The intent of this paper is to measure the issues and challenges of implementing a balanced scorecard in public sector organisations. In recent old ages the demand of the populace sector organisations to demo and mensurate their public presentation drives them into the demand of implementing the BSC. Although the BSC is originally designed for the privet sector ( it was designed by Kaplan and Norton and its chief position where created to suit the privet sector organisations ) , it is now used by the public sector as good.
However, in order to accomplish a successful execution, there are many issues and challenges that must be overcome. The chief issues are the alteration of the BSC in the populace sector organisation, the deficiency of strategic orientation and mapping the causality between the positions of the BSC. There are besides barriers that need to be outreached, which are connected with the concern policies, the construction and the top directors of the organisation.
Public sector organisations are really complex organisations compared to the privet sectors 1s. Due to this diverge and the deficiency of willing to implement the BSC, it is more hard to plan a successful BSC execution. However, despite the troubles, the execution of the BSC is of import because it the BSC itself has a batch to offer to the populace sector.
2. MAIN BODY
2.1 What is a balance scorecard?
Harmonizing to Kaplan and Norton ( 1996 ) , the balance scorecard ( BSC ) is organized in four distinguishable facets of import to the organisation, which are: the fiscal, clients, invention and acquisition and internal procedures of the concern. As Kaplan and Norton ( 1996 p.viii ) said, “ the name reflected the balance provided between short- and long-run aims, between fiscal and non-financial steps, between dawdling and taking indexs, and between external and internal public presentation positions. ”
As Chavan ( 2009 ) claims, the BHS is a procedure which is combined by: “ Clarify and interpret vision into scheme, communicate and associate strategic aims and steps, program, set marks and align strategic enterprises, enhance strategic feedback and acquisition ” and agrees with Kaplan and Norton that the BSC apart from mensurating the fiscal, besides focuses in clients, internal procedures and larning and growing that the organisations employees need.
2.2 Why the balanced scorecard is of import to concerns?
The BSC is a really utile tool to the directors of every company because of its power to drive the companies through its measurings, in better hereafter consequences which mean that the organisation becomes more competitory. Its chief advantage is that transforms the organisations ‘ mission and scheme into measurings that provide the model for strategic measuring and direction system. It besides gives the advantage to the companies to accomplish future growing by developing the critical assets they need while supervising its fiscal consequences ( Kaplan and Norton 1996 ) .
When it comes to non-profit organisations or public sector organisations, the BSC becomes of import because of the force per unit areas that have been exerted from both internal and external beginnings ( such as the authorities ) . This force per unit area is due to the demand of betterment in public presentation and answerability which can be efficaciously achieved by the BSC ( Sharma and Gadenne 2011 ) .
As Chang ( 2007 p. 103 ) said, “ One cardinal benefit of the Balanced scorecard is that it enhances strategic linkage between cardinal and local units. ”
Issues and challenges of the BSC execution
3.1 The success factors of a BSC execution
First of wholly, it can non be argued that there are some cardinal elements that an organisation must see in order to accomplish a successful execution of the BSC. Harmonizing to Assiri, Zairi and Eid ( 2006 ) , there are 27 critical success factors which are divided in three chief classs. The first class is the Dominant factors, which are the most important in the execution. The 2nd class is called the “ Main factor ” and contains the “ mission ” , the “ value ” , the ” vision ” and the “ scheme ” . The 3rd one is the “ Encouraging factors ” . Northcott and Taulapapa ( 2012 p.180 ) support the old statement with a more analytical survey and they claim that the most of import factors are
“ a participate pre-implementation determination procedure, larning from others BSC executions and benchmarking best pattern, strong direction support, equal resourcing of BSC enterprises, modifying the standard BSC theoretical account so that it matches the organisation ‘s context and scheme, uninterrupted in-use acquisition and preparation, post-implementing reappraisal ” .
The deficiency of strategic orientation in a BSC
One of the most of import issues that need to be outreached by the populace sector organisations, is the deficiency of perceive strategic orientation. That appears to go on chiefly when high degree directions ignore or misunderstand the importance of the strategic orientation to the balanced scorecard. As Northcoot and Taulapapa ( 2012 ) said, “ The BSC design must flux from scheme ” .
Harmonizing to Chavan ( 2009 ) , the high degree directors will specify the important steps and KPIs needed to the organisation in order to construct the BSC. That means that the leaders are traveling to find what “ success ” means for the organisation. It is besides their occupation to reassign this intent to the employees. This is of import because the employees are one of the companies ‘ most valuable assets. So by reassigning the intent of the company to the employees might assist the company develop a more appropriate environment which can take to better strategic orientation. The reply to the inquiry “ Why the definition of the KPIs and measurings included in the BSC is a really of import factor? ” is traveling to be analyzed farther down in this research.
In research done by Kim and Hatcher ( 2009 ) can be detected that they linked the scheme with the BSC. They besides agree with Northcoot and Taulapapa ( 2012 ) , that the employees of the organisation must encompass the vision in order to guarantee communicating. That means that it is of import to understand the corporate individuality of the organisation in order to guarantee communicating which is critical for constructing the BSC.
However Kaplan and Norton ( 1996 ) claimed that the failure of the BSC in the scheme orientation is due to the narrow position that the BSC is built to better the public presentation of the organisation. Harmonizing to them the BSC is the “ manner to pull off concern ” because it provides schemes for accomplishing future success.
This can be argued because harmonizing to the W4 members ( in an empirical survey conducted in USA and Canada ) , the most of import thing in wining in the BSC execution is the designation of the public presentation measurings with the strategic planning. As the consequences of the research show, all 4 positions are linked together and the measurings become important in order to accomplish the ends of the scheme ( Wilson, Hagarty, Gauthier, 2004 ) .
However, it is really hard to unite the scheme with the BSC when it comes to pattern. In an empirical survey conducted in Germany, most of the directors who were interviewed supported the fact that the BSC is a utile tool which helped them with the scheme procedure and the edifice their public presentation measuring system, but they faced a trouble with the combination of these two. As merely few of the directors interviewed managed to unite scheme with the BSC, it is obvious that the chief issue is the deficiency of experience of the directors. However, it was clearly proved that in order to implement the BSC in public organisations, a clear scheme is the most important factor, every bit good as the duty and coverage constructions. Without strategic orientation it is really hard to specify the ends of the organisation and it is even more hard to to the full work the benefits of the BSC. In that instance the cardinal factor in order to associate the scheme with the BSC is to to the full understand the “ cause and consequence concluding ” between BSC and scheme ( Greiling, 2010 ) .
Alteration of the BSC in the organisations context and scheme ( job in accommodating the BSC to accommodate public sector organisations )
Harmonizing to Northcott and Taulapapa ( 2012 ) , one of the chief jobs in implementing the BHS in a public organisation is to understand its construction and modify the BHS harmonizing to its scheme. The challenge of using the BSC in the populace sector organisations is because of the fact that it is hard to specify the client and a batch of directors found it hard to reply this inquiry. That is because of the specialnesss that the clients in the populace sector organisations have and besides to the diverse of non-profit organisations such as the populace sector organisations.
Harmonizing to Kong ( 2010 ) , specifying the client in a public sector organisation is hard, because of the assortment of the services it provides. In other words, public sector is really diverse and the services it provides have a scope of clients. So in order to place the client, some restrictions must be specified.
As Greatbanks and Tapps ( 2007 p.580 ) said, “ Within a public service environment, client definition can be more complex, ensuing in a multiplicity of clients or service users, every bit good as stakeholders ” . A likely definition to the inquiry “ who is the client in public sector ” , would be everyone who pays revenue enhancements. So they must be convinced that the services they get have good compared with the money they spent in revenue enhancements. But many of the services in public sector focal point on the community excessively.
Apart from the external clients there are the internal clients excessively. So another dimension that must be examined carefully is the satisfaction of the internal client.
Harmonizing to Chan ( 2004 ) , one of the grounds that lead to internal clients ‘ dissatisfaction is the deficiency of linkage between the BSC and the employees ‘ payment-bonuses. Provided that, it is indispensable to advert that if the internal client is non satisfied, so his efficiency is decreased and this could take to external client ‘s dissatisfaction. Those statements can be supported by the respondents of the research which was conducted in the USA and Canada ‘s public sector organisations. The respondents rate the importance of this issue with 3.8 out of 5.
Besides the figure of the KPIs must be defined and apart from that they ( KPIs ) should be a feasible figure. But in instance of an organisation in public sector ( because it is a non-profit organisation ) the figure of the KPI is tremendous and it is hard to be processed by directors and as Chang ( 2007 ) claims, a public sector organisation has to present many aims, so in that instance the KPIs ca n’t be easy controlled. This is besides supported by Sharma and Gadenne ( 2011 ) , who said that public sector organisations come under great force per unit area because of internal and external beginnings such as the authorities.
In the empirical survey in the NHS, was found that the authorities had to utilize six dimensions of KPI in order to better the measuring of the public presentation of the infirmaries. Those dimensions had all together 49 KPIs which were all valuable to mensurate this public presentation and they were called High Level Performance Indicators ( HLPI ) because they are important to the infirmaries ( Chang, 2007 ) .
On the other manus, Greatbanks and Tapps, ( 2007 ) claim that the private sector sometimes becomes an obstruction to the execution of the BSC to the populace sector organisations ‘ , because many of the model of the private organisations are treated as indistinguishable and used in an indistinguishable manner in public sector organisations and that is caused by the force per unit area exerted in order to show answerability. In their article Sharma and Gadenne ( 2011 ) back up the fact that a public sector organisation is more demanding than a private one, so there are more KPIs that need to be calculated. The last parametric quantity of this topic is that public sectors ‘ directors should acknowledge the work of private sector organisations and learn from them, but more of import, to seek their experience diluted in their ain criterions.
The experiment that took topographic point in WOAK ( a non-profit organisation in Hong-Kong ) proves the above. The failure of the facets ( as the directors and employees of the organisation claimed ) was in finding the KPIs which are valuable for mensurating the BSC, in the preparation of the frontline degree, in understanding what scheme is and how to use the scheme and eventually in disbursement less clip in put to deathing the scheme than needed because they spent more clip in be aftering the BSC ( Kwokwah, Connel, 2006 ) .
As Kong ( 2010 ) points, the failure of the BSC in the private sector rely on the non-financial steps and variables. In that instance, the fact that WOAK failed to accomplish those non-financial steps and variables should be expected in a non-financial organisation ( Kwokwah, Connel, 2006 ) .
Another issue that must be considered in modifying the BSC in public sector organisations is how “ balanced ” the scorecard is. Harmonizing to Norreklit ( 2000 ) , there are two jobs associated with happening the balance in the BSC. The first 1 is that the links between the facets in the BSC are logical instead than causal. In add-ons he claims that there are differences between the scheme planned and the scheme expected by the company. Those two factors combined, do the BSC ‘s premises invalid and that is the ground why it should be adjusted in the organisation ‘s construction.
However, as Davis ( 2006 ) claims, the purpose of the populace sector organisations is to increase the common wealth and can this can be achieved merely when the clients are satisfied by the services of the organisation.
3.4 Problems with mapping causality
The job with function causality is oriented in the fact that the “ BSC is ill understood or even under-developed ” as Northcott and Taulapapa ( 2012 ) discussed in their research.
Lowrie and Cobbold ( 2004 ) examined the causality in the BSC and reached the decision that the strategic aims are connected to each other. Besides their causality is associated with the scheme of the organisation and the failure of the BSC pasture in the fact that it was really hard to be designed. As Dror ( 2007 p.50 ) said, “ The causality construct is a important issue in the country of pull offing public presentations. It enables to place medium and long-run causality forms and linkages among public presentation steps. ” In his research proves that with utilizing his attack is better to find the causality needed to construct the BSC in both strategic and operational degree.
However, Barnabe ( 2011 ) tends to differ with simple methods. Harmonizing to him, in order to do a better BSC execution the usage of a dynamics-based BSC is more appropriate.
The dimensions of actions, programs and schemes are non clearly shown in the BSC. In farther analysis, means that even though the BSC is a good tool for mensurating the public presentation of the organisation, when it comes to the causality of the organisation there are jobs that need to be overcome. The more informations and groundss accumulated, the better proviso of estimations of cause and consequence relationships, but on the other manus the BSC is based on simpleness and this makes hard to implement the BSC if non the appropriate indexs are selected. But when it comes to the populace sector, which uses many non-financial measurings as shown before, it is hard to associate the relationships. As Dror ( 2007 p.42 ) states, “ Typically, companies collect and build up immense sums of natural informations that are non purpose oriented ” . So in farther analysis, the disadvantage of constructing a BSC in a public sector organisation is that it takes a batch of clip because it is really complex ( Barnabe, 2011 ) .
In other words, what Barnabe ( 2011 ) claims, is that when using the BSC combined with a dynamics-based BSC, it is easier to happen the connexions between the relationships which are created in the BSC, every bit good as separate the “ causes and effects in clip. ”
3.5 Which are the barriers to a successful BSC execution.
Statisticss in New Zealand showed that less than 19 % of the LGO ‘s respondents use the BSC in their organisations. The chief ground for this, as the respondents replied, is the use of alternate systems which were either self-developed or they used alternate available non-BSC tools. Another ground is the size of the organisation. Small size organisations tend non to implement the BSC. The resources are besides a barrier for the organisations. The BSC is based on garnering information, so if there are non sufficient resources to treat that information and acquire valuable consequences, the BSC can non be implemented in the organisation ‘s construction. Furthermore, the deficiency of resorts reacts to the client service. Besides, another of import issue is the deficiency of clip. Many of the directors think that they are excessively busy to exhausted clip on forming a BSC and they should pass this clip concentrating on current jobs of the organisation. Last but non least, the deficiency of the top directors ‘ support which is important for advancing the BSC is another hard obstruction. Top directors should promote the center directors to utilize the BSC and assist them by supplying resorts in order to prolong it ( Northcott and Taulapapa 2012 ) .
Although the BSC is a tool designed for the private sector, it is besides utile to the populace sector, but in order to do it work decently there are plentifulness of issues and challenges needed to be outreached. Those accommodations are critical for the BSC execution and when they are successfully processed, the BSC becomes an recognized direction tool ( Wilson et al. , 2004 ) .
The alteration of the BSC to the public organisations ‘ construction is hard, because of the many non-financial facets of the organisation, which are of import to find the ends every bit good as accomplish them. In order to make that, the organisation must specify the suited or appropriate KPIs needed. However, there is non a right reply to the inquiry how many KPIs and measurings are appropriate for an organisation. But due to the complexness of the populace sector, those steps should non be big in figure. The external clients ‘ definition is besides another point that must be examined carefully because of the complexness of the public sector. Till now, attempts failed to demo consequences in placing them. The internal clients ‘ satisfaction is besides an issue that must be examined, because it affects measurement factors such as net income and external client satisfaction every bit good as the balance between the positions of the BSC ( Kong, 2010 ) .
The scheme appears to be another important issue. The scheme is traveling to find of which measurings and KPIs need to be implemented every bit good as how the directors are traveling to plan the policies and how they are traveling to do the employees embrace them. Those measurings are of import because they are traveling to find the organisations public presentation ( Sharma, Gadenne, 2011 ) .
Last but non least, mapping the causality is besides a large challenge for public sector organisations. Its prosperity chiefly depends on the attempt to understand and develop the BSC harmonizing the organisation ‘s demands. Its significance is major because without it, the organisation seems to be incapacitated in prolonging the scheme and in the development of public presentation direction control systems ( Lowrie, Cobbold, 2004 ) .
As Assiri et al. , ( 2006 ) claim, although there is an enlargement of the BSC in public sector organisations, farther research should be done on the restrictions and the challenges of implementing it. However, if those issues are overcome, the BSC becomes a powerful direction tool.
In decision, the chief points of a successful BSC execution are non merely the alteration of the BSC and the strategic orientation, but besides mapping the causality between the positions of the organisation and the clip spent to understand, design and the use of broad attacks, because the purpose of the BSC is the scheme and the vision of the company ( Kaplan and Norton, 1992 ) .