Linking Metrics to the Strategic Plan

January 2006

The Texas State government implemented a system back in the early 90’s they called “performance-based budgeting”. Performance-based budgeting links the strategic plan with the budget and with performance metrics.

It was and is a cool planning and tracking system for both budgets and metrics, and it is probably the most anal-retentive planning and budgeting model out there! (As an accountant myself, I am being complimentary when I say “anal retentive.”)

A few years into the process, they realized that being very clear about how the metrics linked to the strategic plan was necessary for good results. Otherwise folks just measure what is easy without much thought about how it relates to the plan.

So the state budgeting gurus came up with the following structure to guide the state agencies who had to implement performance based budgeting:

Outcome metrics are linked to the objective.
Input, efficiency, and output metrics are linked to the strategy.

OK—that wasn’t very helpful, was it?

A silly example

First let me explain the elements of a strategic plan using a silly tongue-in-cheek example:

A strategic plan has the following elements:
Vision, Missions, Philosophy, Goals, Objectives, Strategies

I like to think of it as an octopus with an unreasonable number of arms and a single small head.

Vision is the ideal statement that guides the organization and is usually too “out there” to implement. It is the small head of the octopus.

Here is what Ann Richards, the Texas Governor defined as her vision, and I am paraphrasing here:

VISION: To create an environment where all Texans can achieve their dreams.

Man, that is good! Makes you want to move here, doesn’t it? OK, maybe not. But it is visionary!

Next come missions. These are further breakdowns of the vision and they get a little more specific. For instance, the State of Texas has a variety of functions, such as education, health care, commerce/transportation, and so on. The State defined a mission for each function. For example, the mission for education might be:

MISSION: All Texans will be edumacated.

Now, you might be tempted to define a performance metric here—to measure whether Texans are edumacated—but that would be premature! Don’t do it! It will yield a jumbled bunch of results. We need to keep breaking things down.

For example, let’s say that the State divided its mission into two goals: one to ensure that Texans can cipher and one to ensure that Texans have access to higher edumacation. Let’s just work with the ciphering goal.

GOAL: All Texans can cipher.

We could go ahead and do some performance metrics, but again, I warn against it. Let’s break this down into objectives and then strategies first.

So how can we make sure that all Texans can cipher? We need to make sure they graduate from high school or get an equivalent degree. We also need to work with foreign-language students to make sure they can cipher. We may need to implement adult literacy programs.

Let’s work with the first objective—that Texans graduate from high school.

OBJECTIVE: All Texans graduate from high school or get an equivalent degree.

Next come strategies. Strategies tell us how we are going to make the objective happen. To help Texans graduate, we can do a variety of things:

• We can test each grade level so that it isn’t a surprise if students can’t read when they are seniors.
• We can provide day care for teen parents.
• We can prevent teen pregnancies in the first place.
• We can give students a bonus for completing high school.
• We can hire more teachers to work with kids with special needs…I could go on and on. (Those of you in education, please forgive my naiveté.)

Let’s just work with the testing strategy.

STRATEGY: Test each grade level for core skills.

Please note that I just drew one arm of the octopus. We started with vision and made a choice of one mission. We then chose one goal, and one objective, and one strategy among multiples of each. So we just worked on one arm of the octopus.

Yes, you are right. This is a lot of work!

Now how do the metrics fit in?

The outcome metric goes with the objective and the input, efficiency, and output metrics go with the strategy.

Here is the whole arm developed with the metrics:

• VISION: Create an environment where all Texans can achieve their dreams.
• MISSION: All Texans will be edumacated.
• GOAL: All Texans will be able to cipher.
• OBJECTIVE: All Texans will graduate from high school or earn an equivalent degree.
  • OUTCOME METRIC: Percentage increase in Texans earning a high school diploma or equivalent degree.
• STRATEGY: Test all grade level for core skills.
  • INPUT: Number of young eligible for public education.
  • EFFICIENCY/EFFECTIVENESS: Average cost per test, average length of time to develop each test, average length of time spent testing, percentage increase in the number of students tested.
  • OUTPUT: Number of students tested.

Wow, that is a lot of work, and it also generates some silly metrics that no one is going to care about.

But, I recommend you go through the entire process—making choices for each piece of the structure—and then go back and choose the ones that resonate with you, instead of pulling the metrics out of the air with no structure.

Without structure, folks will generate some crazy, weird, irrelevant but easy-to-measure metrics that no one will care about because they don’t fit into the bigger plan.