BSC in the Public Sector
When it was first launched at the beginning of the 1990s, the Balanced Scorecard was promoted as a concept that addresses the performance measurement and later on strategic management needs of the private organizations.
However, few years later, the Balanced Scorecard concept started to be adopted on a largely bases also by different organizational and governmental bodies in the public sector (Kaplan and Norton, 2001). Today, a myriad of local government bodies, organizations that serve the interests on governmental authorities and federal authorities, successfully adopted the Balanced Scorecard.
Among the most renowned adopters of the BSC is the City of Charlotte, North Carolina, US; the City of Brisbane, Australia, US Department of Defense, US Department of Transportation or Centrelink Australia (Gueorguiev et al, 2005; Kaplan and Norton, 2001).
Need for Balanced Scorecard adoption in the public sector
According with Kloot and Martin (2000), the drive for reform in the public sector has traditionally focused attention solely on the measurement of performance. The research performed on several local governmental bodies in the state of Victoria, Australia shows several inconsistencies between the traditional approaches to performance, adopted by the public bodies, versus a desired strategic oriented performance approach that resembles that of a Balanced Scorecard methodology.
Performance – Oriented Approach
Top-down State Government and councilor imposed, control oriented performance measurement
Strategic collaborative development of a performance management system involving all stakeholders
Imposition of universal, industry-wide measures with less validity for specific councils
In-house development of valid, council specific measures to be used for organizational improvement and benchmarking with like councils
Periodic reporting for the purpose of meeting control requirements of senior management, councilors and State Government
Real-time, up-to-date performance information for all stakeholders to monitor progress, demonstrate accountability and manage outcomes
Piecemeal, myopic approach with a focus on the measurement process
Integrated performance management system across the organization focused on value for money service delivery and organizational improvement.
Focus on financial measures only
Focus on financial and non financial measures: a results and determinants approach
Source: Kloot and Martin, 2000
Kloot and Martin (2000) argue that this traditional approach to performance in the public sector does not offer a strong linkage between strategic objectives and performance measurement. Additionally the researchers found that the local governments pay much less attention on the means for achieving long term improvement in relation with internal operations and innovations and learning activities.
A similar view is outlined also by Kaplan and Norton (2001) who argue that traditionally, public organizations encountered difficulties when defining clearly their strategy. Accordingly, most of the times, public organizations strategic plans consists of a list of programs and initiatives articulated on the organizational mission and vision, but no outcome that the organizations are trying to achieve, are defined.
Rohm (2001) in one of the presentations for the U.S Foundation for Performance Measurement outlines several reasons for which the Balanced Scorecard should be adopted in the public sector. Some of the ideas resemble and strengthen the arguments previously exposed. Accordingly in the view of Rohm (2001), Balanced Scorecard should be introduced in the public sector in order to:
- Provide alignment between mission, strategy, processes and personal performance
- Align local government priorities to the state and federal priorities
- Demonstrate the value of programs to citizens
- Develop meaningful performance measure in order to determine the outcomes of the programs
- Link mission and vision to budget request
- Determine resources allocated and contract cost for each initiative
- Increase interagency coordination in order to eliminate waste and duplication
Balanced Scorecard framework for Public Sector
Many public organizations had difficulties with the original architecture of the Balanced Scorecard which places the financial perspectives at the forefront, followed by the Customer, Internal Process and Innovation & Learning dimensions (Kaplan and Norton, 2001)
This is due to the fact that achieving financial success is not the primary objective for these organizations. Instead the citizens or contributors perspective is much more important and represent the primary focus (Kaplan and Norton, 2001). This being the case, the scorecard perspectives can be adapted, in a structure that best fits the strategic interests of public organizations.
The new Balanced Scorecard framework for the public sector switches between the Financial and Customer Dimensions positions. Additionally, Kaplan and Norton (2001), proposes the identification of several primary strategic themes that drives the organizations actions which can be placed at the very fore front of the scorecard.
Balanced Scorecard famous implementations in the public sector
Three of the most known and successful implementations of the Balanced Scorecard in the public sector were made by the City of Charlotte, U.S., the City of Brisbane, Australia and Centrelink, Australia.
Balanced Scorecard - City of Charlotte, US
The Balanced Scorecard for the City of Charlotte was built round five strategic themes: community safety, transportation, city within a city, restructuring government and economic development. This was possible as many objectives in the four perspectives were common for all themes. Later one, individual scorecards for each theme were built. The customer perspective which is placed at the top of the scorecard captures through its seven objectives aspects of the all five focus areas. The financial objectives that come next, function as enablers, helping the city to achieve its customer or citizen objectives. Finally, the internal and learning & growth objectives support the financial and customer objectives (Kaplan and Norton, 2001).
Balanced Scorecard - City of Brisbane, Australia
Taken the model from the city of Charlotte, the city of Brisbane followed according with Kaplan and Norton (2001), a similar Balanced Scorecard implementation process.
Centrelink is a governmental body established by the Australian Government in 1997 in order to provide a common source for information, assistance and payment. Soon after its establishment, in 1998, Centerlink adopted the Balanced Scorecard as its main performance management tool. The Balanced Scorecard was created around the governmental organization 6 main goals:
- To built partnership with client agencies that deliver required results and provide value for money
- To increase customer and community involvement and satisfaction with services
- To create an environment where Centrelink people give value to customers, client agencies and community to their skills and commitment to service
- To efficiently manage Centrelink business and return a dividend to government
- To provide innovation and personalized solutions consistent with government policy
- Be the first choice and benchmarked at the best practice in service delivery (Australian National Audit Office, 2003)
Five years from the BSC implementation at Centrelink, the Australian National Audit Office (2003) report outlines that the organization believes the BSC has:
- Successfully translated Centrelink’s strategy into operational terms in the BSC
- Has been a force for aligning the whole organization to achieving KPIs, with increase results once the BSC was made available online at Area Support Offices and Customer Service Centers
- Helped make strategy everyone’s business
- Australian National Audit Office (2003), Centrelink’s Balanced Scorecard, Audit report.
- Gueorguiev, I., Dimitrova, S., Komitska, M., Traykov, H. & Spassov, K. (2005), Balanced Scorecard based management information system – A potential for public monitoring and good governance advancement, The Electronic Journal of e – Government, Vol. 3, No. 1, pp. 29-38.
- Kaplan, R. & Norton, D. (2001), The strategy focused organization. How Balanced Scorecard companies thrive in the new business environment, Harvard Business School Press, Boston, MA.
- Kloot, L. & Martin, J. (2000), Strategic performance management: a balanced approach to performance management issues in local government, Management Accounting Research, Vol. 11, pp. 231-251.
- Rohm, H. (2001), Managing public sector organizations with the balanced scorecard, Presentation, U.S. Foundation for Performance Measurement.