing policies that could conflict with their agencies mission and strategic objectives.

    Within the Federal space, FMTs must comply with multiple, conflicting policies and voluminous Standard Operating Procedures (SOPs). The awareness, interpretation and application of all applicable Financial Management policies presents a daunting task. Below are some suggestions for government and public services managers to consider with every change in administration:

    • Review universe of applicable policies to confirm relevance to mission and financial reporting.
    • Update SOPs to reflect changes and ensure alignment with your strategic objectives, and proper interpretation and application throughout your agency.
    • Solicit feedback and confirm understanding and acceptance from the agencies FMT. Communicate feedback to appropriate stakeholders, and proactively resolve any concerns.
    • Maintain on-going monitoring through self-assessments to confirm appropriate interpretation and application.
    • Keep it simple. Many Federal FMTs such as the Department of Defense (DoD) are tasked with supporting complex multi-faceted missions. These teams must execute well in supporting all aspects of their missions. Complex policies and SOPs will have a counter-productive effect given the complex nature of some of the agencies operations.
  2. Integrated governance, risk and compliance (GRC): Several standards and guidance documents exist to help government and public services managers and their FMTs operate in an efficient and effective manner, to execute missions and provide accountability and transparency to congress and tax payers. Government and public-sector FMTs must embrace performance expectations and a culture of accountability and make appropriate changes.

    Accountability begins by keeping things simple with a focus on high-risk items that could significantly impact the agencies mission and operations, strategic objectives and, financial reporting and, prevent and detect fraud, waste and abuse.

    Complex solutions, when applied to solve complex problems in the context of a complex operating environment often result in predictable and expensive failures. If sustainment, effectiveness and efficiency are important, solutions must be simple.

    Private-sector organizations have learned how to integrate GRC strategies to drive performance results, minimize reporting errors and realize significant savings by not performing these tasks in organizational silos. What is stopping government and public services managers from modifying and applying these concepts in a similar manner within the framework of existing OMB standards?

  3. Changes to the tone-at-the-top (entity-level controls): For any organization to function in an effective and efficient manner, there needs to be a balance between personnel, processes, and systems. The tone-at-the-top brings this together as leadership makes critical decisions to ensure the following:
    • People – the right personnel, with the right skills are available to get the job done right the first time and minimize waste through re-work.
    • Processes – the combination of manual and automated processes has been properly designed and implemented to help the organization accomplish its objectives. Simplicity, functionality, acceptance and understanding by staff is critical for efficient and effective processes. On-going monitoring is critical to assure that changes are made appropriately and align with strategic objectives and missions.
    • Technology – the systems and tools deployed by an organization are only as good as the ability of employees to utilize the technology in the context of the organizations processes, policies and procedures to accomplish objectives, in an effective and efficient manner, and report performance.
    • Tone-at-the-top – government and public-sector organizations are expected to comply with multiple and complex and often conflicting policies; while relying on outdated processes and legacy systems. Management must institute a focus on effective and efficient processes and workflow improvements to maximize performance while operating in an environment of continuous budget cuts. Leadership must establish and enforce a culture of performance and accountability.

    Tenures for commercial CFOs and executives are often longer than four (4) to eight (8) years, which means they have the time to develop and implement long-term sustainable solutions. Changes in administrations often result in turnover and gaps in key government and public services positions. The frequency of turnovers and delays in filling top positions presents challenges that impacts continuity, tone and the ability to implement long-term sustainable changes. The challenges should not stop government and public services managers from implementing the appropriate tone, delivering results within budget and, providing improved accountability and transparency.

  4. Independent and objective internal audit function: Can the Office of Inspector General (OIG) function like a true best-in-class private sector internal audit department to create and sustain value?

    The Institute of Internal Auditors (IIA) in its guidance and standards outlines 16 steps for creating and sustaining an internal audit department. Examples of these steps include: Establishing authority for the internal audit function, identifying leadership and an independent audit committee and, understanding bench-marking needs. Private-sector organizations with best-in-class internal audit functions go beyond the traditional internal audit role of reporting findings to making recommendations to improve accountability and transparency. For private sector organizations profit, cost and loss objectives are the incentive to develop internal audit functions capable of creating and sustaining value in many ways.

    Are the OIG departments within most Federal Agencies set-up to function within the frame-work of existing Federal guidance and standards and be the equivalent of a best-in-class internal audit function? If the answer is “no”, then the next obvious question is, why not?

    A best-in-class OIG could be the reason to ensure a Federal Agency executes its mission and realize economy, efficiency and effectiveness of operations and accountability.

    Could there be a benefit having a singular, uniform OIG and internal audit structure across all Federal Agencies? Achieving significant improvements requires identification of and consequences for continuous violations and non-compliance with policies and guidance.

  5. A best-in-class comptroller and CFO organization: Can the government and public-services sector agencies establish a best-in-class comptroller and CFO shop like those in the private-sector?

    The U.S General Accounting Office (GAO) in its April 2000 Executive Guide series publication examined the reforms laid out by the CFO Act and subsequent related legislation, and described how they can be effectively implemented, to place Federal CFOs/FMTs on par with private sector corporations, as well as state and local governments that have already made investments in financial management.

    According to this GAO report, the private sector, CFOs/FMTs roles previously centered on oversight and control, focusing on fiduciary responsibilities and with less attention to increasing the effectiveness of operating divisions. However, the evolving business environment created need for significant changes. Increased competition resulted in the requirement to find new ways to reduce administrative costs, add value, and provide a competitive advantage. At the same time, advances in information technology made it possible for CFOs/FMTs to shift from a paper-driven, labor intensive, clerical role to a more consultative role as advisor, strategist, analyst, and business partner. Government and public-services sector CFOs/FMTs face similar pressures to increase efficiency.

    The list below outlines the recommendations from the GAO report:

    • Build a foundation of control and accountability that supports external reporting and performance management.
    • Provide clear, strong executive leadership.
    • Use training to change the organizational culture and engage line management.
    • Assess the finance organization’s current role in meeting mission objectives.
    • Maximize the efficiency of day-to-day accounting activities.
    • Organize finance to add value.
    • Develop systems that support the partnership between finance and operations.
    • Reengineer processes in conjunction with implementing new technology.
    • Translate financial data into meaningful information.
    • Develop a finance team with the right mix of skills and competencies.
    • Build a finance organization that attracts and retains talent.
  6. Best-in-class Information Technology (IT) and Information Security (IS) operations: The availability, reliability and integrity of data is important to make timely and critical business decisions to help an organization accomplish objectives and provide accurate financial and performance reports. Within most organizations, the IT function plays a significant support and facilitation role to the CFO/FMT and other stakeholders. The ability of the IT/IS and CFO/FMT teams to speak a common language is a critical component for them to work as an integrated team to help the organization accomplish objectives while providing improved accountability and transparency.

    Some government and public-services sector organizations have struggled achieving financial audit objectives due to challenges obtaining and providing adequate and complete “evidential matter” to support audits from key systems. For these agencies, the inability to obtain accurate, complete and reliable data impacts their ability to make critical business decisions which impacts performance.

    While struggling to modernize their IT infrastructure, federal and public-sector agencies must also respond to increasing Cybersecurity threats. The recent experience with the City of Atlanta, GA (after a March 22, 2018 ransomware cyberattack affected multiple applications and client devices) highlights the need for heightened cybersecurity controls and processes. Best-in-class organizations realize the need to separate the IT support and facilitation role from the IS function.

  7. Human capital requirements: Investments in a skilled work force that can function within the dynamic nature of your organization’s operations is critical. Government and public-services sector CFOs/FMTs must begin by assessing areas for “skills” improvements within their respective organizations and be open to new ideas to accomplish results in an efficient and effective manner.

    Pro-actively targeting, recruiting and retaining talent from best-in-class private sector organizations could be an alternative approach to diversify the skills within your respective teams. Look for accountants, auditors, risk management and information systems professionals with proven experience successfully applying accounting, auditing and IT principles and concepts across multiple industries. Such employees can successfully transition into the government and public-services sector space and drive performance results.

  8. Continuous monitoring: The evolving risks facing many government and public-services sector organizations remain an area of concern. Identifying, prioritizing and mitigating key risks impacting operations, performance and financial reporting must remain a top priority.
    The questions raised, and issues discussed in this article are an attempt to explore simple solutions and facilitate conversations on ideas that could be implemented to improve performance measurements, reporting, accountability and transparency for government and public-services sector CFO’s/FMTs in the context of existing standards and guidance. Budget uncertainty and constraints and the need to-do-more-with-less are unfortunately the “new normal”. The pressures from congress and tax payers to drive effectiveness and, efficiency and, improve accountability and transparency will only increase.

Jonathan Ngah, CISA, CIA, CFE, CGFM, is a Principal at Synergy Integration Advisors, a consulting firm providing Audit, Governance Risk and Compliance (GRC) solutions to Federal Government Agencies, private-sector and not-for-profit organizations.

Misalignment Between Organization Strategy and Line-of-Business (LOB) Priorities

We’ve all heard the many clichés describing when segments and teams within an organization are aligned in their goals and strategy: “We’re all in this together,” “we’re on the same page,” “we’re rowing in the same direction.” And there are plenty more.

Since we all realize that achieving alignment in a common goal is critical to the success of any group endeavor, why is this so hard to achieve?

Several recent business headlines point to one area where this is all too common: the misalignment executing enterprise-wide strategy and Line-of Business (LOB) priorities.

Alignment between strategic direction and operational tactics is crucial to any successful organization and requires strong leadership from the top and commitment from all LOB functions. Lack of strategic alignment is a recipe for disaster. Consider Facebook: the social media giant ran into problems when a third party improperly gained access to the data of millions of users – the strategic objectives of reputation and growth conflicted with LOB objective of maximizing revenue. Wells Fargo experienced a similar conflict between reputation and LOB revenue maximization when employees opened millions of accounts without the permission of customers. On April 12, 2018, Starbucks offered another example of the damage towards achieving strategic goals caused by a LOB policy decision to remove guests that sat down at a table waiting for a friend without purchasing anything.

I define strategic alignment as an in-depth knowledge and application of the organization’s strategic direction, and agreement on its validity, by all the major LOB functions and processes of the organization. A misalignment occurs when there is a lack of awareness understanding importance of the strategy, or miss-application in executing the strategy by various departments or LOB’s.

Sun Tzu, author of the Art of War, captured the difficulty in achieving success without getting what we call in the modern age “buy-in” from all those involved in the endeavor: “Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise; for the result is waste of time and general stagnation.”

Why does strategic misalignment exist and remains unresolved for many public and private sector organizations?
What is the actual cost if not resolved over time?

The costs can be very high, as we have seen with Facebook, Wells Fargo, and many other examples too numerous to recount here.

Eight Causes of Misalignment

There are eight primary reasons why strategic misalignment occurs and why management and internal auditors fail to resolve those imbalances when they do occur.

  1. Lack of awareness: Executive management, boards and committees, and internal audit all failed to identify risks. No one within the organization recognizes the misalignment between strategy and specific departmental goals. This often occurs when overall strategic goals are poorly communicated throughout the organization. What steps should management implement to prevent this from happening?
  2. Management is aware and unable to resolve problem: If management is aware of the misalignment, do they have adequate processes and controls to resolve the disconnects? Adequate processes and controls alone without commitment will not resolve the problem.
  3. Commitment to resolve misalignment loses out to competing priorities: Even when executive management is committed to strategic goals and has adequate policies in place to resolve issues, without the proper emphasis and sensitivity towards resource constraints (capacity), the LOB will simply evaluate requests for corrective actions in the context of other competing priorities. This minimizes the effectiveness of resolving strategic misalignments throughout the organization.
  4. Tone at the top (business-as-usual attitude): With the proper tone, the issues articulated in causes #1 to #3 could not have occurred, or would result in minimal impact to the organization. The opposite is true for organizations lacking the appropriate tone. The business-as-usual attitudes and sub-cultures within LOB segments override enterprise-wide goals, exposing the organization to increased risks and significant losses, including financial and reputational damage.
  5. Quantifiable costs of misalignment: Over time, management will identify and probably resolve symptoms from causes #1 to #4, such as missed delivery deadlines, quality and product recalls, increased costs, loss of market share, customer complaints, employee turn-over, lack of innovation, and other problems. Whatever losses that can be quantified at this stage are typically minor when compared with compliance and regulatory issues or sustained reputation damage.
  6. Risks implication (unable to identify and mitigate risks): Managing high-level strategic risks (and achieving alignment with operational processes) are impossible if they can’t be identified. It’s best to keep this brief with a recent example. Starbucks recognized and reacted quickly to their LOB inappropriate actions, whereas Wells Fargo was slow to formulate an effective response to LOB actions resulting in significant negative publicity that began in 2016 and will require years for the bank to overcome.
  7. Compliance implications plus added costs: Unchecked LOB actions that conflict with strategic goals can result in executives testifying to congress or European Union committees and courts, resulting in increased regulatory pressures. This is often a significant cost that can’t be adequately quantified in the short term. A combination of regulatory fines and seizure, class-action-law suits, and loss of top customers can accelerate the demise of the most profitable organization. In April 2018, for example, Wells Fargo accepted a fine of $1 billion related to auto insurance and mortgage abuses. Most organizations would choose the smaller costs of enhanced controls and compliance with strategic goals over steep fines and regulatory restrictions.
  8. Inability to execute mission and impact to customers: For any business and government agency, the ability to execute mission and keep customers happy requires alignment between the enterprise-wide strategy and LOB priorities. Skilled employees working on cross-functional and collaborative teams focused on the mission and customer are imperative. Facebook and Wells Fargo will be dealing with the fallout from LOB’s failing to adequately execute strategic goals for a long time. In such case, customers have a choice. They can simply reject a brand or minimize how they use a product or service.

Executives and Managers should be proactive in anticipating and resolving problems related to misalignments between enterprise-wide strategy and line-of-business priorities. These must be identified and resolved as soon as possible to avoid long-term financial losses and reputational damage. I welcome any suggestions you can provide on this topic.

Jonathan Ngah, CISA, CIA, CFE, CGFM, is a Principal at Synergy Integration Advisors, a consulting firm providing Audit, Governance Risk and Compliance (GRC) solutions to Federal Government Agencies, private-sector and not-for-profit organizations.

Evaluating Value Created by Management Consultants

The next time you are in a with management consultants hired by your organization to provide support, bring up this question and listen to the different answers: “What is your value proposition?”

Before you can begin to answer this question, it is important to distinguish between the actual value provided and the perception of value. A consultant may perceive that the service they provided offered real value to the client and be able to quantify the value but the client may not have the same perception of the value.

The perception of value derived from services provided by consultants can be impacted by the level of involvement (skills, risks, cost, timeline and complexity) and the importance of the project to the client.  

How would a manager who decided to hire consultants describe this value?  

How would the consultants perceive the value provided?

Merriam-Webster dictionary defines value as “a fair return or equivalent in goods, services, or money for something exchanged.”   The services provided by consultants should create real and perceived value for their clients. Consultants should remain focused on value creation when executing engagements.  Providing complex solutions that clients cannot easily understand, implement and sustain is an example of non-value-added outcomes.

The term “value” is often used by consulting firms as a major differentiator when marketing diverse services to global clients. Yet evaluating the value chain for consulting is not a straight forward process.  It can depend on clients pressing needs (which can change during the course of the engagement) and other subjective factors that can’t be easily measured.

How is value created and perceived?   

Consultants create value for their client if:

  1. they enable the client to provide the same or better quality good or service at a lower cost, or
  2. they enable the client to improve existing processes for the same costs.  

The perception of value however is constantly evolving. What we value today could be significantly different from what we value tomorrow.  

The strategy for value creation is no longer a matter of positioning a fixed set of activities along that old model, the value chain. Successful organizations increasingly do not just add value, they reinvent it.  As a result, an organizations strategic task constitutes an ongoing reconfiguration and integration of its resources and capabilities to constantly create value for customers. What an organization does with those resources and capabilities is just as important as what resources and capabilities it possesses.   

Evaluating the value of management consulting services should not be different.  This also applies to projects managed by internal consultants. Such services are often measured in cost saving opportunities, increased revenue generation, return on investments, payback, etc. to the customer.  Not all value created however, is captured by the traditional methods.

Let us know your thoughts on the issues raised in this blog, and check in next month as we continue exploring ways to provide value-added solutions to clients.  

The content in this blog should not be considered advice and is provided for informational purpose only.  For additional information on the issues outlined, please contact us at information@synergy-ia.com.


1 – From Value Chain to Value Constellation: Designing Interactive Strategy by Richard Normann And Rafael Ramírez.