Introduction:
After Michael Faraday had demonstrated his induction coil to a meeting
of the Royal Society, Benjamin Disraeli asked him "Is it of any
practical use, I mean, can it be taxed?" This interchange was probably
the beginning of the trend to transfer the requirement of identifying
benefit to the employee, rather than the employer.
Practicality, a
1915 book tells us, is the sense of seeing things as they are and
doing things as they ought to be done. Specifically, it is defined as
the science of being skilled in the application of means to attain
particular ends.(Nicolle, 1915)
Competition is forcing
organisations to downsize to a hard core of operatives, whose only
function is to serve the needs of customers, and a nucleus of managers
who find and hold on to those customers. (Handy, 1996, 23) It is
essential to demonstrate connection to organisation's core tasks.
Libraries and librarians are particularly vulnerable. Just as CD-ROMs
and the Internet have deprived teachers of their competitive advantage
over their students, (Handy, 1996, 7) so have they, in the broad sense,
deprived librarians of their competitive advantage. Old-fashioned
teaching transferred known solutions to known problems from teacher to
student. "Seeing things as they are, doing things as they should be
done" may suggest the old ways might still work, but future change
is likely to be discontinuous change. Discontinuity requires innovative
problem solving and innovative perceptual filters. The assumptions you
make are perceptual filters. Whether you are soaring or plummeting, the
way you view things has to change.
Performance involves more
than just the achievement of a target for one part of a system.
Nonetheless, current performance measurement practice highlights the
tendency to gather process data and to report in a way that obscures
the value of the library to the parent organisation. Organisations
assess performance by looking backwards, resulting in a built-in bias
against long-term research and development activities. Personal
performance evaluation is rarely linked to organisational performance.
Counting people as costs,
not assets, constitutes a powerful incentive to minimise costs. Rather
than just telling our organisations we are valuable, we must
demonstrate how valuable we are, in very precise terms. We have to
demonstrate that we are of practical use, in Disraeli's terms, not
Dewey's. The difference between the two is not subtle. This is part of,
and apart from, clearly and continually demonstrating that libraries
are integral to the organisation achieving its goals, both now and in
the future.
Deficiencies of Current
Performance Measurement Practice
Performance measurement very rarely means actual assessment of a real
situation. On the contrary, it usually involves a set of assumptions
from a simplified model. It is generally more relevant to setting goals
than to assessing their achievement, (Seddon, 1991, 180-190) and
published material on performance measures, and measurement as applied
in most libraries, is inadequate in a number of aspects:
- It is not holistic
- It is incomplete
- Data collection focuses
on process and transactions
- There is significant
under-performance in extracting information from the data collected
- There is a lack of a
bias towards action as a result of the evaluation and interpretation
that is carried out
- Customer satisfaction
data is approached as a report card rather than as a source of
information about areas where improvement or further investigation is
needed
Process measures imply a
prior judgement about the desirability of certain processes. They
relate to what is done rather than what is achieved. They should,
therefore, be used very precisely and reported with caution. You might
imagine what you are doing is providing a realistic picture which will
result in budgetary support, but, thanks to media hype and simplistic
thinking, many of our decision-makers have taken to believing in Magic,
that information comes from the ether, that everything is on the
Internet. How it gets there is a Mystery, but Mystery is an essential
part of Magic and therefore discontinuous logic is Not a Problem.
Libraries tend to report raw usage statistics, sometimes analysed for
trends, though some do track and report efficiency improvements. Few
have moved to regular reporting of outcomes.
Performance measurement
has two distinct purposes: to improve operations and ultimately
services, and for reporting. These purposes should neither be confused
nor used as surrogates for each other. Identifying the organisation's
concerns is essential, as is constantly measuring the library service
against these concerns. Reporting on the value of the library in the
form which senior decision-makers most easily can understand requires
couching that information in financial terms, not process terms.
My library service has
developed and implemented in-depth holistic data gathering that
delivers information about the value of library services to the
organisation that concentrates on the impact and significance of the
librarian's activities. I have written about this extensively,
elsewhere (Cram, 1995a, 1995b, 1996a, 1996b). To summarise: for some
years we have been using Return on Investment (ROI) as our sole basis
for reporting.
In accounting terms simple
ROI is the ratio of the average annual net income of an activity
divided by the internal investment in that activity. In library terms
it is demonstrating the value of the services and information the
library delivered as a ratio of the funds provided in a particular
financial period. This must include expenditure on the collection,
salaries, and operating costs. Though the resources vote is capital
expenditure, exclusing expenditure on collections from annual
return-on-investment calculations could increase vulnerability to
closing of libraries, realisation of the assets, and outsourcing of
services.. Part of the difficulty in assessing the value of a service
like research is the personal nature of the work that a research
librarian does. The circumstances of the request affects the value of
the information that is received. ROI in the special library relates
also to productivity gains which result from having trained researchers
providing the service on behalf of people whose main role is
contributing directly to the achievement of the organisation's goals.
It is therefore important to gather value information at every
transaction and particularly to record the customer's assessment of
monetary value.
ROI carried out in this
way is, however, deficient in that it reports only on short-term
returns, yet a library service is an intangible asset, the value of
which lies in the future and its future value is dictated by what its
parent body is prepared to pay now in return for some expected benefit.
I will return to later in this paper.
Most organisations do not
demand that each part, each process, each step in the value chain
justify itself on a strict ROI basis. Attempting to do so would be
inordinately costly because of the immense complexity of most
organisations. The relationships between actions and outcomes are not
linear. Causes become effects, and effects, causes, so that causal
links are untraceable. Long-term outcomes for any complex entity are
thus essentially unknowable (Caulkin, 1994, 34) benefits at the macro
level are much easier to identify and quantify than those at a micro
level. This is one reason why customer satisfaction has become so
important as a means to judge how well the organisation is doing.
Performance Reporting
Reporting on performance serves a purpose different from collecting and
evaluating data to assess library services. Reporting focus and quality
is critical to survival. In a fee-based service how and what you report
needs to demonstrate a clear understanding of what customer-value based
service is in the context of your particular library and
organisation. In a budget-based service you need also to
demonstrate personal benefit to the decision-maker. The reason for the
differential is the reality of performance measurement. Even where it
is centrally defined and formally shared, value is a context-dependent,
subjective, social construct (Badenoch, 1994, 16). It is attributed by
a person. To be able to demonstrate value requires that libraries
understand who their stakeholders are and the requirements of these
stakeholders. The measures for the goals of the person in charge become
the goals of the person next down the line. Reporting value rather than
reporting usage, enables libraries to demonstrate to parent bodies that
the library delivers a profit on the resources invested in it. In a
very real sense a library is an investment in intellectual capital, a
speculative investment in intellectual futures, thus value raises
particular problems of definition in the corporate library context: is
it asset-based, based on cost-savings, risk based, or profit-based? How
do librarians demonstrate personal value? How is stakeholder
satisfaction measured?
All stakeholders need to
be identified. All libraries have four major groupings of stakeholders,
each with its own unique requirements (Cram, 1996a). The different
motivations and needs of these groups must be understood, and
recognised in the way performance data is gathered and used, and in the
way the library reports on its performance.
Figure
1: Stakeholder groupings
What represents value
to one group will differ from what represents value to another.
Recognising this is central to managing the dichotomy that exists
between those who make decisions about funding and those who make
decisions about quality of service. Measures of customer value cannot
substitute for measures of normative stakeholder value. Where a library
chooses to report on customer value to normative stakeholders, there
needs to be a systematic approach to evaluating user satisfaction with
the quality of service. Explicit assessments, rather than anecdotal
evidence should be reported. In reporting value, care must be taken not
to confuse the value of information with the value of the library.
Librarians know that the skills and services they provide are a
critical contribution to the overall benefits realised, but this may
not be so clear to others.
Measuring Satisfaction
For a library to be successful in the long run, it must satisfy all
stakeholders, not customer groups alone, so library activities,
programs and policies should be evaluated in terms of their
contribution to satisfying stakeholders. (Naumann, 1995, 120)
Customer satisfaction is
typically measured through occasional surveys conducted when a good
report card is required, while indirect measures of customer
satisfaction are used as the 'real' measures of service. Data on
satisfaction of other stakeholders is rarely, if ever, systematically
considered, collected, or evaluated.
There are a number of
problems with customer satisfaction data gained through surveys.
Satisfaction measurements are generally designed to tap the underlying
global or net satisfaction with a product or service. The information
gathered is aggregated, and the observed distribution of satisfaction
ratings is presumed to be a reflection of "true" satisfaction (Naumann,
1995, 102). Caution should be exercised when interpreting customer
satisfaction survey data or using them in decision making. In virtually
all customer satisfaction surveys the distribution of responses is
negatively skewed, that is, the majority of the survey participants
report satisfaction. Though different modes of data collection do
result in markedly different reported levels of satisfaction, the
distributions of those satisfaction ratings are consistently negatively
skewed. (Badenoch, 1994, 37)
Figure
2: Satisfaction Distribution
To obtain information,
which can be fed back into the service design and operation loop and
minimise obscuring of data by the tendency to skewing, stakeholder
satisfaction information should be sought on specific issues rather
than general ones, and questions framed as an information-seeking
rather than a compliments-eliciting mechanism.
Attempting to demonstrate
value in hard terms, rather than soft, throws us back on financial
reporting. The ultimate measure for any corporation is profitability.
In the private sector that translates to profit, current ratio, return
on investment and share price. In the public sector it translates to
'bang for the buck'. When a library saves time and increases
productivity it contributes to the bottom line. Unfortunately,
profitability is only half of the story, because it is always a
historical measurement. We must convince our organisation that both
libraries and librarians are a rational investment, not a cost. Charles
Handy suggests that Governments and companies need to put a value on
intellectual assets, employee morale, training and development (Handy,
1994).
Individual Performance
Evaluations
Personal performance
management and review systems in budget-based organisations primarily
tend to be a control mechanism. Focus on control has obscured the core
motivation for personal performance review- to ensure that staff are
worth the money spent on them. It makes sense to re-design personal
performance assessment and reporting to make explicit the value the
staff member returns to the organisation.
Even if it is not within
your power to change the system, it is within your power to ensure that
the way you report on your own performance makes the connection
explicit. Though you will probably be able to report ROI in relation to
your salary , salary on-costs, training and development, that is by no
means the whole picture, which brings me to the crux of this paper.
Are Librarians of Any
Practical Use?
One of the difficulties for libraries and librarians is that the value
of the information they provide depends on the proportion of value
added by the recipient. That varies, and becomes mixed up in the issue
of intellectual capital. So how do we demonstrate that librarians are
of practical use? If we apply the logic of modern accounting practice,
a librarian is an asset. Where current year bottom line is the
watchword , this raises some interesting questions as to how we
calculate the total value of a librarian. How do we value not only of
what a librarian does, but what that librarian knows?
The recent work of the
Special Libraries Association in developing competencies is quite
brilliant, but it adopts what might be characterised as the Brand Power
Method of establishing the importance of librarians to their
organisations. A Brand Name confers economic benefits such as pricing
power, distribution reach, and greater ability to extend your line by
launching new products. These give the owners a higher return on their
assets than unbranded competitors, a view we have been working hard to
establish in our organisations. However, used in isolation, this
approach is inadequate. Whereas the organisation will own all aspects
of its own branded products, it does not own its library resources or
librarians in the same sense. It might own the intellectual capital
represented in the information in its collection, at least to the
extent that it owns the sources, and has the right to use the
information therein within the limits allowed by intellectual property
legislation and licensing agreements. Though it will own the output of
the intellectual capital of its librarians, it does not own their
intellectual capital. Awards and governance structures often fail to
recognise who actually owns intellectual assets and organisations
generally find it difficult to distinguish between the cost of paying
people and the value of investing in them. Librarians have to ensure
that their organisations see them not a hired hand, but as a hired mind
which supports the growing of intellectual and human capital by the
organisation. Your brain, and what it contains, is always your
property.
The stock market prices
high-tech stocks at a higher premium-to-book-value than stocks in
industries with mature technologies. In other words, it sees the
intellectual capital as seeding for the future. In mergers and
takeovers, this is clearly manifested. A good business is typically
valued at several times the value of its tangible assets. The
difference is the potential added value of the intellectual capital
residing in its key people.
If we say x% of what a
librarian does in and for an organisation is devoted to seeding the
future rather than to current-year tasks, that proportion of salary
should be treated as capital spending because that percentage of the
value of the individual's work will be realised in future years. This
must include the cost of training, presumably undertaken as an outcome
of a formal process of organisational needs analysis and business
justification. Training should be immediately applicable and thus
immediately add value. That value adding should also be an investment,
something that might show returns over a period of time. So cost of
training should be amortised over a period of time. Detailed analysis
of what the librarian does, of the librarian's training, and what that
training has achieved, is all part of the decision as to what
percentage of the cost is identified as an expense, part of the
recurrent account, and what is seen as a capital investment. But what
do we use as a basis?
An important facet of
accrual accounting is the allocation of benefits and expenses over the
period that the organisation derives benefits from its assets. The
analogy of valuation of a library collection would suggest that we have
to start with a value for the intellectual capital as it stands,
depreciate for aging knowledge, add the value of new knowledge and
subtract the value of discarded or obsolete knowledge.
While a librarian may be
considered to be a non-current asset, the librarian's intellectual
capital is used in the day-to-day provision of service and operation of
the library. Individual items within a library collection show a
pattern of declining use, obsolescence and/or of physically wearing out
over time. It follows that depreciation is appropriate. The value of a
library collection is the current replacement cost of the service
potential of the materials within the collection.
The major test of value,
is:
- What is the value of
this collection to the organisation?
- What does it contribute
to the organisation?
- What would it cost to
replace the services the organisation obtains from the collection?
- This is the deprival
value of the collection, a concept based on the legal notion of
compensation for loss.
In contemplating the
potential of various methods for valuing a librarian, I turned to how
we value collections. Depreciation is a method of allocating the value
of an asset is over the period in which it provides service potential.
The rate at which an asset is depreciated is dependent on how long its
useful life is in the context of the organisation which owns it. Such
assessments are estimates of the future life of assets based on current
experience. In other words, the useful life of librarians isreflected
only by the experience of the particular library which 'owns' them
because the purposes for which the library's clients use those
librarians and the type of use to which they are put, in combination,
determine the useful life of the librarian.
There are two aspects to
useful life: Physical Life and Relevance Life. Physical life is simply
how long the librarian lasts. This is not necessarily consistent across
all user populations, or climatic conditions or subject specialisation.
Relevance life refers to the period between acquisition and
obsolescence, the period during which the librarian's intellectual
content is relevant to a library's user population. I do not know
whether usage of librarians falls off with increasing age, but one of
the criteria for allocating costs is that the method chosen should
generally model the loss of service potential. In order that the rate
of depreciation reflects the decline in service potential of library
materials, publications should be depreciated more rapidly in the early
part of the life-expectancy period. Is this applicable to young
librarians? Or do we have an element of appreciation? Do some types of
knowledge and experience cumulate and thus increase in value - somewhat
like a nice bottle of Grange Hermitage? At what stage does your
knowledge and experiences become corked?
We need to construct a
base price for the intellectual capital of a newly qualified librarian,
value each addition of new knowledge, and subtract the value of every
piece of knowledge forgotten or obsolete. This emphasises that a large
proportion of professional knowledge depreciates and puts continuing
education into perspective. Assume, in the absence of any hard data and
for ease of calculation only, that the initial knowledge with which
librarians graduate from library school has an average life of ten
years, though obviously, some of the knowledge gained has a much
shorter life, and some much longer. Salary and all other investments an
organisation makes in a librarian, together with the investments the
librarian makes in him or herself, can cumulate to a cost/value
approaching half a million dollars after ten years, even when
depreciated. However, the salary is treated as an expense by the
organisation, while this methodology suggests that it be entirely
treated as an investment in an asset, which is patently as inaccurate
as the view that salary is an expense. The answer may lie somewhere
between the two. Identify the proportion of your work which returns a
benefit to the organisation within the current financial year and use
this to calculate Return on Investment, and calculate the value of the
investment the organisation has made in you, and use that to calculate
Return on Asset (ROA).
The implications of making
such a radical change in measuring and reporting individual performance
require demonstration, in financial terms, of the gain to the
organisation of its investment over, potentially, many years.
Conclusion:
We are on the edge of managerial, organisational and technical change.
We must, therefore, be prepared for discontinuous personal change. The
purpose of performance measurement is to drive behavioural change, to
alter the social architecture of the organisation in ways that fit with
the organisational vision for the future. However, simply complying
with the organisational conventions may prove inadequate when
librarians attempt to prove that they contribute to the bottom line of
the organisation to an extent that is not replaceable by other means.
You have to know whether you are corked or competitive. You have to
demonstrate that you are an asset, in every sense of the word.
References
Badenoch, D. et al. 1994.
'The value of information', in Feeny, M. and M. Grieves. The value
and impact of information. London, Bowker-Saur.
Caulkin, Simon. 1995.
'Chaos, Inc.,' Across the Board, July/August, 1995.
Cram, J. 1995a 'Moving
from Cost Centre to Profitable Investment: Managing the Perception of a
Library's Worth'. Australasian Public Library and Information
Services (8) 3.
Cram, J. 1995b.
'Demonstrating Value for Money: Issues for Libraries & Librarians.'
Singapore Libraries
(24) 1995, 38-57.
Cram, J. 1996a.
'Performance management, measurement and reporting in a time of
information-centred change'. Australian Library Journal (45) 3, 225-238
Cram, J. 1996b.
'Benefitting the bottom line' Australian Library Journal.
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Empty Raincoat: Making Sense of the Future. London: Hutchinson.
Handy, C. 1996. Beyond
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Books.
Naumann, E. 1995. Creating
customer value: the path to sustainable competitive advantage.
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How to acquire i. New York: Funk & Wagnells.
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