According to Stewart and Carpenter-Hubin (2002:56) performance measurement is seen as an administrative control mechanism to assign accountability both externally and internally. Carman and Conrad (2000:91) state that performance measurement should also be considered to be a feedback loop to improve institutional performance, not just a mechanism for assigning ‘praise or blame’. It should serve to improve employees’ understanding of the municipality’s core business and its commitment to achieving developmental goals and mandates.
Khalo et al. (2013:116) state that a successful performance management system should cause a municipality to reassess how it operates, in light of its priorities and on the basis of objective information. For local government, performance measures also provide a tool to drive forward a transformation agenda by requesting municipalities to consider their own objectives in light of the national government’s stated transformation priorities.
A municipality’s performance is difficult to measure. This is particularly true for the outcome of the municipality’s activities or the final effect envisaged. In spite of this difficulty, performance measurement can perform a number of functions. These functions should lead to positive outcomes, both for the institution as a whole and the people who manage it (Khalo et al., 2013:117). These outcomes include the following:
Transparency: Through performance measurement, an institution (such as a municipality) can communicate the services and products it supplies, as well as the costs involved. Transparency may then result in various forms of rationalisation. Critical questions could be asked about the effectiveness, efficiency and economy of processes, and how various activities contribute to the institutions performance (Khalo et al., 2013:117).
Accountability: Through performance reviews, municipal councils are able to demonstrate that rates and taxes are being directed to priority areas, in line with the council’s development planning commitments. Municipal departmental performance targets are included in annual reports, reinforcing accountability to the public. Performance reporting also enables provincial treasuries to hold municipalities accountable for increased spending and inappropriate resource allocations (Khalo et al., 2013:117).
Learning: A municipality should use performance measurement to learn on a continuous basis: learn from mistakes; learn from best practices; and learn through improved systems, processes and behaviour changes. The transparency created may teach an institution what it does well and where improvements are possible (Khalo et al., 2013:117).
Incentive for increased output: Performance measurement should reward increased and improved output (that is services and products) (Khalo et al., 2013:117). There seems to be a direct correlation between the introduction of performance management systems and a rise in an institution’s output (Khalo et al., 2013:117).
Performance measures should express, usually in quantifiable terms, how well a municipality delivers on its constitutional mandate and obligations. Measures may be applied to municipal services as a whole or to the processes involved in delivering a particular service. Municipal councils should assess the economy, efficiency and effectiveness of the municipality. Performance measures and targets should enable them to do so (Khalo et al., 2013:117).
According to Khalo et al. (2013:118) the three basic aspects of a municipal service that may be measured are:
The inputs (financial, human, material) that are used to produce a service;
The outputs achieved (for example, the number of municipal council houses built); and
The outcomes achieved (for example, a decrease in property levels and increased economic growth).
Municipalities must set indicators to capture the functionality of their institutions (Carman & Conrad, 2000:92). Boland and Fowler (2000:419) define performance indicators as instruments or criteria that indicate whether progress is being made in achieving specific goals. They provide a framework for gathering data for measurements and performance reporting. Carman and Conrad (2000:92-93) differentiate among various types of indicators to measure performance, as shown in Table 5.1 below.
Table 5.1: Indicators to measure performance
Type of indicator Explanation
Input indicators These are indicator that measure economy and efficiency in purchasing material to deliver services without compromising quality. The economy indicators are usually expressed in unit cost terms, while efficiency indicators may be the amount of time, money or number of workers it took the municipality to, for example, build one house.
Output indicators These are effectiveness indicators to measure whether
municipal processes and activities generate the desired output.
They are usually expressed in quantitative terms, such as the number of households connected to the water supply system as a result of a municipal water provisioning programme.
Outcome indicators Outcome indicators measure the quality and impact or long- term effects or results of the output. Outcome indicators are associated with policy and programme objectives.
Cost, input, process, output and outcome indicators
These sets of different indicators relate to the processes, activities, results and effects of municipal processes.
Type of indicator Explanation Composite
indicators
Municipal functions can have a variety of outcomes that need to be measured. The danger of this is that councils can end up with a long list of indicators that becomes difficult to manage and communicate. In response to this problem, a set of composite indicators for each sector (for example, transport, water, sanitation, electricity, public participation, housing, and so forth.) could be used. Composite indices combine a set of different indicators into one index by developing a statistical relationship among them.
Baseline indicators These are indicators that show the status quo or the current situation, and are generally in the planning phase to indicate the gap between the existing and desired performance.
Source: Carman and Conrad (2000)
In setting performance indicators, Khalo et al. (2013:119) caution that there is usually an apprehension that by developing indicators, municipal officials will provide top management with ‘weapons to be used against themselves’. This aspect, namely the human and behavioural dimension of performance management, will be explained below.