Module 3B Managing Resources

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Given the concern that incentivization can lead to unexpected outcomes, it is often not tried in public sector bodies and budget-driven approaches are preferred for managing performance. Balanced Scorecard The Balanced Scorecard model was popularized by Kaplan and Norton in 1996. While being developed with private sector organizations in mind, it has great applicability for the public sector. As the title suggests, it aims to establish and maintain a suitably balanced set of metrics for monitoring performance. It recognizes that financial metrics on their own are not enough and can lead to a distorted perspective, which is one of the criticisms of budget-driven performance management. According to Kaplan and Norton, “what you measure is what you get.” In other words, the things you decide to focus on become the things you achieve. What gets measured gets done. In a similar vein, Lord Kelvin, a scientist notable for his work in developing a new temperature scale, remarked “if you cannot measure it, you cannot improve it.” We need tools to define how well we are doing currently, to set targets for improvement, and to determine whether we are being successful. Peter Drucker, the management guru, said it like this: “If you can’t measure it, you can’t manage it.” The balanced scorecard examines performance from four perspectives: • Financial perspective. • Customer perspective. • Internal perspective. • Learning and growth potential (organizational capacity perspective). The model links to value creation. Improvements in capacity drive improvements in processes leading to greater customer satisfaction and ultimately better financial performance. 50
The balanced scorecard approach needs to be adjusted for the public sector. Public financial management (PFM) is not focused on generating profits for shareholders. Outcomes and impacts are not always measurable in simple financial terms. Governments are also highly complex entities compared with most organizations, having many different lines of activity and services. As compared to commercial institutions, government agencies face a unique set of challenges when trying to manage performance and achieve their strategic goals and initiatives. Their mission and budgets are often decided externally… Additionally, agencies face the uphill task of meeting their goals without direct control of shrinking budgets and resources. This furthers the need for managing performance at every step along the way. 26 Adaptation of the balanced scorecard model to a public sector setting can be summarized as follows: Balanced Scorecard Public Sector Emphasis Perspectives Financial perspective Budgetary performance, stewardship of resources Customer perspective Stakeholder engagement and satisfaction Internal perspective Economy, effectiveness, efficiency Learning and growth potential Knowledge and capacity The balanced scorecard itself can take the form of a regular report or digital dashboard with information organized to reflect these quadrants, showing actual performance or status in comparison with goals. Pros Pros and cons of balanced scorecard Cons 26 Whittaker, J., Strategy and Performance Management in the Government, Pilot Software, November 2003. Quoted in “How to Manage (and Measure) Government Performance,” FreeBalance, August 9, 2022. 51
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Module 3B Managing Resources

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