The Emergency Board in September 2000 raised issues about the limited number of performance indicators tied to performance funding, the improvement targets set by the campuses, and the method used to allocate performance awards. Between September and the first of December, the provosts and presidents met with Chancellor's staff several times to discuss the issues raised by the E-Board and propose revisions that are responsive to their challenges. The proposed revision of the performance indicator and performance funding policy is the result of this iterative process that involved campus leadership. This draft is presented as a discussion item. Staff solicits the reactions of the Board's System Strategic Planning Committee before the full Board reviews the policy in February 2001.

Revised Performance Funding Policy

Rationale. To meet the demand by the public and policy makers for greater accountability in Oregon public higher education, we propose changes to the performance indicator and performance funding policy approved by the Board in January 2000.

Proposed Changes. The proposed changes include five features:

Indicators Tied to Performance Funding. In the first year of implementation of performance funding, OUS tied only two indicators to funding. The proposed revision to the policy ties two kinds of indicators to performance funding. First, staff proposes that OUS provide incentives for performance growth for five indicators the institutions share in common. Second, staff proposes OUS provide incentives for performance growth to indicators that are specific to an institution given its mission, circumstances, and strategic directions. Depending on the number of indicators selected by an institution, OUS will tie incentives to seven to nine indicators beginning in 2000-01.

Shared Indicators. Each campus will share indicators in common tied to performance funding. OUS will tie funding to five shared indicators:

Institution-Specific Indicators. These common or shared indicators are enhanced by the identification of institution-specific indicators. These yet-to-be-determined indicators take into account the mission, vision, and circumstances appropriate to each campus. The Chancellor or designee reviews and approves the institution-specific indicators selected by each campus.

Improvement Targets. Institutions will establish improvement targets for the seven indicators tied to performance funding. Productivity growth will be expressed as percentage changes in performance compared to improvement targets as one-year, two-year, five-year and ten-year averages. Two-year performance averages will be compared against the target in a given year. Numerical data will also be available.

Both an internal view and an external view of excellence are needed to set goals for improvement. Consistent with the approach used to set benchmark goals in Oregon Benchmarks, campuses will set targets that represent improvement against their baseline performance (usually 1987-88 through 1997-98) and take into consideration the current performance of their peer institutions. Campuses will set targets for a total of seven indicators-for the five shared and the two institution-specific indicators for 2004-05 (and all interim years between 2000-01 and 2004-05). Once fixed, improvement targets would be changed only with expressed agreement with the Chancellor or designee.

For positive trending indicators, institutions should establish a percentage change using the longest data time series available used to create the baseline (usually 1987-88 through 1997-98) and then set two targets-one to sustain growth at the current pace and the other to accelerate growth above the current pace.

Sustain growth target. Determine the percentage change in the baseline data for positive trending performance to set the 2004-05 target to sustain the current rate. Assume a straight line between 2004-05 to the data for last baseline year (usually1997-98) to set annual interim targets to reach the 2004-05 target. When an institution is performing at or above 90 percent on a given indicator, the a target should be to sustain excellence.

Accelerate growth target. Campuses should also create a challenge or stretch target for 2004-05 by accelerating the current growth rate in relation to its statistical peers.

The target for 2004-05 should close the gap between its performance and the best peer institution. Additional incentives will be given to institutions that meet or exceed the performance of the highest performing institution in their peer group on a given indicator. If the OUS campus is already the top performing institution among its statistical peer institutions, the campus will be rewarded for achieving additional incremental improvements against aspirational peers as negotiated with the Chancellor or designee.

For negative trending indicators, institutions should set one target based on turning around performance by 2004-05.

Turnaround targets. For negative trending or erratically fluctuating indicators, institutions will set targets to return performance to best level in time series (usually 1987-88 through 1997-98) by 2000-01 and improve by ten percent between 2001-02 and 2004-05. There will be no performance awards available to an institution for a given indicator until its performance exceeds the best level in the time series.

Campus Incentive Award. Pending the availability of performance funding, OUS will base the incentive award for each campus on improving performance against 2000-01 targets for a total of seven indicators (five shared and two institution-specific). The incentive award will be distributed between shared and institution-specific indicators-- 60 percent for the shared indicators and 40 percent for the institution-specific indicators.

In 1999-00, OUS allocated the largest portion of the incentive fund pools to all campuses for meeting (or nearly meeting) improvement targets and a smaller portion to bonuses to two campuses for exceeding their targets. The E-Board asked that OUS turn this approach upside down. The legislators did not believe rewarding every campus for every indicator is a credible process. We anticipate that each campus will be a winner on some indicators, but rarely all. It is even possible that a campus may not receive any performance reward in a given year. Consistent with Board policy to reward improvement against past performance, we will propose the campus receive some proportion of the award available when it falls short of an accelerated growth target but performs better than the target that sustains growth for a given indicator.

The indicators tied to performance funding are a subset of indicators that will be reported annually to the Board and biennially to the legislature. The full set of indicators reported annually is included below.

Annual Reports of Institutional Performance and Effectiveness

The annual reports of institutional performance and effectiveness will include 13 indicators--the five shared indicators tied to performance funding, two institution-specific indicators tied to funding, and six shared indicators not tied to performance funding.

Shared indicators (tied to funding) include five indicators as follows:

Institution-specific indicators (tied to funding) include two indicators the institutions will identify by January 15, 2001. These will be reported to the full Board in February 2001.

Shared indicators reported (but not tied to performance funding) include six indicators as follows:

Continued Development. OUS will continue its development work on other indicators (e.g., internships, distance education/technology courses and enrollments, employer satisfaction) and begin development of more appropriate indicators of the cost effectiveness goal. (For example, the sponsored gifts and contracts indicator also reflects entrepreneurship, faculty quality, and mission differences.) The development work for the cost effectiveness indicators will be completed by Vice Chancellor Tom Anderes and the Administrative Council.

Timeline. Campuses will propose the two to four institution-specific indicators to the Chancellor by January 15, 2001. The Chancellor will approve the selection by each institution before the February 16, 2001, Board meeting.

Campuses will revise improvement targets for the five shared indicators and propose targets for the two yet-to-be-determined campus-specific indicators by March 1, 2001. Institutions will set challenging 2004-05 targets for these seven indicators as well as for the interim years beginning in 2000-01.

Action on this item will be recommended at the February 16, 2001, Board meeting.