Balanced Scorecard Applied in Public Sector

Balanced Scorecard Applied in Public Sector
Shi Baojuan1 Wang wenling2
1
School of Management
Hebei Polytechnic University, Tangshan China, 063009; 2Tianjin University, Tianjin China, 300072
Abstract: This article starts from the successful experience of balanced scorecard applied in the
administration of the working performance in governmental offices and western business world,
integrated with the characteristics and its applied principles. It begins with the experiments of the
administration of the working performance in governmental offices in our country, probes the
possibilities to introduce balanced scorecard to the administration of the working performance in
governmental units, revises and remoulds the balanced scorecard according to the mission logic of
public units, and constructs rational and effective system of assessment target.
Key words: Balanced Scorecard; Public Unit; Performance Administration
1. Introduction
In 1996, a purchasing unit, a subordinate section of Department of Communication and
Transportation of the USA, purchased Balanced Scorecard, a system of assessment. This purchasing unit
is one of the first government units to adopt Balanced Scorecard. After that Balanced Scorecard is
approved and adopted in the governmental units in Australia and Singapore. Recently, there gradually
appears performance administration in some local governments and public units, together with the
establishment of mechanism of target assessment. However, these systems are far away from perfect not
only in theory but also in practice, as reflected in problems, including the backwardness of the theory of
performance assessment; lack of performance assessment subject; the lack of scientific nature of the
methods and techniques of performance assessment, the unidirectional nature and the separation of
assessment target from the organizational goals. To solve these problems, we are considering
introducing Balanced Scorecard to public units. As a scientific, complete and systematic theory and
methods of performance administration, the application of it is sure to improve the performance and
quality of performance administration of public units.
2. Balanced Scorecard
Balanced Scorecard (abbreviated for BSC), originally applied in enterprises, is an effective tool of
performance assessment and administration. Balanced Scorecard starts from the strategy (to increase the
value of the market of enterprises and the net flow of current of these enterprises) of business
development, and observes enterprise performance from such aspects as financial status, satisfactory
level of customers, technological process internal business, learning and bringing forth new ideas.
Financial target can reflect the consequences brought about by the actions previously taken, promote and
improve the future performance of a business from activities of the other three aspects. Balanced
Scorecard takes non-unidirectional target as assessment method. The unique character to distinguish
Balanced Scorecard from other methods of performance assessment systems lies in the assessment of
the performance of complex business and complex units; therefore it helps the administrators to know
the enterprises completely, so as to transform the strategic goals into specific aims and assessment
targets. In a word, Balanced Scorecard is to increase the performance of an organization by cultivating
the working staff of an enterprise, in order to raise the level of satisfaction of customers, and enlarge the
part of the enterprise in the market, and in the end realize the strategic goal to raise the value of the
business.
Balanced Scorecard overcomes the shortcomings of the backwardness of the unidirectional
financial target, which can easily lead to the short-term of business activity, neglect the benefit of the
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whole while purchasing the best partial benefit. It has enforced theoretical base and it is easy to operate.
The moment it was put forward, it got applied in the enterprises of America and other developed
countries.
3. The Adaptability of Balanced Scorecard in performance Assessment of Public
Units
3.1 The quintessence of Balanced Scorecard goes well with the value adoption of performance
administration of public units
Balanced Scorecard postulates balanced mentality, laying more stress on the fact that the level of
the performance and the advantages of an organization do not directly show the “financial status” of an
organization. Instead, it thinks more of carrying out strategic management of an organization, and the
unique balancing view, together with view of long-term development. The quintessence lies in subtle
balance of the variables between long-term targets and short-term targets, and also that between the final
targets and processing targets, that between advanced targets and backward targets, that between
organizational performance and individual performance, that between external concern and internal
appeal, along with the balance between the assessment of historical business management and the
assessment of expected achievement in future, that between the degree of agreement of other
organizations and the degree of agreement of customers, and that between internal managing process,
stimulating mechanism, staff cultivation and the increase of production service. This balance to an
organization is what water is to fish. Governmental units and other public units should all pay attention
to the balance between various values, as well as their missions and organizational strategies. Therefore,
the design of the system of performance achievement assessment should assert “balanced” mentality.
3.2 It is indispensable for government’s organizations to purchase balance in order to achieve
great achievements.
Having had a lot of investigations about the administration of governmental organizations
American scholars, like Mark·G·Bobwichy, have come to the conclusion that the base of setting up high
organization administration performance is to assess the work of the organization, the purpose of which
is to provide a “source” for promoting reform, target selecting and administrative monitoring rather than
a punishing method that “I have spotted your vulnerable points.” Achievement performance
administration covers the following targets: the present structure of organizational culture; the level of
satisfaction of customers the organization; the level of satisfaction of staff the organization; and the
needs for reformation of the organization. So, for public units like governmental offices, the system of
performance target should be more of a “balanced” one. It can be, for example, the balance between a
long-term target and a short-term target, that between competition and cooperation; that between
fairness and performance; and also that between stability and development. In this way, the practice of
Balanced Scorecard meets the needs of organizations with high performance like governmental
organizations and public units.
From the above analysis we know that the theory of Balanced Scorecard agrees with the value
orientation of performance administration of public units. It can be well operated to apply Balanced
Scorecard in public units. Balanced Scorecard theory and practice are a good attempt to improve
performance administration of public units.
4. Necessary revisions should be done when Balanced Scorecard is in use in
performance administration of public units
As Cameron & Whitlen(1983) points out, there is no permanent mould in the assessment of
achievements of an organization, thus it is a frame rather than a theory that is more necessary. The four
dimensional Balanced Scorecard “ should be looked on as a mould instead of a restraint.”
Kaplan &
Norton, 1996 and “it is not universally available to all enterprises or organizations as a standard
mould.”
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Public units are products of political orders rather than the results of the exchanges on the markets.
Compared to private enterprises, public units have some specific features as follows:
Firstly, as far as surroundings are concerned, public units are short of a market where resources can
be provided to them as a certain kind of income. Thus they are different from the enterprises whose
resources are directly provided by markets. On the contrary, their resources are from one or several
supervisory mechanisms. Thus, their activities are refrained by various political factors so that the
operation is quite unstable.
Secondly, in terms of the factor of exchanging, the ownership of public units belongs to the public,
so the cost and benefits are separated. As the operation is carried out with certain enforcement, it has a
far-reaching influence and it is usually under the supervision of the public.
Finally, in terms of internal procedure, public units often have vague and mutually conflicting
targets, most of which don’t have a “bottom line” to measure whether or not they succeed. The fact is
that there is more contextual performance than task performance, more behavioral targets than targets in
quantity.
The features above of public units entrust specific characteristics to them. That’s why the
assessment of performance of public units is essentially different from that of enterprises. The
assessment of performance of enterprises can be measured by the profits from the ratio between the
productive cost and the sales of their products on the market, although the performance of enterprises is
more and more influenced and restricted by many factors as the development of intellectual knowledge,
the changes of the internal and external economic conditions, demands of customers, obtaining of
information of market, and cultivation and discipline of the staff of the enterprises. The assessment of
performance of enterprises is linked to many factors and problems that are becoming more complicated
day by day, but the way to show and exchange performance has not been radically altered. The core of
assessment of performance is to maintain and judge its achievement. But as public units with public
powers, which provide public products and services the public and the society, their performance has
specific characteristics: their products are not concrete material; they don’t have object of service; the
process of carrying out their service does not need the market; and their effect is usually delaying. All
these differ the assessment of public units from that of enterprises. Therefore we should construct
scientific performance assessment target system according to internal nature of performance of public
units and its natural specialities of performance assessment of public units. We should also have
scientific performance judging methods and moulds. Balanced Scorecard as scientific method of
assessing performance of enterprises, should be applied to public units according to the strategic
development of the enterprises, with its structure and targets revised and integrated. We can’t take for
reference the whole frame of mould of the balanced scorecard of enterprises.
5. The design of Balanced Scorecard in Public Units
As an administrative system for strategic development, Balanced Scorecard can be applied to all
kinds of organizations. However, it is only a mould. In order to have it available in the administration of
any specific organization, we must reconsider the specialities of the specific organizations.
The practical process of applying of Balanced Scorecard can be shown in Figure 1.
The task of public units
From the aspect of customers
Who are our customers?
How to something valuable for our customers?
From the aspect of finance
How to produce something
valuable under the condition
of productive cost controlled?
Expectations and
strategic goals
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Internal technological process
Which one or ones of the items the
working technological process should
be strengthened in order to satisfy
customers as much as possible within
the limits of the budgets?
From the aspect of cultivation and development
How to maintain growth and change to meet the needs
of legislation and the public?
Figure 1
the Basic Structure of Balanced Scorecard in Public Units
Expectations and strategic goals: expectations of public units lie in providing services of high
efficiency within the limits of financial budgets; help improve people’s material and cultural life. The
strategic issues are keys to realizing the strategic goals of public units. The strategic goals are a
long-term matter of overall importance. In the actual application of balanced scorecard, we can separate
the strategic goals in to several different concrete goals, which are directions of the realization of
performance targets.
From the aspect of customers: for the public units, the so-called customers are those who live in the
communities of their administration. What are in their consideration are: people’s needs in social life,
economic development, governmental work, cultural life and so on. These measuring targets can be
further grouped in a series of questions in details: whether the people are satisfied with the service;
whether the service are well accepted and practical; whether the service is transparent; whether the
people participate and how they do it; whether their attitude of serving the people is proper; whether
they get on well with the people they serve; whether their service is well qualified and fair enough;
whether they provide job opportunities for the people; whether they make it sure that the people are
secured and so on.
From the aspect of finance: the ultimate goals of public units are to fulfill their tasks, meet the
people’s needs in public service, rather than to succeed in making money. But financial target is still
quite important in the whole process. The financial target of public units is to provide the best service to
the public with in the expense of budget. Specifically speaking, we should bring the running cost under
control, raise the efficiency of investment, and reduce waste. We should also take as major targets the
yearly budget, the use of this budget, the income from the cost of the capital, the effective utilization of
all the resources, along with the cost and social beneficial results. What’s more, the raise of this idea can
add to the changing of the wrong doing that we never cared the cost and never paid attention to the
social beneficial results in public units in the past. In this way, we can realize prior disposition of the
resources.
Internal technological process: This is referred to as the process to provide products or service to
customers. The inspection of the internal technological process provides grounds for the analysis and
improvement of the performance of public units. This is also where this balanced scorecard is different
from the traditional assessment of performance. This targets start from internal restricting factors of
public units, combined with the width and depth of administration, the status of internal process and the
status of external assessment, systematic operation and the reforming mechanism of the system, assess
the performance of public units scientifically and from many aspects. For public units, generally,
internal technological process includes all kinds of considerations from the unification of operation,
transparency of responsibility, the flexibility of information system, the electronization of public
documents, the timely linking up between public units, the effectiveness of coordination, to arrangement
of controlling and the understanding of the demands of the public.
From the aspect of cultivation and development: What cultivation and development reflect is
whether the organizations have the capacities to have more reforms and produce more value for the
future. This mainly lies in the reform and development of these organizations, as well as government
functionary who provide service for the public. The dimension of targets for cultivation and
development covers such fields as the cooperation and interaction between the relevant units both at
home and abroad, the training and stimulating of the staff, the regularities of proposals for improvement
put forward by the staff, the praise and spread of excellent performance and achievements.
The greatest difference of balanced scorecard from traditional method lies in the fact that it puts its
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task on top of the structure, right beneath it is the customer rather than finance, which shows that, for
public units, the best way to fulfill their task is to produce as much value as possible for the customer, so
as to respond to the society. This overwhelming target can only be the peak of the system of balanced
scorecard of the public units, so as to guide the assessment of performance. The task itself clearly shows
the importance of the existence of these organizations, together with purpose they are reaching after
working so hard. This also distinguishes the use of balanced scorecard of enterprises from the use of
balanced scorecard of public units. It is the customers of the organizations that are more interested in the
process of fulfilling the task, rather than those who are closely related to the benefit from the financial
system.
The relation between the four aspects of balanced scorecard can reflect that the concern for the
customers is the basis of the other three aspects. Concerning of the customers can help the public units
to consider satisfying people’s material and spiritual needs, on the basis of the consideration of financial
goals; the criteria to measurement of financial design can clearly help to reach the purpose to serve the
customers and to meet the targets of meeting the speed of economic development so as to have enough
money as needed; the design of internal technological process can make it clear to realize the customers’
goals; the design of the aspect of cultivation and development is to establish the mould of learning in the
organizations, cultivate their crucial capacities to change the flow of information by using electronic
office system, reform the structures of the public units in order to promote the development of the
society.
6. Conclusion
“Balanced scorecard” appeared in the 1990s. It is a very successful method of assessment of the
performance of enterprises. It focuses on the performance of the enterprises from the strategies of the
development of the enterprises, from the financial status, from whether the customers are satisfied, from
the internal technological process, from cultivation and creativity of the staff. What are produced by the
public units is not practical material; those who can benefit are not fixed to a certain number; the way to
realize it is not through the market. All these make the assessment of the performance of the public units
different from that of enterprises. The balanced scorecard is a scientific method of the assessment of the
performance. We should revise and integrate this system for the consideration of the development of it.
Therefore it can be applied in the public units so as to add to the administration of the quality of the
assessment of it performance.
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