The need to have built-in inefficiency is not the only thing that differentiates government from the private sector. Success in business and success in government are measured quite differently. In a business, metrics are an important management tool, but the true and unescapable measure of success is profitability. In government metrics are the only way to gauge success. A business cannot survive if more money is going out than is coming in. Profit, as noted earlier (in Section 5.2), is absent from government. so government must rely on metrics to measure program effectiveness and employee performance. Metrics are not a bad idea. Any organization can learn a lot about its operations by measuring progress toward goals and objectives. However metrics can have unintended consequences, especially in an environment that does not have to worry about profit.

A well-intentioned energy metric helped preserve obsolete and vacant Department of Veterans Affairs (VA) space. In order to encourage energy reduction, VA established a metric to monitor the amount of energy used per square foot of building area. For each medical center, the areas of its buildings were added together, and divided into the total energy used. Many medical centers have vacant or partially vacant space that does not use much energy because it is so lightly occupied. The removal of this obsolete vacant or underutilized space is a good thing, and would save money, but reducing the building area by tearing down underutilized buildings that use little energy would actually make the amount of energy used per square foot increase. Therefore, the energy metric created an incentive to keep obsolete and underutilized buildings. This would appear to be irrational to anyone who did not see the incentive created by the well intentioned metric.

Another example of unintended consequences involves the funds the VA medical centers receive to buy furnishings and renovate buildings. These funds typically must be spent in the fiscal year they are appropriated. Success is measured by getting all of the funding obligated in the fiscal year. Failing this metric is not acceptable, and a tremendous amount of effort is put into into planning how to spend the money as early in the fiscal year as possible. In our office we referred to this as the “burn plan”. I recall one year when one of our top managers called me late in the fiscal year and asked if we could buy $50,000 worth of chairs. I said, yes, and asked what kind of chairs were needed. He said it did not matter, just get the money obligated. The metric had to be met even if it wasted some funds.

The unintended effects of the energy and funding metrics above are a relatively easy to understand. Seeing the unintended consequences of government employee performance metrics is a bit more difficult.

Imagine that you are a physician running a small private clinic. In your practice, as in any business, you must take in more funds than you spend, and you must provide the services customers want and need. If your practice does not provide good care to your patients, then they will go elsewhere, and they will tell others not to go to your clinic. The survival of your clinic directly depends on meeting the needs and wants of each patient. When you decide which of your employees should be hired and fired, and which ones should get bonuses, you consider how each contributes to the interlocking goals of customer satisfaction and profitability. If one of the physicians is amazingly talented, and sees many more patients than anyone else thus generating a lot more revenue, and a lot more good will than anyone else in the clinic while helping other employees improve, then you can and would reward him accordingly. On the other hand, you would be forced to fire a physician who creates discord, is difficult to work with, and puts your clinic at risk of failing, even if he was a technically competent doctor. If you do not reward and promote your best employees, and do not correct or remove your poor employees, your best employees will leave to find better work environments and bosses, and your practice will become less and less viable, and may even close. Your practice may have a Human Resource department, and all sorts of performance standards and job descriptions, but you know that know your clinic’s success is directly linked to each employee’s contribution to profitability. The key thing to realize about your private clinic, and business in general, is that you are managing people.

Now imagine that you are a manager of a small VA clinic. Each of your employees has a position description, a competency checklist, and a performance plan. As long as an employee is doing what his position description says he is supposed to be doing, meets the competency requirements, and meets the minimum acceptable performance level, you are required to rate him as an acceptable employee. Productivity is important to the success of the clinic, and to VA as a whole, so the organization has established national performance metrics to be used to measure productivity for each physician. The number of unique patients seen per day is a simple example of such a metric. You have two physicians in your clinic who see about the same number of unique patients over the course of a year. One of these physician told the clerks to only schedule brief appointments. Anything that could not be done in the brief visit would have to be done in equally brief follow-up visits. His patients will have to make multiple trips to the clinic, but he will be able to see many patients per day. Your other physician scheduled the times for his patients in a way that minimized the number of times that each patient would have to return to the clinic since many of the patients lived some distance away. This resulted in longer patient visits, and fewer patients seen per day. The second physician was providing better customer service, but did not see as many patients per day. When you, as the clinic manager, evaluate these two physicians, you might well have to rate the second one lower on this metric even though you know he was providing better patient care. In government, employee ratings compare the employee to his position description and performance standards, but do not connect directly to the survival of the clinic because its existence does not depend on profitability .

I was often reminded that in government it is the position that you hold that defines what is appropriate for you to do. Many government managers do realize they are really managing people, not just positions, but they do have to mange people based on the positions they fill. Theoretically, if every position is filled, and the people in the positions are competent and do what their position description says, then the organization will function as intended. The problem is that people do the work and people are all unique with different levels of intelligence, knowledge, ambition, and skill. Positions are just empty boxes, a way to provide order in the workplace; they do not do any work. A position is part of the rules; it is not a person. A position cannot treat another position like it would like to be treated, and a workplace that defines its people by the position they hold is telling its employees that it values conformity and equal outcomes rather than the freedom and equal opportunity that are the products of America’s Christian principles and foundation.

Typically government employee performance plans cascade down from above. In other words, some of an employee’s performance standards support performance standards in his supervisor’s plan. The supervisor’s plan has performance standards that support his supervisor’s plan. This arrangement is logical, but it often results in some standards that really make little sense as they cascade down through the organization. These standards are normally sort of glazed over since it is difficult to see how they fit into day-to-day job performance. Because they often refer to things outside of an employees’s control, they may be unmeetable, but they can be quite useful when managers need them to give a problem employee a negative rating. They can also be misused to label an idealistic whistle-blower as a problem employee since he probably did not meet one of his unmeetable performance metrics. Even if no one else did either, it does not matter. When the Congress passes laws making it easier to terminate bad employees, some of the first employees at risk of being fired will be whistle-blowers.

Exceeding the standards established for each metric is the key to a successful government career. Many poor government employees are able to stay employed because they meet or exceed the performance metrics. (I knew of one high ranking manager who hired a brilliant analyst, and told her that one of her prime responsibilities was to monitor his performance standards to be sure that he exceeded all of them.) Sometimes the best way to get rid of a problem employee, like the metric-beating physician above, is to promote him. That seems crazy, but metrics are what the Administration and Congress emphasize, so having managers who are good at meeting metrics makes perfect sense.

Unfortunately, unlike the private clinic, a VA clinic can survive despite incentives that may be at odds with customer satisfaction. The employees meeting the performance metrics continue to have a place to work, and the whole idea of managing through metrics gets reinforced. No matter how well intentioned and clever, virtually any metric can, and will, be gamed. This gaming has the effect of promoting the wrong people and making everyone else quite cynical. The key thing to remember about the government is that supervisors are managing positions first, not the people who occupy them.

Before going on, please allow my government-induced cynical attitude to illustrate how government might respond if challenged to move away from management by performance metrics: First guidance would be written in lofty language outlining the the goal of moving to a system that uses the talents of each individual employee by managing people instead of positions. Second a task force consisting of a Senior Manager, the usual consultants, a whistle-blower or two, Human Resource staff, Union representatives, Information Technology experts, and former senior employees would be created and tasked with implementing the guidance. They would come up with another name for position descriptions and a recommendation for a new Information Technology system that would make sure that everyone was treated like he or she would like to be treated. The task force would also identify the additional funding and staff that will be required to implement all of the changes. Additional subgroups would be created to develop new performance guidelines. After all of that, little would change and cynical employees would still have little reason for hope.

The solution is not to eliminate metrics, but to recognize their limitations. Government operations will improve when government is not managed as though it was a business. Attempts to manage a government office as though it were a business are doomed to failure. Government operations must be more visible, and government “civil servants” must be held to higher ethical standards than employees in private businesses. Solutions to the problems in government will be addressed in more detail in a future post. Until changes are made, metrics will continue work just as easily against employees as for them, creating an environment that creates cynical employees. Employees who are forced underground to do their jobs…