2GC-WP-201504-Improving public sector governance through better

Transcription

2GC Working Paper
Examining Opportunities
for Improving Public Sector
Governance through better
Strategic Management
Henrik V. Andersen & Gavin Lawrie
March 2015 2GC Active Management
1 Bell Street Maidenhead Berkshire SL6 1BU UK
T: +44 1628 421506 E: [email protected] W: 2GC.eu
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2GC Working Paper
Abstract
Following years of management reform, strategic management has recently become an
imperative in public sector. This paper presents research on the application of the Balanced
Scorecard and associated management processes for strategic control purposes in a public
sector environment. It shows how an improved Balanced Scorecard design has the potential
to enhance strategic management and public sector governance. The strong similarity
between the proposed approach and proven analogous designs as applied in the
commercial sector, suggest that the added utility derives simply from encouraging better
general management behaviours.
Introduction
Since the 1980s many Western democracies have undergone considerable management
reform aimed at creating economic savings, improved service quality, more efficient
government operations and effective policies (Pollitt & Bouckaert, 1999), driven by the
combined effect of “extensive welfare state tasks, reduced financial latitude, economic
structural crisis, and the internationalisation of public matters” (König, 1996, p 31). New
management techniques like strategic management and total quality management have
been introduced, and changes to public accounting principles have made it easier to
accommodate costing activities, benchmarking and market testing (MAB, 1997; Hood, 1995).
The introduction of management techniques predominantly rooted in the private sector into
a public sector environment presents public sector managers with two major challenges:
First, the long-term policy consistency required to accommodate the planning and
implementation of the organisational changes often triggered by the introduction of new
management techniques is hard to obtain. The general intensification of the political
process in many western democracies, where politicians become increasingly focused on the
short term driven not least by intense media pressure, runs contrary to this need for
consistency (Alford, 2000; Stewart 1996, p1, Pollitt & Bouckaert, 1999).
Second, the relatively simple accountability model found in modern private sector
organisations, wherein Executive Directors are responsible to the board for both strategy
formation (including setting strategic goals and priorities for the organisation) and the
management of the execution of this strategy (i.e. to achieve those goals). In public sector
organisations (e.g. government departments and agencies) the accountability model is more
complex - typically a political leadership is responsible for strategy formation (in the form of
policies and strategic priorities) and an executive leadership is responsible for managing
implementation of these policies. Such a division of accountability is prone to conflict and
repudiation of responsibility (Pierre, 1995, p3) and the strategic relationship between the
political and executive leadership will need to be managed through a more effective
strategic management processes (Poister and Streib, 1999, p309; Stewart, 1996, p1). If this
cannot be achieved, the notion of “public management” is unrealistic (Stewart 1996, p1) as
2GC Working Paper - Improving Public Sector Governance
through better Strategic Management
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2GC Working Paper
an activity involving the determination of strategy and objectives, as opposed to “public
administration” concerning the maintenance of processes and rules (Hughes, 1992, 290 –
294).
The paper does not address directly the societal and political implications of the
management reforms, but highlights and addresses some of the practical managerial
consequences resulting from them. The need for strategic management in the public sector
is thus assumed, given that public sector organisations are “being made more accountable
for achieving best value performance, often within a more market-focused arena” (Collier et
al, 2000). The Balanced Scorecard concept is already widely applied in various formats in the
public sector (MAP, 1997; http://www.balancedscorecard.org).
This paper therefore examines the extent to which the concept and underlying processes
associated with the use of Balanced Scorecard for strategic control1 purposes in the private
sector may also be used to support strategic management processes in public sector. The
paper also considers the extent to which changes to the Balanced Scorecard framework
might be required in order to maximise its value to the public sector.
The arguments presented are based on a combination of general literature review,
unstructured interviews with 15 public sector organisations in the UK, Australia and New
Zealand, and the authors’ extensive practical experience of facilitating Balanced Scorecard
design and implementation projects and technical audits in both private and public sector
organisations across four continents.
In the literature review that follows, we have focused on first developing an understanding
of how significant some of the perceived differences and similarities between private and
public sector organisations actually are. We then assess what challenges such differences
might pose in relation to strategic management in order to better evaluate, in subsequent
sections, the potential benefits of using the Balanced Scorecard in a public sector
environment.
Challenges to strategic management in private and public sector
organisations
Both private and public sector organisations are tasked with producing value for
stakeholders in their environments by deploying resources and capabilities. But “they differ
in the nature of that value and of those resources, capabilities and environments, in ways
which have implications for the making and implementation of strategy” (Alford 2000). The
following evaluates the nature of these implications.
Value generation
In the public sector value is normally associated with production of products and services
(outputs) to create an impact (outcome) on socio-economic issues affecting society at large,
1
The paper defines two common applications for the Balanced Scorecard when associated with Performance Management
Systems:
• Strategic Control; use of Balanced Scorecard to report on the progress of an organisational unit in delivering changed or
improved performance.
• Management control; use of Balanced Scorecard to report on the operational activities of an organisational unit
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(Pollitt and Bouckaert, 1999). ‘Value’ is determined (and maybe also defined) by an
“authorising environment” i.e. the institution(s) granting the public organisation its powers
to conduct its functions and provide/authorise the necessary budget. This authorising
environment comprises a complex web of stakeholders often with conflicting interests e.g.
tax payers wanting to pay less and welfare recipients wanting to receive more, but both
exercising their influence over what should constitute public value generation through
democratic processes. The priorities of politicians are thus influenced directly by the electoral
cycle, but priorities will also be challenged by ongoing attempts from varying interest groups
to circumvent the political process and shift priorities in their favour (Pollitt and Bouckaert,
1999). Politicians therefore tend to maximise their influence by appealing to several interest
groups simultaneously, which leads to broad and often ambiguous directional statements
(Stewart, 1996); a constant challenge to strategic direction and setting of priorities in public
sector organisations.
By contrast, private sector organisations normally exist to provide investors with better than
the risk adjusted expected return on investment associated with an activity being pursuedthe activity itself is simply a means to the end of delivering superior investor returns
measured in terms of tangible economic value. Although this indicates a simpler and more
consistent goal, private sector organisations are still strategically challenged by increasing
speed of change, ever more complex market forces minimising predictability and increasing
the need for adaptability in order to deliver such superior returns (Mintzberg, 1990).
Despite this difference in the concept of value, and the need for public sector organisations
to consider a more complex stakeholder environment, both private and public sector
organisations have to demonstrate value generation to their authorising environment or
Board. Also, both operate in dynamic environments limiting their ability to organise their
activities based on consistent strategic priorities and therefore both need to implement a
highly adaptable approach to strategic management.
Resource allocation
The resources available to public sector organisations include simple tangible resources such
as money (often allocated through some institutional budgeting process), and intangible
resources such as public power e.g. in law enforcement, tax collection, environmental
protection etc. Alford (2000) sees this as one of the differentiating factors between public
and private sector, in that the implications of public power as a resource lies in the potential
saving or cost derived from appropriate use or abuse of that power (Moore, 1995) and
therefore adds to the complexity of strategic management in the public sector. But private
sector organisations in a monopoly or oligopoly position also need to carefully consider how
they use or abuse that power in relation to possible consequences indicating that similar
strategic implications exist – the highly public Microsoft anti trust trial threatening a forced
restructuring of the organisation should serve as a suitable example of this being the case.
The budgeting process itself was an area where public and private sector practices used to
differ significantly. Yet a number of countries have moved from the traditional public sector
approach of budgetary input controls to new models based on output controls such as
accrual accounting based output outcome frameworks (MAP 1997). The new budgeting
approaches are requiring public sector managers to optimise their use of resources to
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achieve externally set output targets (Pollitt & Bouckaert, 1999). Thus while the new
approaches give public managers more freedom and discretionary control over processes
and process inputs (switching money e.g. from people to machines), they are being
subjected to ever more specific evaluation of their ability to deliver the expected outcomes.
This indicates a significant increase in the need for effective strategic control in the public
sector in order to “make sure strategy is implemented as planned and results produced by
the strategy are those intended” (Schendel & Hofer, 1979). It also points to the need for
public sector managers to look beyond the short-term financial focus constituted by annual
budget cycles (Johnson & Kaplan, 1987), which is still the authorising environment’s main
lever of control over the use of resources in public sector (Stewart, 1996). It would therefore
be reasonable to assume that public managers, just like private sector managers having to
cope in highly volatile operating environments, need to adopt a more forward looking yet
flexible management approach enhancing strategic control (Muralidharan, 1997; Goold &
Quinn, 1990).
Accountability and trust
Much of the accountability debate in the public management literature focuses on the
potential shift of accountability from elected politicians to employed public managers as a
result of the new public management reforms, and the negative consequences this shift
might or might not have on the political / constitutional process (Denhardt and Denhardt,
2000; Pollitt and Bouckaert, 1999, Pierre 1995). Yet in relation to effective strategic
management this paper is more concerned with two other aspects of accountability in public
sector organisations: firstly the potential negative impact on radical performance
improvement caused by political ‘abuse’ of public accountability driven by structural changes
separating “steering from rowing” (Osborne and Agebler, 1992, p.32); secondly the
importance of internal accountability between layers of management within public sector
organisations. Both appear to be influenced by the lack of a performance culture more
common in private sector organisations and by the lack of trust in-between the dual
political/executive leadership (Pollitt and Bouckaert, 1999; Stewart 1996).
Publicly owned organisations in the private sector are subject to constant market testing as
targets for future performance as well as results from past performance are normally tested
and compared against those of relevant competitors. Although enabling market testing has
been part of the aim for introducing new public management principles, as discussed in the
introduction of this paper, there appears to be limited evidence of the extent to which this
has been achieved successfully (Pollitt & Bouckaert, 1999). Among the reasons likely to derail
the good intentions behind new public management could be the lack of trust and the
sometimes perverse behaviours this may entail, for instance when:
•
“an unending stream of new legislation and regulation, memoranda and instructions,
guidance and advice floods into public sector institutions”. This not so much to further
accountability to the public as to satisfy the perceived need for tight control executed
by the funding authorities by requesting a range of performance information chosen
more for the ease of measurement than for its ability to provide a true picture of
performance quality (O’Neil, 2002);
•
arbitrary and contradictive targets are imposed on public managers as a measure of
control, but cannot be achieved without fudging (O’Neil, 2002);
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•
organisations having publicised significant stretch targets are strongly criticised for
failing to achieve these, although their performance may still have improved
dramatically. And when the same organisations do achieve their targets, they still risk
having their resources redeployed to inferior performers (Stewart 1996).
One would assume that these unique challenges to external accountability imposed by the
authorising environment might have considerable negative consequences for public sector
organisations’ ability to develop internal accountability and trust and thus hamper their
ability to articulate and commit to clearly articulated stretch goals. Yet external
accountability is required by law and internal accountability is required to run organisations
effectively in a dynamic environment, where the “old ways” of machine bureaucracy are
obsolete (Simons, 1995). Public sector organisations therefore have no choice, but to try and
implement an approach to strategic management that can help alleviate the potentially
negative consequences of this situation. However, this is not entirely dissimilar to private
sector organisations that also need to develop trust and clear accountabilities. Although
technically being classified as internal issues, private companies still face similar challenges as
exemplified above in the form of distrust leading to counterproductive control initiatives e.g.
in the relationship between parent companies and the businesses in their portfolios
(Campbell et al, 1995). Indeed Balanced Scorecard for strategic control is one of the tools
successfully used in private sector to avoid such problems (Shulver and Antarkar, 2001), and
therefore may well have equal potential for public sector organisations.
Strategic management implications
While accepting the fact that not all public sector organisations are the same, as exemplified
by e.g. core government departments compared with service delivery agencies, none of the
above challenges preclude public sector organisations from successfully introducing strategic
management, as long as it goes beyond the traditional view of strategic management as
“rational planning towards clearly defined coherent goals” (Alford, 2000).
Drucker (1980) proposed similar ideas and warned public sector against inertia and the lack
of ability to learn, adapt, and change. This view is mirrored by Mintzberg’s (1990) reckoning
with the “design school” approach to strategic management in both public and private
sector.
“Strategy formation must above all emphasize learning, notably in circumstances of
considerable uncertainty and unpredictability, or ones of complexity in which much power
over strategy making has to be granted to a variety of actors deep inside the organisation.
We also reject the model where it tends to be applied with superficial understanding of
the issues in question.”
Henry Mintzberg, 1990
Mintzberg’s approach to strategic management doesn’t differ between public and private
sector organisations, but rather emphasises the utility of the approach in professional
bureaucracies; an organisational form, which at least used to be quite characteristic for many
public sector organisations (Mintzberg, 1981).
The literature review therefore suggests that the biggest difference between strategic
management in the public versus the private sector would appear to be content rather than
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form. Both sectors are forced to operate in dynamic environments with a high degree of
uncertainty and the need to avoid that “the corporate plan, once complete, is a tablet of
stone, given an honoured place in annual reports, but otherwise forgotten” (Stewart, 1996).
Both sectors comprise organisations that are often managed from a short-term budgetary
perspective focused on financial rather than strategic control. Interviews with public sector
organisations undertaken by the authors over the past two years have confirmed this
impression and highlighted the need for a strengthening of strategic management to
improve public sector governance. Public sector managers therefore need to adopt an
approach to strategic management that helps them clarify the expectations of their
authorising environment, communicate a more consistent strategic direction internally, while
at the same time demonstrate externally their organisations’ ability to interpret and respond
to frequently changing political signals and priorities. The changes in management process
needed to achieve this increased flexibility as well as clarity and communication of strategic
direction point to the need for improved strategic control in public sector organisations,
when compared with the following general management principles for strategic control, as
suggested by e.g. Muralidharan (1997):
1. agree unambiguous descriptions of a set of strategic goals, the achievement of which are
likely to achieve the long-term vision of the organisation
2. agree the actions necessary to achieve these goals (causes) and the results they are
expected to produce (effects)
3. monitor the implementation of the plan using indicators chosen and tailored to suit this
particular purpose and subsequently use the information produced to inform
management discussion/decisions about possible corrective actions
4. monitor changes in the external environment e.g. new/changed policy directives, sudden
changes in the economy and update the plan on the basis of a) changes in external
planning assumptions b) learning about the management team’s cause and effect
assumptions identifying the need to change these when relevant
5. involve staff in the decision making process developing ownership and building on the
combined operational insight of the organisation
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Enhancing public sector governance through
improved strategic management
The authors have extensive practical experience of the application of Balanced Scorecard and
its associated management processes to address similar strategic control issues in the private
sector, as have others (e.g. Olve et al, 1999). Given the apparent similarity of strategic control
issues being addressed by the public and private sector, it is proposed that a Balanced
Scorecard approach would be equally effective in addressing the strategic control issues
highlighted through the literature review and interviews. However, given the increased
complexity of stakeholders in the public sector, it was thought likely that a modified version
of the private sector design approach would be required in order to reflect and
accommodate this increased complexity. Our emphasis on the importance of using an
appropriate Balanced Scorecard design approach in relation to purpose of the Balanced
Scorecard application has emerged as part of our own consulting work along with the
considerable evolution of the Balanced Scorecard since its introduction ten years ago.
Balanced Scorecard
The Balanced Scorecard was originally proposed as an approach to organising and
presenting performance measurement information that combined a limited number of
financial and non-financial measures which had been selected with a view to providing
managers with more concise and more relevant information about organisational
performance than they were previously receiving via traditional management reports,
particularly with regard to key strategic goals (Kaplan & Norton 1992). By encouraging
managers to focus on a limited number of measures drawn from four ‘perspectives’, the
original Balanced Scorecard aimed to encourage clarity and utility of strategy
implementation.
While the Balanced Scorecard was originally proposed as an approach to performance
measurement that combines traditional financial measures with non-financial measures to
provide managers with richer and more relevant information about activities they are
managing (Kaplan & Norton 1992), it has since developed to the point where it can form the
basis for a ‘strategic management system’ closely resembling the above principles of strategic
control.
Living up to all five of Muralidharan’s strategic control principles (as listed above) and
addressing all three process concerns is best achieved by the most modern definitions of
Balanced Scorecard. What in our experience constitutes an appropriate Balanced Scorecard
design approach for strategic control is therefore described briefly below.
Destination statement
In order to make rational decisions about organisational activity and not least set targets for
those activities, an enterprise should develop a clear idea about what the organisation is
trying to achieve (Senge 1990, Kotter 1996). Accordingly, the most effective Balanced
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Scorecard design processes use the creation of a strategic destination statement describing,
ideally in some detail, what the organisation is likely to look like at an agreed future date
(Olve et al. 1999; Shulver et al. 2000). In many cases this exercise builds on existing plans and
documents – but it is rare in practice to find a pre-existing document that offers the
necessary clarity and certainty to fully serve this purpose within an enterprise.
Strategic objectives
While the destination statement offers a clear and shared picture of what the organisation
will look like at some point in the future, it does not provide a suitable focus for management
attention between now and then.
What needs to be done and achieved in the medium term for the organisation to “reach” its
destination on time is agreed upon in the form of objectives or priorities. By representing the
selected objectives on a “strategic linkage model” (see Figure 1), the design team is
encouraged to apply “systems thinking” (Senge 1990; Senge et al. 1999) to identify causeand-effect relationships between the selected objectives i.e. what do we need to do to
achieve the results we expect. This approach also helps ensure the objectives chosen are
mutually supportive and represent the combined thinking of the team’s high-level
perception the business model.
Strategic linkage model and perspectives
In Figure 1 the chosen strategic objectives are spread across four zones or ‘perspectives’. The
lower two perspectives contain objectives relating to the most important activities in terms
of business processes, cycle time, productivity etc. (Internal Processes) and what needs to
happen for these processes to be sustained and further developed in terms of people,
product and process development (Learning & Growth).
The two top perspectives house objectives relating to the desired results of the activities
undertaken i.e. how we wish external stakeholders (e.g. the general public, partner agencies
and organisations to perceive us (External Relations) and how this will ultimately translate
into financial results and economic value (Financial). In the public sector however it normally
doesn’t make much sense to look at economic value. A more practical approach would be to
focus on organisational governance and mission efficiency. That is intermediate outcomes
have been delivered in accordance with expectations of the authorising environment, within
budget, legal frameworks and in accordance with organisational values. Changing the name
of this perspective to Organisational Governance may therefore provide a solution to this
common argument about the utility of Balanced Scorecard in public sector.
Measures
Once objectives have been agreed measures can be identified and constructed with the
intention to support management’s ability to monitor the organisation’s progress towards
achievement of its goals (Olve et al. 1999).
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Concerns with the Balanced Scorecard
Attempting to successfully incorporate the above components and strategic control activities
in a Balanced Scorecard application, relies first and foremost on getting the executive
management to realise and agree that strategic change (strategic control) is in fact what they
hope to achieve from adopting the Scorecard, as opposed to e.g. improved process control
(management control). Considering that more than 70% of Balanced Scorecard applications
supposedly fail (McCunn, 1998), the risk of poor design, particularly with regards to the
strategic control activities point 1, 2 and 5 above, therefore needs to be minimised.
Various standardised Balanced Scorecard design approaches still rely on the original design
process described by Kaplan & Norton in 1996. Kaplan & Norton later suggest that
articulation of strategic priorities in the form of so called strategy maps, defining how the
organisation is going to achieve its vision, but it does not call for any effort to check that
there is a prior profound and shared understanding of what the vision really means (Kaplan
and Norton, 2000). This advice ignores the fact, that many management teams do not have
a clear and shared vision for the future (Senge 1990, Kotter 1995).
The original design approach also suggests that the organisation’s strategy is first analysed
by a small group comprising key personnel supported by consultants. Their analysis is used
then to drive the selection of priorities or strategic objectives on behalf of the organisation’s
management team. But failure to use a collective approach may weaken the value of the
strategy itself (Simon 1976, Mintzberg 1990) and its implementation due to lack of support
from those accountable for executing it (Thomson 1967).
A further concern with the original Kaplan & Norton design is the method of linking strategic
goals to the measures ultimately selected. It entails a process of strategy articulation that
requires first the selection of key “strategic objectives” across the four Balanced Scorecard
perspectives. This selection process involves the choice of strategic objectives in a way that is
decoupled from any consideration of the causality between them. Cause and effect links are
only considered “post-hoc”. But, as Epstein & Manzoni (1997) argue, the key to linking
strategy with performance measures is found in the development of assumptions relating to
the prior understanding of cause-and-effect relationships. This view is also supported in the
cause-and-effect theories as described by Hedberg (1981) and later elaborated on by, for
example, Burke & Litwin (1992).
In order to test the validity of the assumed usefulness of Balanced Scorecard application for
strategic control in public sector, the authors intended to base what is now an ongoing
consulting assignment, on the above design principles and components. This in spite of
concern raised by some of the interview objects relating to the utility of the original four
Kaplan & Norton perspectives in public sector organisations. The main concern related to the
“Financial” perspective considering that the ultimate goal for public sector organisations
clearly isn’t creation of economic value as discussed earlier. The experience from this work is
presented and discussed in the subsequent sections of the paper.
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Case study
The case study describes an anonymous UK service delivery agency (UKA). UKA delivers
services and policy advice to and on behalf of a number of different departments. UKA’s
performance is evaluated on the basis of the results (intermediary outcomes) created by its
services (outputs) and the effectiveness these have on generating the desired societal impact
(outcomes).
An official audit had criticised UKA’s Board for its failure to be routinely informed about the
organisation’s progress in implementing the Board’s agreed strategy. The UKA Board of
management agreed to remedy this weakness through the introduction, organisation wide,
of a Corporate Performance Management system based on the Balanced Scorecard. UKA
decided to develop an executive level Balanced Scorecard as the first component of an
integrated agency-wide approach to performance management designed to eventually
incorporate more than 40 Balanced Scorecards. The resulting design project involved the use
of the authors’ firm as external consultants to support the planning process, facilitate the first
Balanced Scorecard developments, and transfer sufficient knowledge for UKA to continue
the roll-out of the Balanced Scorecard using internal resources, as well as support UKA’s
ability to continuously update and amend the Balanced Scorecards.
First a series of ‘destination’ statements were created. These described the expected
consequences five years later of the successful realisation of the Agency’s strategies in a
limited number of high-level areas. This was achieved through a facilitated workshop
approach including the entire executive team. In the most part, the new destination
statements created clarified and built consensus about elements of existing published
statements of strategic intent adopted by the Agency, and these documents were used as a
starting point for discussions with the executive team.
The executive team then worked collectively, directly from these destination statements, to
agree what they thought would be the key activities that the Agency would need to
undertake successfully during the five year period, if the described destination statements
were to be realised. Initially the team attempted to shorten the planned process and avoid
having to formally describe these key interim activities and directly select measures of
performance based on their agreement concerning the destination statements, and a loose
understanding of required activities.
The resulting set of ‘status’ measures comprise the Corporate Balanced Scorecard and are
used to report the agency’s progress at implementing its strategy to the Board. The
approach adopted appears to have succeeded in delivering greater awareness and focus
within the Board on the agency’s strategic performance, and ‘destination’ statements are
used between the agency and its stakeholders to discuss and agree what exactly is expected
of the agency and what can realistically be achieved.
The measures are reported to the Board quarterly, but the Directors intend to monitor and
discuss measurement results on a monthly basis in order to more actively adapt and respond
to the information provided as well as to changes in their operating environment. While the
adapted approach chosen for the Corporate Balanced Scorecard worked, it had weaknesses
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e.g. with regards to the lack of discussion about activities required to deliver desired
outcomes, as well as lack of formal documentation of what the executive team’s choice of
activities really meant. In realising the risks of this “incomplete approach”, UKA has decided
to use a Balanced Scorecard design more closely aligned with the latest four- box Balanced
Scorecard design as the basis for developing ‘local’ Balanced Scorecards in the Agency’s
major operational and functional units.
The Corporate Balanced Scorecard, together with draft or completed Balanced Scorecards
from other relevant parts of the organisation, forms the starting point for development of
local Balanced Scorecards; this is in order for the local management teams to better identify
their most important contributions to the implementation of corporate strategy, secure
overall strategic alignment and enhance accountability.
Discussion
The case study offers evidence that the latest generations of Balanced Scorecards have equal
potential to address the strategic management issues in public as well as in private sector.
UKA’s decision to revert to an approach that more closely reflected a 3rd generation
Balanced Scorecard design, as had originally been proposed by the consultants’, once they
had gained increased experience with the practical implications of Balanced Scorecard
design issues, emphasises this point. It also goes to demonstrate that the utility of the
original four Kaplan & Norton perspectives can be maintained in public sector organisations
despite the complex stakeholder environment in which they operate, and the different
definitions of value generation identified through the literature review.
Nevertheless changing the name of Kaplan & Norton’s “Financial” perspective to e.g.
“Governance” perspective would better reflect the public sector’s obligation to serve its
authorising environment by delivering whichever definition of value is appropriate.
Preliminary feedback from UKA indicates that ‘destination statements’ may help alleviate the
issue from the literature review of too broad and ambiguous directional statements issued by
the political leadership. UKA intends to use it in discussions between executive and political
leadership to interpret more clearly, and even quantify the political leadership’s exact
expectations of value contribution. But since the political leadership isn’t likely to officially
underwrite detailed goals (Stewart, 1996), destination statements need to be considered an
internal planning document owned by the executive leadership.
UKA also feel their new Corporate Management System enable them to better budget for
achieving agreed strategic outputs, as discussed in the literature review. Although the
shortcut in the initial design approach limited UKA’s discussion and planning of activities
required to reach the desired destination, they still feel they have a much better starting
point for developing budgets rooted in strategic thinking rather than in the budget of the
previous year, as used to be the case.
In the initial part of the design process UKA’s managers demonstrated signs of reluctance to
articulate and commit to stretch goals – an expected behaviour as mentioned in the
literature review. Yet the full participation of all managers in this process and the agreed
approach to rolling out the Balanced Scorecard to the rest of the organisation, based on the
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same consensus seeking and participative style, clearly eased those tensions. However, it is
obviously too early to comment on the long-term effectiveness of the approach, not least
when considering the likely continued influence of externally set arbitrary and contradictive
goals.
Nevertheless, UKA’s executive team believes that the performance information provided by
their Corporate Performance System will support improved internal understanding of the
organisation and its output effectiveness. This should enable the team to present a more
robust argument when engaging in constructive dialogue with their authorising
environment and so, they hope, eventually reduce sudden counterproductive policy changes
and the number of arbitrary performance targets set by outsiders.
Conclusion
The paper demonstrates how the latest Balanced Scorecard can be deployed usefully as a
strategic control tool in public sector organisations and thus enhance public sector
governance, at least when using appropriate Balanced Scorecard design and associated
management processes. The strong similarity between the approach described for the public
sector and the commercial sector approach it was based on suggest that the added utility of
the proposed Balanced Scorecard in the Public Sector is derived from its better reflection of
general management behaviour and requirements, rather than its ability to accommodate
through novel design, the specific and unique characteristics of the public sector. Although
there is no evidence to suggest that Balanced Scorecard has the potential to solve all the
strategic management concerns raised by the widespread management reforms of the past
20 years, it does seem able at least to reduce the potential negative consequences of these.
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