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The Humphrey School of Public Affairs is the University of Minnesota's school of policy and planning.


State and Local Policy Program

10 Principles in Economic Development

Measurement and Evaluation

  • Have you identified and do you measure desired economic outcomes for your area?
  • How do you measure the success of your economic development efforts?
  • How do you evaluate your economic development efforts and ensure accountability?
  • Do you regularly assess the performance of your efforts against the goals you set?

A high performance organization collects information about its performance in order to assess the impact of its work and evaluate the strengths and weaknesses of its services. Measurement is also a prerequisite for accountability.

State and local economic development organizations, however, have not done a good job of measuring and evaluating the impacts of their programs. One of the reasons is that it is very difficult and costly to conduct a statistically valid evaluation. Another reason is that there is no incentive or reward for development agencies to invest in such measurement and evaluation.

In the past few years, at the urging of governors and legislatures in several states, there has been some progress, though slight, toward accountability for economic development programs through measurement and evaluation. At this time, there are only a few models to use as examples. These examples illustrate different approaches toward measurement.

Characteristics of an effective state strategy

  • FOCUSING ON SPECIFIC POLICY OUTCOMES
  • INVESTING IN KEY ECONOMIC FOUNDATIONS, SUCH AS HUMAN RESOURCES AND PHYSICAL INFRASTRUCTURE
  • PREVENTING PROBLEMS FROM ARISING WHICH LATER WILL COST EVEN MORE TO REMEDY
  • ACHIEVING APPROPRIATE SCALE IN ACTION TO PRODUCE REAL IMPACT
  • DECENTRALIZING RESPONSIBILITY TO THOSE CLOSEST TO THE ACTION
  • LEVERAGING MINIMUM PUBLIC RESOURCES TO PROMOTE PRIVATE INVESTMENT
  • USING MARKET MECHANISMS WHERE APPROPRIATE TO ENHANCE PERFORMANCE
  • ASSESSING PERFORMANCE AND INSISTING ON ACCOUNTABILITY

*R. Scott Fosler, "The Emerging Economic Paradigm: States Ride the 'Third Wave'." Paper presented at the National Conference of State Legislatures Annual Meeting, August 11-15, 1991, Orlando, Fla.

Measuring state performance

The state of Oregon has developed a set of benchmarks that measure the state's performance in achieving statewide goals related to people, quality of life, and the state economy. The most recent report contains 259 benchmarks that are used to compare Oregon's performance with other states and countries. The Oregon Progress Board, created to serve as the "caretaker" of the state's strategic plan, oversees the selection and updating of benchmarks and the collection, analysis, and reporting of benchmark data. The benchmarks have been widely endorsed throughout the state and have been used extensively for planning and evaluation purposes. Benchmarks have been incorporated into state program and budget priorities, applied to state strategic planning efforts, used by legislators to hold agencies accountable for performance, and adopted by local governments and nonprofits in setting their own priorities. While other states have adopted the Oregon approach to measuring state performance, none have implemented as complete a system as Oregon, nor integrated this information as thoroughly into the legislative and policy-making process.

Monitoring program performance

Another approach to measurement is to assess performance at the program level. The Minnesota Department of Trade and Economic Development (DTED) uses a performance monitoring system to survey business and community customers to determine how well economic development programs are serving them and what impacts the programs have on jobs, sales, or other performance measures. These surveys are conducted periodically to allow comparison over time and to determine whether program improvements or changes in service delivery are making a difference. Program managers use the data to assess progress and make improvements in their programs, and the department uses the data in assessing the impact of its program. In 1994, all Minnesota state departments were required to prepare extensive performance reports as part of the budgeting process. DTED used the data from its ongoing performance monitoring system to prepare its comprehensive report.

Evaluating programs

Program evaluation, for the most part, is the missing link in economic development programs. Timothy Bartik, an economist with the Upjohn Institute, has written periodically about the need for evaluation of economic development programs and why it doesn't occur. Bartik suggests that two types of improved evaluation methods are needed (1993, pp. 29-30). The first type is an evaluation methodology that is relatively inexpensive and can be used now and on an ongoing basis to improve performance of state and local economic development programs. Surveys of business clients, such as that used by Minnesota's DTED, seem to be the most feasible inexpensive evaluation approach. Bartik suggests standards for how survey questions should be asked and how surveys should be administered to ensure reasonably objective information. The Urban Institute, which assisted Minnesota in its pilot project, has begun to address some of these issues.

A second type of evaluation is also needed, according to Bartik. He argues that we need a long-term effort to develop rigorous evaluation methodologies that would accurately estimate the impact of economic development programs on a firm's performance. Such rigorous evaluations would compare assisted and unassisted firms and should be designed to control for statistical selection bias. Bartik suggests that such evaluation approaches should be developed cooperatively by federal agencies and state and local economic development officials. Federal agencies that should be involved are the Department of Housing and Urban Development, the Economic Development Administration, the Small Business Administration, the National Institute for Science and Technology, and the Department of Labor.