Performance Contracts in Research Organisations

1. Performance Contracts in Research Organisations The World Bank Knowledge Economy Forum on Technology Absorption by Innovative SMEs Plenary Session VIII: Nurturing Partnerships between SMEs & Technology Transfer Institutions Ancona, 17 -19 June 2008 Fritz Ohler, Technopolis Group, Vienna, Austria

2. Some conceptual issues in the governance of research and technology organisations: supportive and misleading concepts • Actors and role (attributions) • Strategies and processes • Mission • Ownership • Funding • Goals + Impacts • Clients • Partners • Indicators

3. Mission statements: The Swiss army knife – [] centre • The [] Centre performs (1) research and (2) development and related (3) measurement and (4) testing in areas which are of particular (5) societal and (6) economic relevance to (7) the country. • In doing so, the [] Centre adopts an (8) inter- and (9) trans-disciplinary approach aiming at (10) international excellence and (11) visibility. • The [] Centre shall (12) collaborate with the (13) private sector, (14) public administration as well as (15) stakeholder organisations in order to (16) develop and (17) support the implementation of (18) innovative, (19) economically feasible and (20) environment-friendly (21) systems solutions. • In doing so, the [] Centre provides a (22) sustainable contribution to the (23) benefit and the (24) security of the country. • The ‘It-does-everything-except-make-the-tea’-model.

4. Mission statements: The lighthouse – IMEC (Belgium) • "IMEC performs (1) scientific research that runs (2) 3 to 10 years ahead of (3) industrial needs in the area of (4) micro- and (5) nanoelectronics, (6) nanotechnology, (7) design methods and (8) technologies for ICT systems.“ • The lighthouse model • One purpose • Highly visible • Provides orientation

5. Interaction between the centres and their principals: The [] centre • Annual reports with inconsistent concepts and structure which does not allow tracking of changes • 70 indicators according to • Economic performance (32) • Scientific performance (13) • Human resources (17) • Knowledge and technology transfer (SMEs, spin-offs) (7) • A strategy report (1035 pages!) • But: No reaction from the ministry on the reports • Numerous re-structuring, changes of priority areas, re-orientations, high turnover rate of top management

6. Interaction between the centres and their principals: IMEC • A performance contract • 4 pages ! • 12 indicators • A thorough evaluation at the end of a 5-years performance contract period • A swift implementation of recommendations within 2 months • A new performance contract! • And a vibrant performance!

7. The performances compared: IMEC vs. []

8. Why performance contracts? (1/2) • PCs allow to talk about and to clarify • Intentions • Expectations • Goals • Strategies • Indicators • PCs separate • Outcomes (the responsibility of the centres / their management) from • Impacts (outside and beyond the responsibility of the management) • PC as a deal • Provide autonomy, but expect outcomes

9. Why performance contracts? (2/2) • PCs properly attribute the roles and division of labour between • The principals (owners, funders), often governments • (should) have a strong mandate to ensure certain achievements / outcomes • The management • being in charge of making sure that the agreed outcomes are actually produced • being autonomous in the selection of the 'best strategies' to achieve the goals • The supervising / advisory bodies • really supervise the relationships between principal and the management and to advice them to improve • PCs help to reduce goal overload (cf. Swiss-army-knife vs. lighthouse) • PCs allow to repair the clock while running the clock

10. Performance contracts and performance indicators: a check-list (1/2) • A research organisation needs to have a clear mission • Which should be understood and shared amongst employees, management, shareholders, and major stakeholders • The formulation of the mission • Should be the task of the top management, not of the shareholders • Each single word counts • Goals should be derived which should reflect the mission of the centre • Goals should be expressed • As performances, not as intentions or chosen directions • Goals should be stated in a way • That the achievement of goals can be measured • By using appropriate performance indicators (PIs)

11. Performance contracts and performance indicators: a check-list (2/2) • Each PI should be explained • Why it is appropriate to mirror certain goals • Each indicator should be precisely defined • The method of measurement should be described • Measurement of PIs should • Be simple to use and interpret and • Not require extensive studies • Different PIs should not be aggregated (e.g. via an algorithm) in order to have one overall composite indicator • Due to interrelations amongst PIs, ’corridors of expectations’ can be agreed • PIs and should not lead to ‘perverse behaviour’

12. Performance indicators: a proposal for selection (1/2) • If major orientation is being an "international centre of excellence, scientific performance, visibility", then • PI 1 Total revenues stemming from contract research • PI 1a Total revenues stemming from contract research from abroad • PI 2 Number of publications • PI 3 Number of invited papers • PI 4 Scientific awards • PI 5 High ranking positions in associations, events etc. • PI 6 Revenues from public funding agencies (‘competitive funding’) • PI 7 Career of employees in the academic research (e.g. nomination of professorships at universities)

13. Performance indicators: a proposal for selection (2/2) • If the major orientation is "Doing sufficient exploratory work", then • PI 8 Number of PhDs (on-going, completed) • PI 9 Number of joint publications with academic research • PI 10 Number / value of contracts with universities • If the major orientation is "Impact on the economy", then • PI 11 Total turnover with regional / national companies • PI 11a Number of contracts with regional / national SMEs / new SMEs • PI 12 Number of hours training to firms or organisations • PI 13 Number of (new) spin-offs • PI 14 The value of ‘knowledge based support’ provided to spin-offs • PI 15 The number of 'real' patents (EPO, USPTO) • PI 15 Career of employees in industry

14. How to achieve a performance contract? (1/3) • The PC should be a real contract, signed by authorised partners • Should be super-ordinated to all other agreements • The PC should be short • 4 pages • Each word should be put onto the precision scale • The PC should contain the following elements • The mission of the centre • Related goals and related performance indicators, no strategies! • Levels of achievement, at least ‘corridors of expectations‘ according to time table • The roles of the owner / funder (often: government) • Reporting

15. How to achieve a performance contract? (2/3) • Duration • 3-5 years • In the first round • The principal should strictly fulfil its obligations in order to have a strong (moral) position if the centre does not achieve the agreed levels of performance • The management of the centres should propose the first draft of the PC • Information asymmetry • Otherwise they would perceive it as an intervention

16. How to achieve a performance contract? (3/3) • In order to have a proper basis for negotiation, a self assessment report can be extremely helpful • 40-60 pages • Past performance, expectations, justifications, numbers and time-series, as much as possible • Outside assistance can help • For benchmarking & mediation • Indispensable in the first round • Outside assistance has to move back and hand over the process to the principal • Time requirements • 4-6 months

17. Thank you. Technopolis has offices in Ankara, Amsterdam, Brighton, Brussels, Paris, Stockholm, Tallinn, and Vienna.    Please see our web site fordetails:  www.technopolis-group.com