KPI REPORTING IN THE PUBLIC SECTOR Towards a Dynamic Triple Bottom Line Keith T Linard 1 Director, Ankie Consulting Pty Ltd GREENDALE VICTORIA 3341 AUSTRALIA Tel: 0412-376-317 E-mail : linard.keith#@#gmail.com (Remove ‘#’ for email) ABSTRACT: Performance indicators are key feedback drivers of organisation dynamics. However, the evaluation literature gives no scientific basis for their selection or validation. An even more significant omission in the literature is the validation of “business rules” associated with such indicators. It is presumed that managers instinctively know the “right way” to respond to indicator change. Research shows that managers typically misread delayed feedback effects and their decisions are correspondingly inappropriate. The balanced scorecard suffers from the above limitations, especially the feedback interrelationships between indicators. Recent reports by the Commonwealth Auditor General raise concerns regarding agency performance management systems which echo concerns going back to the 1980’s. It is apparent that there remains a lack of understanding of performance indicators as well as evidence of loss of corporate knowledge. In particular, a review of federal, state and local government guidelines, with the exception of NSW and Queensland, and a review of federal agencies, with some outstanding exceptions such as AusAID and various NSW agencies, have little conception of the critical importance of cause-and-effect, or program logic, in the development of their KPIs. This paper discusses development of a “dynamic balanced scorecard” based on the system dynamics paradigm, which accounts for delayed feedback effects. The paper outlines the modelling of causal interactions within an organisation that impact on output quality. Keywords: system dynamics; balanced scorecard; BSC; performance indicators ; KPI; performance management; systems thinking; cognitive mapping; effectiveness audit. THE HEALTH OF PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR Performance Management has improved & is still improving First, there is no doubt that there have been dramatic improvements in public sector performance management over the past 2 decades or so since the Hawke-Keating Labor Government initiated a dramatic objectives-oriented shake up of the federal bureaucracy with its Financial Management Improvement Program (FMIP), and corresponding action by State Governments. My comments and criticisms in this paper should be seen as a desire to lift the game even further rather than a condemnation of the ongoing efforts of so many good people. Where have we come from? Management attitudes and management systems have come a dramatic distance since 1980’s. 1 Keith Linard is former Director of the University of New South Wales Centre for Business Dynamics & Knowledge Management and a former Chief Finance Officer with the federal department of Finance.