Water Utility Palermo (Apam), Italy

 

During the last decade, as several scholars point out (Foster et al, 2004; Bianchi and Montemaggiore, 2008) , there has been an increasing effort to reform and privatize the public utility sector. This change of policy was made by many governments in the quest to revitalize the sector by improving its management efficiency and performance.

 

In order to foster performance excellence by pursuing competitiveness and financial stability, traditional planning and control systems exclusively based on financial indicators were not any more sufficient in order to manage the interest of multiple stakeholders, provide an accurate strategic management direction and keep strategies on track. In this context, several public companies decided to adopt new performance management architectures based on the Balanced Scorecard.

 

According with Bianchi and Montemaggiore (2008) citing Bracegirdle (2003), the adoption of the Balanced Scorecard approach in the public utility entities:

  • Provide both public accountability to local governments and citizens and internal accountability between different managerial levels
  • Improves performance in relation with the quality, quantity and costs of the services issues through better strategic planning, and
  • Determines expenditures, by better allocating budget resources to measurable results

 

Such example of a public utility company that has adopted the Balanced Scorecard framework is that of a City Water Company (Amap) from the region of Palermo, Italy. The implementation and characteristics of the Balanced Scorecard are outlined by Bianchi and Montemaggiore (2008) in a case study summarized below.

 

About Palermo Water Utility

Palermo Water Utility or (Amap) has been running the municipal water provisioning and distribution for the area of Palermo since 1950. As a result of a new set of regulations imposed by the Italian government in 1994 in order to foster public utility efficiency and effectiveness but also due to several management dysfunctions, a research project was decided to be set in place in order to develop a Balanced Scorecard.

 

Among the main critical issue identified buy the BSC project team at Palermo Water Utility were:

  • Negative operating income was balanced by public contribution and influenced by the political power of the Board of Directors
  • Managers were focusing on specific tasks, without being aware on how they are contributing to the company’s results
  • The management information systems was based on a set of reports that mainly addressed bureaucratic issues and not strategic information needed to set the performance pace in the company
  • Evaluation programs were used for control and “punishment” of bad performance instead as a tool to enhance and improve efficiency in work

 

The new Balanced Scorecard framework, designed by the project team strived to give a new identity and direction for the company by outlining its strategy: “ To improve the company image by higher efficiency and effectiveness in the provision of water in order to increase its competitiveness for the management of the integrated water service in the area of Palermo”


The Balanced Scorecard was structured according with the Kaplan and Norton’s BSC traditional perspectives, outlining the main strategic objectives, key performance indicators, targets and initiatives. The Balanced Scorecard framework was supported by a Strategy Map that shows the causal linkage between the Key Performance Indicators from each perspective.

 

Strategy Map - Water Utility Palermo - BSC20.com

Source: adapted from Bianchi and Montemaggiore, 2008

 

For more details on the Balanced Scorecard project at Water Utility Palermo and different Balanced Scorecard Scenario simulations underpinned follow the link listed below:

 

References

  • Bianchi, C. & Montemaggiore, G. (2008), Enhancing strategy design and planning in public utilities through “dynamic” balanced scorecard: insights from a project in a city water company, System Dynamics Review, Vol. 24, No. 2, pp. 175-213, available at: http://onlinelibrary.wiley.com/doi/10.1002/sdr.395/abstract.
  • Foster, V., Tiongson, E. & Laderchi, C. (2005), Chapter 3 - Utility Reforms, from the volume Analyzing the distributional impact of reforms, A practitioner’s guide to trade, monetary and exchange rate policy, utility provision, agricultural markets, land policy and education, edited by Coudouel and Paternostro, The World Bank, Washington.

Source: adapted from Bianchi and Montemaggiore, 2008

 

For more details on the Balanced Scorecard project at Water Utility Palermo and different Balanced Scorecard Scenario simulations underpinned follow the link listed below:

http://onlinelibrary.wiley.com/doi/10.1002/sdr.395/abstract

 

References

Bianchi, C and Montemaggiore, G. (2008), Enhancing strategy design and planning in public utilities through “dynamic” balanced scorecard: insights from a project in a city water company, System Dynamics Review, Vol. 24, No. 2, pp 175-213

Foster, V; Tiongson, E. and Laderchi, C. (2005), Chapter 3 - Utility Reforms, from the volume Analyzing the distributional impact of reforms. A practitioner’s guide to trade, monetary and exchange rate policy, utility provision, agricultural markets, land policy and education, edited by Coudouel and Paternostro, The World Bank, Washington.

BSC in practice : Case studies

 

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