100111 NE Lincs Council

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Management Case Study

Using Performance Management to

Transform a Failing Organization: The

Improvement Journey of North East

Lincolnshire Council

For more information please visit: www.ap-institute.com


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2009 Advanced Performance Institute, BWMC Ltd. (All rights reserved) www.ap-institute.com Page 2

Using Performance Management to Transform a Failing Organization: The Case of NE Lincs Council API Case Study

Using Performance Management to Transform a Failing

Organization: The Improvement Journey of North East

Lincolnshire Council

By

Bernard Marr* and James Creelman

Abstract: This case study illustrates how an organization used Performance

Management to turn itself around from the worst performing Local Authority in the

country to one that is on a performance improvement journey, heading towards top

performance. This case study should of interest to most organizations as it

illustrates the essential role of senior leadership buy-in and support to change the

organizational culture and make it performance focused. It also demonstrates how

the organization managed to agree strategic priorities (which is so vial in difficult

economic times) and improve its data quality to generate management insights that

lead to real performance improvements.

Version: 26 October 2009 *corresponding author

Bernard Marris the Chief Executive and Director of Research at the Advanced Performance Institute. E-mail:

[email protected]

James Creelman is a Fellow of the Advanced Performance Institute

The Advanced Performance Institute (API) is a world-leading independent research and advisoryorganisation specialising in organisational performance. It provides expert knowledge, research, consulting

and training to performance orientated companies, governments and not-for-profit organisations across the

globe. For more reading material or information on how the API might be able to help your organisation please

visit: www.ap-institute.com

How to reference this case study:

Marr, B. and Creelman, J. (2009) Using Performance Management to Transform a Failing Organization: The

Improvement Journey of North East Lincolnshire Council, Management Case Study, The Advanced

Performance Institute (www.ap-institute.com).


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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 NELincolnshires 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%).


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Financial Mismanagement

But it was the financial audit of 2004 that would

prove both the low-point in the councils

performance and catalyze the subsequenttransformation 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 ProjectsBeing 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 councils 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

councils 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


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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 ademonstration 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 councils 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 councils 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 difficultand 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 weexplain 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 managersfrom 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.


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Data Challenges

A further underlying problem within NE Lincolnshire

Council that was constraining attempts at

improvement was the quality of its performancedata, 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

councils 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 rightfirst 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


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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 of

stakeholder 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 whats

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 ReportingA 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 ReviewsA 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 wasnt 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 reinvestmentpriorities 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


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performance management within the council.

Emblazoned across the front page was the words

performance, performance, performance, which

the Chief Executive chose as a new organizationalmantra so to leave managers in no doubt as to what

was expected of them going forward (see Figure 1).

Figure 1: Signpost to Success Document

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 doesnt 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 focusesattention 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 whatsbothering 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


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Lincolnshire used to be subjected to a centrally

government run triennial survey of community

satisfaction. We realized that we couldnt wait for

three years to get a view of what was happeninglocally, 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, wewill refine our goals based on the findings.

Feedback from the citizens 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 prioritiesWith 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.

Figure 2: State of the Borough Report


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Strategic Aim Examples

The councils 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 thesepriorities 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

Figure 3: Plan on a Page


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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 ofpeople 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 the

organization 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 andefficiencies 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

Figure 4: Actions, Measures, Targets, Responsible


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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 justas we have aim discussions that look at the

progress of priorities we also come together as a

leadership team to look at whats 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 performanceimprovements 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 thatdocument 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 councils

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 itspeople 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 days holiday. NE Lincolnshire

Council was one of only three councils to improve

so dramatically from 2005 to 2006.


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Next Step Performance Improvement

NE Lincolnshire Council has clearly made excellent

progress since beginning its performance

improvement journey in 2004. There is now a muchclearer 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. Theres 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 councils 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 enablethe 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 wasnt 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. Hewas 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 everybodys agenda and

radar.


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Chief Executive commitment also impacts another

of Comptons critical success factors paying

attention to change management. Change is

difficult and oftentimes people dont understand whythey have to change, she says. If we dont 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 everyones job. Weve 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 wenow have the culture and the momentum to make

this happen.

Endnotes, References & Further Reading

Marr, Bernard (2010), The Intelligent Company: Five Steps to Success with Evidence-Based

Management, Wiley, Oxford.

Marr, Bernard (2009), Managing and Delivering Performance: How Government, Public Sectorand Not-for-profit Organizations can Measure and Manage what Really Matters, Butterworth-

Heinemann, Oxford.

Marr, Bernard (2006), Strategic Performance Management, Butterworth-Heinemann, Oxford

www.ap-institute.comFor more case studies, reports andarticles visit www.ap-institute.com

The Performance Management Audit work by the Advanced Performance Institute has not

only identified things we can improve but has also re-vitalised our interest in performance

management and invigorated a real desire to get much better!

Beverley Compton, Deputy Director, Policy and Performance


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Highlights from the API resources library:

Our Resource and Research Library offers a selection of relevant downloads and links to books, articles and

case studies. These have been selected as useful information sources for further reading and to illustrate best

practice and leading thinking.

Some key ideas explained in simple terms:

What isPerformance Management?

What is theBalanced Scorecard?

What is aKey Performance Indicator?

To read more just click: http://www.ap-institute.com/resources.htm

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100111 NE Lincs Council