Guidelines for Drafting a Performance Agreement

By Earl Coleman,2014-06-18 10:11
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Guidelines for Drafting a Performance Agreement

     Draft: September 28, 2009





    Cabinet Secretariat

    Government of India

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The Prime Minister approved the outline of a “Performance Monitoring and Evaluation System

    (PMES) for Government Departments” vide PMO I.D. No. 1331721/PMO/2009-Pol dated

    11.9.2009. Under PMES, each department is required to prepare a Results-Framework Document


A RFD provides a summary of the most important results that a department/ministry expects to

    achieve during the financial year. This document has two main purposes: (a) move the focus of the

    department from process-orientation to results-orientation, and (b) provide an objective and fair

    basis to evaluate department’s overall performance at the end of the year.

The following Guidelines are divided into three broad sections: (I) Format of RFD; (II)

    Methodology for Evaluation; and (III) RFD Process and Timelines

I. Format of Results-Framework Document

A Results-Framework Document (RFD) is essentially a record of understanding between a Minister

    representing the people’s mandate, and the Secretary of a Department responsible for implementing

    this mandate. This document contains not only the agreed objectives, policies, programs and

    projects but also success indicators and targets to measure progress in implementing them. To

    ensure the successful implementation of agreed actions, RFD may also include necessary

    operational autonomy.

The RFD seeks to address three basic questions: (a) What are department’s main objectives for the

    year? (b) What actions are proposed to achieve these objectives? (c) How would someone know at

    the end of the year the degree of progress made in implementing these actions? That is, what are

    the relevant success indicators and their targets?

The RFD should contain the following five sections:

    Section 1 Ministry’s Vision, Mission, Objectives and Functions. Section 2 Inter se priorities among key objectives, success indicators

    and targets.

    Section 3 Trend values of the success indicators. Section 4 Description and definition of success indicators and proposed

    measurement methodology.

    Section 5 Specific performance requirements from other departments

    that are critical for delivering agreed results.

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Section 1: Ministry’s Vision, Mission, Objectives and Functions

This section provides the context and the background for the Results-Framework Document.

    Creating a Vision and Mission for a department is a significant enterprise. Ideally, Vision and

    Mission should be a byproduct of a strategic planning exercise undertaken by the department. Both

    concepts are interrelated and much has been written about them in management literature. Here we

    will provide some working guidelines to write this section of the RFD.

    A Vision is an idealized state for the department. It is the big picture of what the leadership wants the department to look like in the future.

    The department’s Mission is the nuts and bolts of the vision. Mission is the who, what and why of

    the department’s existence.

Vision is a symbol, and a cause to which we want to bond the stakeholders, (mostly employees and

    sometime other stake-holders). As they say, the people work best, when they are working for a

    cause, than for a goal. Vision provides them that cause.

Vision is a long-term statement and typically generic & grand. Therefore a vision statement does

    not change unless the department is dramatically restructured and is expected to undertake very

    different tasks in the future.

Vision should never carry the 'how' part of vision. For example ' To be the most admired brand in

    Aviation Industry' is a fine vision statement, which can be spoiled by extending it to' To be the

    most admired brand in the Aviation Industry by providing world-class in-flight services'. The

    reason for not including 'how' is that 'how' may keep on changing with time.

Writing up a Vision statement is not difficult. The problem is to make employees engaged with it.

    Many a time, terms like vision, mission and strategy become more a subject of scorn than being

    looked up-to. This is primarily because leaders may not be able to make a connection between the

    vision/mission and people’s every day work. Too often, employees see a gap between the vision,

    mission and their goals and priorities. Even if there is a valid/tactical reason for this mismatch, it is

    not explained. The leadership of the ministry (Minister and the Secretary) should therefore consult

    a wide cross section and come up with a Vision that can be owned by the employees of the


Vision should be the horizon of 5-10 years. If it is less than that, it becomes tactical. If it is of a

    horizon of 20+ years (say), it becomes difficult for the strategy to relate to the vision.

Features of a good vision statement:

    ? Easy to read and understand.

    ? Compact and crisp to leave something to people’s imagination.

    ? Gives the destination and not the road-map.

    ? Is meaningful and not too open ended and far-fetched.

    ? Excite people and make them get goose-bumps.

    ? Provides a motivating force, even in hard times.

    ? Is perceived as achievable and at the same time is challenging and compelling, stretching us

    beyond what is comfortable.

The entire process starting from the Vision down to the objectives is highly iterative. The question

    is from where we should start? We strongly recommend that vision and mission statement should

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    be made first without being colored by constraints, capabilities and environment. It is akin to the vision of several armed forces: 'Keeping the country Safe and Secure from external threats'. This vision is non-negotiable and it drives the organization to find ways and means to achieve their vision, by overcoming constraints on capabilities and resources. Vision should be a stake in the ground, a position, a dream, which should be prudent, but should be non-negotiable barring few rare circumstances.

Mission follows the Vision:

    We strongly recommend that mission should follow the vision. This is because the purpose of the organization could change to achieve their vision. Ministry / Department’s mission is the nuts and

    bolts of the vision. Mission is the who, what and why of your department’s existence. The vision represents the big picture and the mission represents the necessary work.

    Mission of the department is the purpose for which the department exists. It is in one way the road to achieve the vision.


    Objectives represent the developmental requirements to be achieved by the department in a particular sector by a selected set of policies and programmes over a specific period of time (short-medium-long). For example, objectives of the Ministry of Health & Family Welfare could include: (a) reducing the rate of infant mortality for children below five years; and (b) reducing the rate of maternity death by (30%) by the end of the development plan.

    Objectives could be of two types: (a) Outcome Objectives address ends to achieved, and (b) Process Objectives specify the means to achieve the objectives. As far as possible, the department 1 should focus on Outcome Objectives.

    Objectives should be directly related to attainment and support of the relevant national objectives stated in the relevant Five Year Plan, National Flagship Schemes, and relevant sector and departmental priorities and strategies, President’s Address, the manifesto, and

    announcement/agenda as spelt out by the Government from time to time.

    Objectives should be linked and derived from the Departmental Vision and Mission statements.

The functions of the department should also be listed in this section

Section 2: Inter se priorities among key objectives, success indicators and targets.

    The heart of the Section 2 of the RFD document consists of the Table 1. In what follows we describe the guidelines for each column of this Table.

     1 Often a distinction is also made between “Goals” and “Objectives.” The former is supposed to be more general and

    latter more specific and measurable. The Vision and Mission statement are expected to capture the general direction and future expected outcomes for the department. Hence, only the inclusion of objectives in Table 1 is required.

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Column 1: Select Key Departmental Objectives

From the list of all objectives, select those key objectives that would be the focus for the current

    RFD. It is important to be selective and focus on the most important and relevant objectives only.

    Table 1: Format of the Results-Framework Document (RFD)

     Action 1

    Objective 1 Action 2

    Action 3

     Action 1

    Objective 2 Action 2

    Action 3

     Action 1

    Objective 3 Action 2

    Action 3

Column 2: Assign Relative Weights to Objectives

Objectives in the RFD should be ranked in a descending order of priority according to the degree of

    significance and specific weights should be attached to these objectives. The Minister in-charge

    will decide the inter se priorities among departmental objectives and all weights must add to 100.

Column 3: Specify Means (Actions) for Achieving Departmental Objectives

For each objective, the department must specify the required policies, programmes, schemes and

    projects. Often, an objective has one or more policies associated with it. Objective represents the

    desired “end” and associated policies, programs and projects represent the desired “means.” The latter are listed as “actions” under each objective.

Column 4: Specify Success Indicators

    For each of the “action” specified in Column 3, the department must specify one or more success indicators. They are also known as Key Performance Indicators (KPIs) or “Key Result Areas (KRAs)” A success indicator provides a means to evaluate progress in achieving the policy,

    programme, scheme and project. Sometimes more than one success indicator may be required to

    tell the entire story.

Success indicators are important management tools for driving improvements in departmental

    performance. They should represent the main business of the organization and should also aid

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accountability. If there are multiple actions associated with an objective, the weight assigned to a

    particular objective should be spread across the relevant success indicators.

Success indicators should consider both qualitative and quantitative aspects of departmental


In selecting success indicators, any duplication should be avoided. For example, the usual chain for

    delivering results and performance is depicted in Figure 1. An example of this results chain is

    depicted in Figure 2.

     Results-Based Management: Adult Literacy Results-Based Management






     Figure 1: Typical Results Chain Figure 2: An Example of Results Chain

If we use Outcome (increased literacy) as a success indicator, then it would be duplicative to also

    use inputs and activities as additional success indicators.

Ideally, one should have success indicators that measure Outcomes and Impacts. However,

    sometimes due to lack of data one is able to only measure activities or output.

Column 5: Assign relative Weights to Success Indicators

If we have more than one action and hence multiple success indicator for an objective, we need to

    split the weight for indicator among the success indicators.

Column 6: Specify Targets for Success Indicators

The next step is to choose a target for each success indicator. Targets are tools for driving

    performance improvements. Target levels should, therefore, contain an element of stretch and

    ambition. However, they must also be achievable. It is possible that targets for radical improvement

    may generate a level of discomfort associated with change, but excessively demanding or

    unrealistic targets may have a longer-term demoralizing effect.

The target should be presented as the following five-point scale

    100 % 90% 80% 70 % 60 %

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It is expected that budgetary targets would be placed at 90% (Very Good). For any performance

    below 60%, the department would get a score of 0%.

Section 2: Trend values of the success indicators

For every success indicator and the corresponding target, RFD must provide actual values for the

    past two years and also projected values for two years in the future.

    Table 2: Trend Value for Success Indicators

    Action 1

    Objective 1 Action 2

    Action 3

    Action 1

    Objective 2 Action 2

    Action 3

    Action 1

    Objective 3 Action 2

    Action 3

Section 4: Description and definition of success indicators and proposed

    measurement methodology.

RFD must contain a section giving detailed definitions of various success indicators and the

    proposed measurement methodology. Wherever possible, the rationale for using the proposed

    success indicators may be provided.

Section 5 Specific performance requirements from other departments that are

    critical for delivering agreed results.

    This section should contain expectations from other departments that impact on the department’s performance. These expectations should be mentioned in quantifiable, specific, and measurable


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II. Evaluation Methodology

At the end of the year, we look at the achievements of the government department, compare them

    with the targets, and determine the composite score. Table 3 provides an example from the health

    sector. For simplicity, we have taken on one objective to illustrate the evaluation methodology.

The Raw Score for Achievement in Column 6 of Table 3 is obtained by comparing the achievement

    to the agreed target values. For example, the achievement for first success indicator (% increase in

    primary health care centers) is 15 %. This achievement is between 80 % (Good) and 70 % (Fair)

    and hence the Raw Score is 75%.

The Weighted Raw Score for Achievement in Column 6 is obtained by multiplying the Raw Score

    with the relative weights. Thus for the first success indicator, the Weighted Raw Score is obtained

    by multiplying 75% by .50. This gives us a weighted score of 37.5%

Finally, the Composite Score is calculated by adding up all the weighted achievements. In Table 3,

    the Composite Score is calculated to be 84.5.

The composite score shows the degree to which the government department in question was able to

    meet its objective. The fact that it got a score of 84.5 % in our hypothetical example implies that

    the department’s performance vis-à-vis this objective was rated as “Very Good.”

The methodology outlined above is transcendental in its application. Various departments will have

    diverse set of objectives and corresponding success indicators. Yet, at the end of the year every

    department will be able to compute its Composite Score for the past year. This Composite Score

    will reflect the degree to which the department was able to achieve the promised results.

    Excellent = 100% - 96%

    Very Good = 95% - 86%

    Good = 85 76%

    Fair = 75% - 66%

    Poor = 65% and below

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    Table 3: Example of Performance Evaluation at the End of the Year

% Increase in number

    1 of primary health care % .50 30 25 20 10 5 15 75% 37.5% centers

    % Increase in number Improve of people with access Access to 2 % .30 20 18 16 14 12 18 90% 27% Better Rural to a primary health Primary Health center within 20 KMs Health Care Number of hospitals

    with ISO 9000 3 % .20 500 450 400 300 250 600 100% 20% certification by

    December 31, 2009

    84.5% Composite Score =

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A. Beginning of the Year

     At the beginning of each financial year, with the approval of the Minister concerned, each

    Department will prepare a Results-Framework Document (RFD) consistent with these


     To achieve results commensurate with the priorities listed in the RFD, the Minister in-

    charge will approve the proposed activities and schemes for the Ministry/Department.

    The Ministers in-charge will also approve the corresponding success indicators (Key

    Result Areas KRAs or Key Performance Indicators KPIs) and time bound targets to

    measure progress in achieving these objectives.

     Based on the proposed budgetary allocations for the year in question, the drafts of RFs th of March every year. To ensure uniformity, consistency and will be completed by 5

    coordinated action across various Departments, the Cabinet Secretariat will review these

    drafts and provide feedback to the Ministries/Departments concerned. This process will

    be completed by March 31 of each year.

     The final versions of all RFs will be put up on the websites of the respective Ministries by ththe 15 of April each year.

     The Results Framework of each Department/Ministry will be submitted to the Cabinet thSecretariat, by the 15 of April each year. It will take into account budget provisions and

    in particular the Outcome Budget. The Results Framework will be drawn up in such

    manner that quarterly monitoring becomes possible. Quarterly reports will be submitted

    to the Cabinet Secretariat.

B. During the Year

     After six months, the Results Framework as well as the achievements of each

    Ministry/Department against the performance goals laid down at the beginning of the year,

    will be reviewed by a Committee on Government Performance consisting of the Cabinet

    Secretary, Finance Secretary, Expenditure Secretary, Secretary (Planning Commission),

    Secretary (Performance Management) and the Secretary of the Department concerned. At

    this stage, the Results Framework may have to be reviewed and the goals reset, taking

    into account the priorities at that point of time. This will enable to factor in unforeseen

    circumstances such as drought conditions, natural calamities or epidemics. The report of

    the Committee on Government Performance will be submitted to the Prime Minister,

    through the concerned Minister, for further action as deemed necessary.

    C. End of the Year

     At the end of the year, all Ministries/Departments will review and prepare a report listing

    the achievements of their ministry/department against the agreed results in the prescribed stformat. This report will be expected to be finalized by the 1 of May each year.

     After scrutiny by the Cabinet Secretariat, these results will be placed before the Cabinet stfor information by 1 of June each year.

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