Key Performance Indicators For Local Government Infrastructure Development: The Case Of Sub-District (Tambon) Administrative Organization

A series of National Economic and Social Development Plans have been developed and implemented successively by different Thai governments, the latest being the Ninth National Economic and Social Development Plan for 2002-2006. The Ninth Plan decentralizes the responsibility to enhance the Thai people’s quality of life from the central to local governments (National Economic and Social Development Board, 2002). In rural areas, the Plan specifies measurable objectives; the core of which being rural infrastructure projects. However, these objectives should be achieved by adhering to a strict balance among the economic, social, and environmental impacts of development projects.

Rural infrastructure is an extremely important aspect of rural development as a key to rural social and economic life (Csaki and Haan, 2003; United Nations, 2004). In Thailand, rural infrastructure was placed as an important sector to support rural economic, social, and quality of life. The latest Thai National Economic and Social Development Plan (2002-2006) had realized by focusing on encouraging local administrative units to solicit in appropriate standardized infrastructure development. As part of the guideline for the formulation of operational plans and development program, a work plan must clearly identifies and prioritizes programs, projects and measures to assure development outcome accomplishment.

To enhance the capability and to empower the production and service sectors at the grassroots, in 1995, the Tambon Administrative Organizations (TAOs) or the sub-district local governments (the smallest local government units in the country) were established. Under the Sub-district Council and Sub-district Administration Act of 1994, TAOs are responsible for planning and management of infrastructure. These cover the infrastructure development and maintenance. The development endeavors encompasses conceptualization, execution, and operation at local level. It is the mission of TAOs to provide and promote efforts aimed at the availability and accessibility of infrastructure services (Leungbootnak and Charoenngam, 2003).

The successful completion of an infrastructure project in a reasonable time typically needs a large amount of investment funds (Ariaratnam and MacLeod, 2002; Clark et al., 2002; Dvorak et al., 2003). However, it is important to note a limited budget has been made available to the TAOs to support development programs. Accordingly, a decision by a TAO to invest in a particular infrastructure project always involves a trade off between the expected benefits from that infrastructure project and alternative infrastructure of social development projects. Therefore, the central government demands accountability for budgetary investments and disbursements undertaken by local governments. TAOs must therefore carefully select projects that are expected to optimize outcomes from such activities.

Due to the tight financial constraints, the government demands TAOs to enforce transparency and accountability in project investment decisions. The management of such infrastructure facilities and services is therefore crucial to use performance measurement as a tool to give decision makers an idea of how well that services are performing (Andrews, 2004; Gargen, 1997; Kelly and Rivenbark, 2003; Neely, 1999). Performance measurement is the phase of management that assesses how good a job the organization or individual is doing. In the context of rural development projects, performance measurement is an instrument for ensuring that a rural infrastructure investments successfully incorporates the desired development strategies (Ghobadian and Ashworth, 1994; Kloot, 1999; Pollanen, 2005). So, TAOs need performance measurement systems to determine how well the project is performing. This measuring instrument provides the feedback needed to evaluate performance on the entire infrastructure development process, from project planning through implementation, and maintenance.

To ensure that the developed project corresponds to rural people needs, it is crucial that performance measurement tool is designed and maintain. The Balanced Scorecard (BSC) provides the accurate understanding of a framework for the performance measurement (Crager et al., 2005; Kaplan and Norton, 1996a). In order to measure performance, the appropriate Key Performance Indicators (KPIs) need to be determined (Cox et al., 2003; Enos, 2000; Verweire and Berghe, 2004).

This dissertation aims to provide a practical perspective involves the focus of the performance measurement of rural infrastructure development in TAOs. Therefore, this study examines the current use and perception of TAOs regarding such performance measurement systems. The commitment of the TAOs to the implementation confirmed the benefits of the performance measurement intentions. A review is given of relevant literature regarding the evolution of performance measurement systems and their application to rural infrastructure development projects. The review additionally includes: the relationships of rural infrastructure and performance measurement, the function of the Balanced Scorecard, the function of the performance measurement, the function of value-chain and the function of critical success factors necessary for KPIs development.

In an attempt to measure the performance, the indicators are necessary to develop for the interpretation (Bruijn, 2002; Magistretti et al., 2002). The identification of the KPIs as well as align them with TAO strategies then becomes the key to realize:
· National Economic and Social Development Plan which emphasis the aims of sustainable development and well-being of Thai people
· Need for a comprehensive measurement of infrastructure development in rural area
· Importance in clarifying the infrastructure project development in their efficiency and effectiveness, and
· Importance in the approaching to the satisfaction of people in the community.

In response to the government’s obligation, Miss Suchanya Posayanant initiated a project which aim was to develop the indicators to measure the performance of infrastructure development in relation to the TAOs’ strategy of service delivery to the community. The study set out to measure the success level of infrastructure development of TAOs in supporting the delivery of infrastructure services to the community. The basis of the assessment systems is developed with performance measurement perception. To accomplish the set of goals, the main objectives are as follow:

1. Examine the existing practices of performance measurement systems and to comprehend the evaluation problems of rural infrastructure development. So that need and justification for the measurement improvement can be identified
· To measure TAO’s expectations and perceived accomplishments of infrastructure development in the areas of economic, social, and environmental development
· To examine the current practice of performance measurement in rural infrastructure development by TAOs
· To determine level of perception of TAOs’ expectation and accomplishment on economy, society, and environment issues
· To examine TAOs’ needs and awareness by using performance measurement in their rural infrastructure development

2. Design the performance measurement framework and Key Performance Indicators (KPIs) in response to the identification of the efficiency and effectiveness of infrastructure development in the approach of the Balanced Scorecard (BSC), Performance measurement, and Value Chain model.

3. Determine the appropriateness of the KPIs so that proper indicators can be proposed for rural infrastructure development of TAOs. The difference among TAOs characteristics in applying KPIs is the primary focus.

4. Determine the KPIs’ utility. For determining the utility of KPIs, a Prototype KPIs has been developed. The purpose is to fulfill the primary research objectives. The development and testing of a Prototype KPIs help TAOs to identify and measure the infrastructure project success and ultimate achievement.

Conclusions

The performance measurement in TAOs
From the survey results, most TAOs currently do not use and do not have access to a formal performance measurement scheme. Learning and growth was the only area in which over 90% of the TAOs use certain forms of performance measurement systems. In all other perspectives, more than half of TAOs had no measurement systems installed. Among the TAOs that have implemented performance measurement, the systems in use were reported informal systems and are usually based on informal and subjective discussions between TAO chiefs or committee members with the village people during meetings. In general, TAOs could provide an informal determination that rural infrastructure projects in their respective areas had effectively contributed to economic, social, and environmental development. However, because of the lack of formal performance measurement systems, it was difficult for TAOs to provide documentary evidence of the performance measurement of their projects.

It was shown that more than 95% of TAOs stated that formal performance measurement systems were needed to provide feedback on rural infrastructure efforts. They also revealed their intention to adopt these formal systems, if provided. Based on this, the BSC has proven to be an effective tool in evaluating rural infrastructure development performance in TAOs. The BSC allows them to assess performance from four important perspectives - mission effectiveness, people satisfaction, internal process as well as learning and growth. Where specific measures are likely to take place, the value chain provides TAOs with great insights into how development process are aligned and measured. Accordingly, the BSC-based performance measurement was developed for TAOs.

The development of KPIs and its framework
The BSC provides a comprehensive framework to define set of KPIs that reflect the CSFs of TAOs. The KPIs are classified and more clearly recognized by adopting the value chain model of TAOs as a framework. This section involves the development of the KPIs by providing concrete example on how the KPIs would look and support the rural infrastructure development in TAOs. As a result, the three phases approach for developing and using the KPIs are:

1. Identify critical success factors (CSFs) for TAOs
The CSFs represent key area of activities that TAOs must meet in order to improve their performance in the development of rural infrastructure. These CSFs established by the BSC approach during the data collection. This focus directly linked to the mission, vision, and strategy, and four performance perspectives: (1) mission effectiveness, (2) people satisfaction, (3) internal process, and (4) learning and growth. Each perspective is analyzed through a set of CSFs: (1) achievement of infrastructure to support social-economic development; (2) people participation; (3) effectiveness of project delivery; and (4) employee competency. These critical areas ensure strategic success achieving in order to provide public facilities and services.

2. Identify value chain model of TAOs
The value chain model for TAOs provides a template that offers a way of analyzing sequence of the infrastructure development activities. Observations and interviewing to TAO chiefs during the second visits to TAOs were found to be valuable in developing and refining the value chain model. The study proposes the value chain model as instrument to align performance measurement along the different development stages. Figure 1 shows a template of CSFs meant to measure project development performance that parallel among the value chain processes.

3. Identify key performance indicators (KPIs)
Once the BSC and CSFs are defined, the KPIs are necessary to specify both to measure the objective’s performance in such critical areas and to demonstrate a tangible success in the extended value chain. Based on these factors in mind, a total of 31 KPIs were developed to measure rural infrastructure development shown in Table 1. KPIs can be classified and more clearly recognized by adopting the value chain model of TAOs as a framework (Figure 2).






Testing the appropriateness of the KPIs
The third research objective was to test the preliminary KPIs appropriateness in different TAO characteristics. Where a set of 31 KPIs was defined, it was found that a statistically significant difference existed among the TAOs. The appropriateness test was grouped into the following four categories:

1. Acceptable: the KPIs measure and track TAOs performance success of the infrastructure project towards (1) Economic development; (2) Social development; and (3) Environmental development.

2. Importance: the KPIs can be used to support and make more effective management decisions.
3. Database readiness: the availability and accessibility to the database which enable TAOs to keep track of the KPIs’ role in the organization.

4. Information Accuracy: the accuracy of information becomes important to certain the KPIs that give sufficient accuracy to the rural infrastructure concern in TAOs.

The majority of the TAO respondents agree that the preliminary KPIs are acceptable for TAOs. However, the TAOs may be counted in a different infrastructure project with different objectives and providing different appropriateness of the KPIs. Due to the priorities and performance criteria, some of the KPIs applicability perceptions are different. Further analyses reveal significant differences among the TAOs, depending on their region and level. The information accuracy of the KPIs depends on the “Personnel Proficiency”, which is determined by the experience and knowledge the employees gained from their individual projects. The scorecard perspectives are considered as a framework approach to the performance measurement indicators.

Implementation of KPIs
This section has presented to support TAOs in practice to better handling and ensure the success of their infrastructure development. In addition to the previous section, the prototype KPIs was perceived as a helpful tool that encourages the performance measurement that reflects the efficiency and effectiveness of the development projects. The results were then subjected to an expert opinion focus group to further verify the KPIs appropriateness.
This phase describes the findings from the focus group interview, which was gathered from participants across 12 TAOs with four types of development focus area – agriculture, industry, commerce, and tourism. The participants have experience in rural infrastructure development more than five years. All of them worked in the first-level TAO, which generates income more than 20 million baht per year. Below is a summary of the guidelines and findings on transcribing interview data:

Applicable to TAOs
- TAOs use these KPIs as measurable indicators of their project development success towards achieving their mission.
- The KPIs were tied to the four BSC perspectives. The indicators clearly assign proper target measures for each rural infrastructure development objective.
- The KPIs in the mission perspective were considered as the most concrete indicators.

2. Importance for Decision-Making Process
- The KPIs are relevant enough to support the measurement of infrastructure development success.
- The KPIs are a helpful performance management tool for evaluating of the management processes and results of infrastructure development.
- The improvement of infrastructure development is based on planning and actual data in the KPIs database.

3. Database Readiness
- The KPIs provide specific predefine measures which enable TAOs to focus on database access.
- TAOs have database gathered from the planning and output data of infrastructure projects to support those KPIs.
- TAOs need to keep information database current.

4. Information Accuracy
- The KPIs require unbiased personnel to measure performance based on these indicators.
- TAOs can provide accurate information to fill in the KPIs for measurement decision.

The example detailed of the prototype KPIs demonstrates the usefulness to measure accurately the TAO’s rate of improvement. The prototype provides two levels of measures. The executive report highlights the development performance against four perspectives. And the operational reporting is designed to support the detailed measurement. The approach was therefore, first, TAOs set targets for each KPI based on information from the past year. Then, measure performance against the KPIs and compare with target performance. The results of the comparison support the understanding and clarifying of key development problems. These KPIs aid decision making for improvement in the process of generating planning and execution of infrastructure. The use of KPIs will help TAOs move towards the kind of performance improvement desired.

Her dissertation abstract is copied and posted.

Abstract

The purpose of this study was threefold. One, the study was to examine the perceptions and current practice of Tambon Administrative Organizations (TAOs) in rural infrastructure development regarding the performance measurement systems. The aim was to determine TAOs’ commitment to adopt formal measurement system if provided. Two, the key performance indicators (KPIs) appropriateness was accordingly explored to provide accurate picture for TAOs to the satisfactoriness of the development results. Three, a prototype KPIs was developed for TAOs that help define and measure the project success and ultimate achievement.

In order to examine the existing practices of performance measurement systems, documentations and personal interviews was conducted. To explore in depth of TAOs’ performance measurement practices, the questionnaire survey was administered to a sample of 120 TAO chiefs, who had extensive experience in infrastructure development and management. 43 responses were returned representing a 36% response rate. Descriptive statistics and chi-square analysis showed that while most respondents have developed informal means to evaluate the effectiveness of infrastructure initiatives, the TAOs have realized the importance of performance measurement. The TAOs have affirmed to formally adopt performance measurement if such systems were made available to them. Based on the results, the commitment confirms the significance of the KPIs development and application.

To further create KPIs, documentation, observations, and expert focus groups were held to give an insight into the adaptation of the Balanced Scorecard (BSC) framework which link critical success factors (CSFs) and TAO’s value chain. This had led to a specific measure of TAO’s performance in rural infrastructure development. To test and further determine the KPIs’ appropriateness, the method used was questionnaire survey and included both descriptive and Kruskal-Wallis one-way analysis of variance. The sample was purposively selected from 617 TAOs that were first established administration and have become a dominant in infrastructure development activities at the local level. 298 questionnaires were returned, generating a 48.30% response rate. There were ten experts to the focus group interview held to summarize the data for analysis from the meaningfulness of the experience from the participants’ perspective. The results from Chapter 5 denote a number of findings. First, the KPIs are acceptable to the majority of TAOs. Second, the applicability perception differences on each of the KPI were obvious among the four regions of TAOs. TAO’s choice of indicator will depend on its strategy which coordinates people living and working in the areas. Finally, results of the research data revealed that the TAOs from the five levels place differences applicability perception on each of the KPI. The KPIs applicability perception is based on three-year rolling budget plans that will enhance the quality of infrastructure and services for the community.
Lastly, in this dissertation, a prototype KPIs was developed and tested to determine the KPI’s utility. Data are collected from 12 TAOs. The prototype KPIs illustrates a quantifiable measure that the TAOs use to communicate development performance for the success. It supports the recommended infrastructure project improvement activities. The focus group, convened ten experts, validated that the prototype KPIs is successfully formed and implemented by the TAOs. The prototype encompasses two sections, one to measure overall success of TAOs, which associates executive view with the scorecard. The second section addresses operational report, which details the KPIs measurement in each perspective of the BSC. This report enables the executive to pinpoint the decision to the most suitable infrastructure projects where the TAO chief can maintain success and improve on the most severe performance degradations. Focus on the KPIs, it is expected that the central government could instantly provides advisory and support for the projects necessary to achieve the performance goals for each Tambon.