The Australian Journal of Public Administration, vol. 70, no. 2, pp.

167184

doi:10.1111/j.1467-8500.2011.00718.x

RESEARCH AND EVALUATION

Balanced Scorecard Implementation in a Local

Government Authority: Issues and Challenges
Bishnu Sharma and David Gadenne
University of the Sunshine Coast
Over the last decade the balanced scorecard (BSC) has emerged as a popular strategic
performance measurement and control system within various public sector organisations
as it assists in effectively implementing strategy and in measuring performance. This article investigates whether the implementation of a BSC has been of value to a large Local
Government Authority (LGA) within Australia. The research takes a thematic approach to
identify the issues, challenges and lessons learnt in relation to the design and
implementation of the BSC, which is accomplished through a review of annual reports,
published relevant documents and semi-structured interviews with 13 senior managers of
various programs and divisions within the LGA. Future research opportunities are also
identified in this area.
Key words: balanced scorecard, public service, local government authority

In the last two decades there has been a

paradigm shift in the public sector toward
more accountability and the adoption of new
pub- lic management which is more closely
aligned with private enterprise management
systems (Chang 2007). This has precipitated
the adop- tion of more sophisticated
performance man- agement and control
systems such as the balanced scorecard (BSC)
which has been widely adopted by both
profit-making and non-profit organisations
around the world (Davis and Albright 2004;
Yang, Cheng and Yang 2005; Lawson, Stration
and Hatch 2006).
The BSC has long been recognised as a
per- formance measurement framework and a
strat- egy implementation methodology
(Reisinger, Cravens and Tell 2003; Tennant
and Tanoren 2005) as evidenced by the fact
that over 50% of the Fortune 500 companies
are using this approach as a performance
measurement and strategic management tool
(Gumbus 2005). However, there is fairly
broad consensus that there are significant
challenges in transposing the BSC principles
to public sector organisa- tions, and that
particular circumstances unique

to the public sector give rise to the need for

ad- justments in both BSC design and
implemen- tation (Kaplan 2001; Niven
2002; Wisniewski and Stewart 2004; Adcroft
and Willis 2005; Greatbanks and Tapp
2007). Therefore, the fo- cus of this article
revolves around seven key themes dealing
with the issues and challenges of BSC
implementation in a large LGA within
Australia. The themes used in this article are
based on the work of Kim (1997). The
article starts with a rationale for
performance mea- surement in public
organisations. This is fol- lowed by a review

of balanced scorecard de- velopment in the

Public Sector. The research framework and
method are then described. A brief
background of the LGA and its BSC development together with the main findings of
the study are then presented. Finally, the conclusions, limitations and opportunities for further research are identified.
Why Measure Performance in the Public
Sector?
Public sector reform in the form of managerialism and new public management has

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Australian Journal of Public Administration C 2011 National Council of the Institute of Public Administration Australia

168

Balanced Scorecard Implementation in a

LGA

been prevalent in countries like Australia,

United Kingdom and New Zealand and
conse- quently many organisations are going
through the process of change management
(Mascaren- has 1993; OFaircheallaigh,
Wanna and Weller 1999; Pollitt 2000; Boyne
2003; Hill et al.
2007; Ghobadian, Viney and Redwood 2009).
The need for public sector reform is also
being discussed in other countries eg, market
based economic reforms in the Indian public
sector (Gurtoo 2009), incremental reform in
China (Wong 2009), and e-governance as
public sec- tor reform strategy in Japan (Kudo
2010). As the public sector comes under
greater pres- sure from both internal and
external
sources
to
demonstrate
improvements in its performance (Wisniewski
and Olafsson 2004; McAdam, Ha- zlett and
Casey 2005), various local/municipal
governments and other government departments are taking an interest in performance
measurement and reporting with an emphasis
on improving performance and increasing accountability (Barry 2000; Berman and Wang
2000).
The public sector management literature
suggests that key stakeholders and the general public are taking considerable interest
in the latest LGA programs and determining whether there is evidence that they are
efficient in achieving the desired outcomes.
Many governments including local governments are reviewing the way they plan,
prepare budgets, implement and manage
programs and deliver services to meet the
govern- ments and citizens demands for
improved performance and accountability
(Auditor General of British Columbia 1995).
Australian public sector organisations were
not an excep- tion to this new public
management system as many of them had a
focus on the intro- duction of new accounting
systems (Umashev and Willett 2008). The
emphasis on account- ability, however, should
not be seen as merely reporting on
compliance with procedures but rather as a
useful and essential management process for
understanding
the
performance
of
programs/services, reaching agreement on

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performance expectations, improving performance and demonstrating to the citizens that

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Australian Journal of Public Administration C 2011 National Council of the Institute of Public Administration Australia

Sharma and Gadenne

the expectations of performance are successfully met (Mayne 1997:161).

As part of overall management strategy,
the managers of public organisations need to
measure performance to evaluate whether
the agency is performing as expected.
Important considerations here include
motivating line staff and middle managers to
do the things nec- essary to improve
performance, and determin- ing the
appropriate budgeting priorities. Other
considerations concern the accountability of
the public organisation to legislators and
other stakeholders in terms of meeting
public expec- tations (Behn 2003). There is
growing
recognition
that
using
performance measures to gauge success is
vital to any organisation whether in the
private or public or non-profit sectors
(Niven 2005).
Measuring performance, however, has
been a challenge for both managers and
researchers (Maltz, Shenhar and Reilly
2003) as the process of designing and
implementing an effective performance
management system in- volves addressing
a number of methodologi- cal issues and

16

managing the change process (Poister

9
2003:xvii). In spite of having workable
performance management systems in place in
public organisations, many of those systems
fall apart before they are complete and also
there are others who end up installing a
system that is not helpful or is simply not
used effec- tively (Poister 2003:xvii). As
discussed in the literature, failure of systems
is basically associ- ated with inappropriate
design of performance management systems
and ineffective imple- mentation. Designing
and implementing per- formance management
systems involves high level functions such as
securing
management
commitment,
organising the system develop- ment process,
clarifying purpose and system parameters,
and identifying outcomes and per- formance
criteria (Poister 2003:23). It also involves
more procedural functions such as defining
and evaluating indicators, develop- ing data
collection procedures, identifying re- porting
frequencies and channels, determining
analytical and reporting formats, and
assigning responsibilities for maintaining (or
modifying) the system (Poister 2003:23).

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Australian Journal of Public Administration C 2011 National Council of the Institute of Public Administration Australia

Balanced Scorecard Development in the

Public Sector
The balanced scorecard (BSC) was originally
developed for the private sector by Kaplan
and Norton in the early 1990s. They argued
that financial metrics alone were not sufficient
to measure performance and in managing an
or- ganisation, top level management needs
var- ious kinds of information about the
products and services that the organisation is
offering (such as quantity, quality, market,
customers, suppliers, competition, and
technology) as in- puts for decision-making
and strategic plan- ning (Kaplan and Norton
1992). In other words, it became apparent that
managers need a bal- anced presentation of
both financial and non- financial measures so
that they are able to view the organisations
performance simultaneously across several
areas or perspectives. Kaplan and Norton
(1992) proposed four different perspec- tives:
the customer perspective how well
are customers satisfied?;
the internal processes perspective
how
efficient is the organisation?;
the
innovation
and
learning
perspective are the performance
dimensions constantly improving?; and
the financial perspective are we
keeping
our owners satisfied?
These perspectives are designed to capture
the firms desired business strategy and to
include drivers of performance in all areas
that are im- portant to an organisation
(Kaplan and Norton 1993, 1996).
Kaplan and Norton assert that since the
BSC focuses on both non-financial and
financial measures that drive the future
financial per- formance of an organisation, it
can be con- sidered as superior to previous
approaches
to
strategic
performance
management which fo- cus on financial
measures only (Kaplan and Norton 2001b).
The BSC can generally be used as a means of
clarifying
and
updating
strategy,

communicating strategy in the company,

aligning unit and individual goals to strategy,
linking objectives to long term targets and bud-

gets, and conducting performance reviews to

improve strategy (Kaplan and Norton
2001a); and it is now also being used as ..
.a power- ful tool for rapid and effective
strategy imple- mentation (Kaplan and
Norton 2005). How- ever, in the last decade,
the balanced scorecards multi-dimensional
focus has also been viewed as a way of
addressing the need for a strategic
performance measurement and control
system within public sector organisations
(Umashev and Willett 2008).
Performance measurement in the public
sec- tor has traditionally focused on
financial mea- sures such as revenues and
cash flows. How- ever, the accounting or
financial indicators which are readily
available in most public sector organisations
reflect what has happened in the
organisation but do not indicate the
underlying drivers of either satisfactory or
unsatisfactory performance (Davig, Elbert
and Brown 2004; Niven 2005). Unlike the
private sector, where financial measures are
used such as return on assets (profitability),
return on shareholders equity, and growth; in
the public sector, it is more relevant to focus

on efficiency measures relating to the

feasibility of launching new pro- grams and
making best use of resources. How- ever, the
task of determining the measures, tar- gets
and collecting the relevant information for
non-financial measures is not easy.
Balanced scorecard research in the public
sector has been conducted within the context of the healthcare industry (Gumbus, Bellhouse and Lyons 2003; Yang, Cheng and
Yang 2005; Coop 2006; Verzola et al. 2009;
Devine, Kloppenborg and OClock 2010); urban waste services (Guimaraes, Simoes and
Marques 2010); public service organisations
(including local government institutions and
municipalities) (Kloot and Martin 2000;
Askim 2004; Chan 2004; Lang 2004; Farneti
and Guthrie 2008; Umashev and Willett
2008); and social and not-for-profit small and
medium enterprises (SMEs) (Manville 2007;
Meadows and Pike 2010). Gumbus,
Bellhouse and Lyons (2003) reported a
successful application of the BSC within a
health care management system. Likewise,
the study of Askim (2004) reported how local
government institutions can become active
learners by adopting a performance

management reform system like the BSC.

This study also reported that the learning
behaviour of different departments of the
organisation were similar despite having
varying manage- ment control practices. On
the other hand, Kloot and Martin (2000)
found that public sector or- ganisations using
the balanced scorecard fo- cus on financial
and community performance rather than
organisational change.
For each dimension of the BSC, organisations need to specify the critical success
factors or the factors that are critical to strong
perfor- mance in each element, the means
(measures) by which performance will be
measured, the levels of achievement (targets)
to be reached in the planning period, and any
special actions (initiatives) that need to be
taken to help achieve the target (Viljoen and
Dann 2003). According to Kaplan (2001) the
Balanced Scorecard has the potential to
enable public sector organisa- tions to:
bridge the gap between vague mission
and strategy statements and day-to-day
opera- tional actions;
develop a process to achieve strategic
focus, avoiding the pathology of attempting
to be everything to everyone;
shift their focus from programs and
initiatives to the outcomes the programs and
initiatives are supposed to accomplish;
avoid the illusion that they have a
strategy
because they are managing a diverse and
noncumulative set of programs and
initia- tives; and
align initiatives, departments, and
individuals to work in ways that reinforce each
other so that dramatic performance improvements can be achieved.
However, this must be tempered by recent
crit- icisms of the balanced scorecard
concerning a lack of so called cause-andeffect relationships, lack of clarity, and failure
to consider some types of stakeholders
(Norreklit 2000, 2003; Johanson et al. 2006).

Kaplan and Nortons BSC assumes a number of

causal relationships between measures of the
four perspectives ie, that learning and growth
measures are causally related to measures of
internal business pro-

cesses which in turn are causally related to

cus- tomer perspective measures which are
causally related to financial measures.
However as il- lustrated by Norreklit (2000),
these measures may simply be correlated or
interdependent. For example, customer
satisfaction is assumed to be a precursor of
financial performance, when in fact it may
be the other way around ie, good results may
cause company employees to make positive
statements about their cus- tomers views
(Norreklit 2000:73). Similarly, company
image which is assumed to be part of the
customer value proposition may in fact be
affected by customer satisfaction (Norreklit
2000:76).
There are also a number of instances that
may demonstrate a lack of clarity in the operation of the balanced scorecard (Norrekilt
2000:72).
For
example,
customer
satisfaction may in some cases be negatively
correlated with financial performance if
customers are satis- fied with lower prices
that lead to lower prof- itability.
Furthermore, customer loyalty which is
often considered to be a precursor of increased profitability, may in some cases lead
to lower profitability if the so called loyal

cus- tomers regularly purchase low margin

products or services. Another factor is failure
to account for the time between say a research
and de- velopment activity and improved
internal pro- cesses leading to increased
profitability, when other external conditions
may have led to the improvement (see
Johanson et al 2006:848).
The four perspectives of the BSC learning
and growth, internal process, customer and financial perspectives, are meant to reflect the
firms accountability to its main stakeholders
comprising employees, customers and shareholders, but this may result in overlooking
other stakeholders such as suppliers and
public au- thorities (Norreklit 2000:78).
However, this has been acknowledged by
Kaplan and Norton who propose that
additional dimensions be added to the
scorecard for these stakeholders (Kaplan and
Norton 2001b:95). Nevertheless, this adds to
the complexity of the BSC as a system for
strategy implementation.
Other researchers/scholars have also raised
questions regarding the BSCs effectiveness
(in relation to implementation) and the
adequacy

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Balanced Scorecard Implementation in a

LGA

of BSC in varying circumstances and differing firm types. For example, Robinson
et al. (2005) found that construction engineering organisations reported significant
chal- lenges in the implementation of the BSC
in terms of planning, deployment and
assessment and review stages which includes
the
motivation
for
performance
management, leadership and resources,
communication mechanisms, measurement
and data collection techniques and the role of
knowledge
management.
This
was
corroborated by Othman et al. (2006) who
found that there are likely to be problems in
implementation when a top down approach is
used, particularly if there is a lack of buy-in
and understanding at the lower levels, and a
lack of employee motivation as the scorecard
may not address human relations norms (see
also Johanson et al. 2006:846). A number of
studies show that there is not a one size fits
all appli- cation of the BSC. In relation to
public sector organisations, Johanson et al.
(2006:847) as- sert that a prescribed BSC may
culminate in a dysfunctional central planning
system that fails to stimulate learning.
Tennant and Tanoren (2005) found that size
may also be a factor as the use of the BSC
by SMEs is very low compared to its wider
adoption in larger com- panies.
Moreover, as briefly referred to in the introduction to this article, there are significant
challenges in transposing the BSC principles
to public sector organisations, which give rise
to the need for adjustments in both BSC design and implementation (Kaplan 2001; Niven
2002; Wisniewski and Stewart 2004; Adcroft
and Willis 2005; Greatbanks and Tapp 2007).
Kaplan (2001) articulates the difficulty that
nonprofit organisations have in clearly
defining their strategy as there is often a focus
on achiev- ing lists of programs and
initiatives rather than strategic outcomes.
Niven (2002) suggests that the main
challenges include issues relating to
difficulties in measuring outcomes rather than
outputs, the tendency to use poor results as
punitive measures, and the failure to determine the true mission of any organisational
unit. Other challenges include a culture of not
trusting business solutions, a lack of staff

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skills in developing innovative measures, and

failure

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Australian Journal of Public Administration C 2011 National Council of the Institute of Public Administration Australia

Sharma and Gadenne

to link the scorecard to compensation

(Niven 2002). Wisniewski and Stewart
(2004) em- phasise the importance of public
sector
firms
recognising that
the
performance management system is required
to serve multiple purposes to meet the needs
of a somewhat diverse array of stakeholders.
Adcroft and Willis (2005:396) assert that the
increased use of performance measurement
in the public sector and the im- portation of
private-sector management prin- ciples and
practices will have the dual effect of
commodifying services and deprofessionalising public sector workers. Greatbanks and
Tapp (2007) conclude that implementation
of the BSC in public sector organisations
will be more complex than in the private
sector as a re- sult of the difficulty in
recognising and defining the diverse array of
stakeholders.

Research Framework and Method

As evidenced in the literature, the BSC
having been widely adopted in the private
sector is now gaining increasing acceptance

17

within the public sector as a strategic

1
performance management system. However,
for government organisa- tions that seek to
create superior value through the BSC, there
are
significant
challenges
in
the
implementation of the BSC. The main issues
include motivation for performance management,
leadership,
communication
mechanisms,
goal-setting
processes,
measurement, data col- lection techniques,
employee reward systems and relating outputs
to outcomes (Niven 2002). In addition to
these challenges, there are also major barriers
in applying the scorecard to the public sector
which stem from the dif- ficulty that many
public sector organisations have in
articulating their mission and asso- ciated
strategies. According to Kaplan and Norton
(2001b) many of the strategies artic- ulated
consist of lists of programs and initia- tives
rather than outcomes that the organisation is
attempting to achieve. Moreover, it is important to recognise that public sector organisations require different strategies than their
counterparts in the private sector as their main
purpose is to satisfy the needs of their
commu- nity constituents (as stakeholders)
rather than

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Australian Journal of Public Administration C 2011 National Council of the Institute of Public Administration Australia

Figure 1. The Three Perspectives of Public Sector Agencies for Financial/Customer Objectives
Mission

Cost of providing service

Value/benefit of service

Legitimising Agent Support

Internal processes

Learning and growth

Source: Adapted from Kaplan and Norton 2001b.

focus on financial outcomes (Umashev and

Willett 2008). Within this context, Kaplan and
Norton (2001b) advocate a modified BSC
framework where the public organisations
mis- sion is featured at the highest level of the
score- card underpinned by three high-level
perspec- tives costs of providing services
(including social costs); value/benefit of the
service (in- cluding positive externalities);
and support of legitimising authorities
(including
the
legislature
and
voters/taxpayers) (see Figure 1).
To achieve best practice in the use of the
BSC, Kaplan and Norton (2001a) emphasise
the importance of both good design and effective implementation. In relation to good
design, Niven (2002) outlines the essential
steps in both the planning and development
phases which include developing objectives
for the BSC, de- termining the appropriate
organisational unit, gaining executive
sponsorship or leadership, building the BSC
team, formulating the project plan,

developing a communication plan, gath- ering

and distributing background material, de-

veloping or confirming mission, values and

strategy, conducting executive interviews,
de- veloping objectives and measures in
each of the BSC perspectives, gathering
employee feed- back, developing cause-andeffect linkages, es- tablishing targets for
measures, and developing an ongoing BSC
implementation plan. In rela- tion to
effective implementation, Niven (2002)
suggests that cascading of strategy, linking
the BSC to compensation, and maintaining
the BSC through constant review and
automated systems are critical elements.

The main problems associated with implementation of the BSC system in public
organi- sations as identified by previous
studies involve difficulties in cascading of
scorecard mea- sures and issues of leadership
(Umashev and Willett 2008); employee
motivational schemes and training in
performance management tech- niques (Kloot
and Martin 2000); and organisa- tional factors
such as top management com- mitment,
information
systems
related
issues
(Cavalluzzo and Ittner 2004). However there

Sharma and Gadenne

is a paucity of systematic studies exploring
and critiquing the effectiveness of using the
balanced scorecard in the implementation
of BSC in local government (McAdam and
Walker 2003:873; Farneti and Guthrie 2008).
This clearly indicates that efficacy of the
implementation of a BSC system in a large
public organisation is still not well understood
and is under-researched. As noted by
Umashev and Willet (2008:380), previous
studies which looked into the BSC
implementation aspects of not-for-profit
organisations indicated that the application of
BSC in the non-private sector has been less
than successful. Reviews of past stud- ies
reveal that they were fragmented in terms of
their focus. This study, therefore, focuses on
one of the largest local government
authorities within Australia and takes a more
holistic ap- proach. In order to capture the
elements of BSC design and implementation
in a more holistic manner this study builds on
the work of Kim (1997) who investigated the
different aspects of performance monitoring
system in the Korean government with
special reference to health care industry using
the following seven themes which are
consistent with the issues identified in the
literature as discussed earlier:
1. The planning phase of the Balanced
Scorecard;
2. Deployment, assessment and review;
3. Leadership and motivation;
4. Communication mechanisms;
5. Measurement, data collection techniques
and the role of knowledge management;
6. Employee
reward
systems
and
incentives; and
7. Transferability to other internal public
sector divisions and business units
Based on the above themes, a semi-structured
interview framework was devised for this
study (see Appendix 1). The interview
questions for the current study were
administered to 13 senior managers of the
programs and divisions within the LGA. The
main objective of the interview was to capture

173

information to address the seven main themes

of the study outlined above. To achieve this
objective the interview contained

174

Balanced Scorecard Implementation in a

a number of standardised
LGA and open ended
questions. This indirect but non-threatening
approach was designed to allow for greater
depth of responses and to elicit or tease out
the real opinions of the managers, who may
have otherwise not been comfortable in providing answers concerning some of the more
sensitive
issues.
Consequently
the
respondents were guided by but not
necessarily limited to the structure of the
questions themselves.
The schedule of interview questions commenced with some background questions
con- cerning the role and scope of the
managers division or program and the
period of time for which it had been
monitoring performance. This was followed
by some questions on how and what types of
processes were used by the manager in
putting the system into place; how, by whom
and for whom the performance in- dicators
(PIs) were developed; and how and where
the data are collected and outcomes are
communicated. These questions were devised to elicit responses on how the system
works. Next, an open ended question was
asked to determine the major components of

June 2011
the performance monitoring system. This was
followed by questions on how and why the
system works at the strategic, tactical and operational levels and examples of how this is
accomplished. Respondents were then asked
questions on whether the system worked
overall and the problems and the challenges it
posed.
In relation to the main issues involved in
establishing and implementing the balanced
scorecard, the interview schedule elicited responses in terms of planning (theme 1),
deployment, assessment and review (theme
2), leadership and motivation (theme 3),
commu- nication mechanisms (theme 4),
measurement, data collection techniques, and
the role of knowledge management, including
how many metrics were used and whether
these were man- ageable (theme 5). This was
followed by ques- tions on the nature of
employee reward sys- tem and incentives (if
any) (theme 6). Next were questions designed
to
elicit
responses on whether their
experience was transferable to other internal
public sector divisions and business units
(theme 7). Finally a series of questions were
posed to probe critical issues

such as staff involvement, the importance of

performance monitoring, resource allocations,
positive and negative impacts, decision processes, organisational culture, accountability, transparency, governance, organisational
change, consensus on performance indicators,
the relationship between outputs and
outcomes, and changes in organisational
behaviour.

LGA: A Brief Background and History of

its BSC Development
The LGA is a large LGA within Australia.
It delivers a range of services such as water
and sewerage, public transport, urban
manage- ment and community administration
to a cul- turally diverse population (LGA
Annual Report 200607). There are a number
of commer- cialised business units and
several main pro- grams covering areas such
as governance, economic development,
customer focus, com- munity service, public
health and safety, long term planning,
transportation,
accessibility,
natural
environmental sustainability, water- ways,
sewerage, organisational capability, and
information and communications technology.
The LGA vision for the future was positioned as the key aspiration for the organisation. In order to deliver on this, the LGA used
a strategic management framework known as
the Balanced Scorecard. The scorecard was
de- veloped to help articulate what outcomes
must be achieved for the community, and, just
as im- portantly, what strategy must be put in
place to ensure that these outcomes occur. The
score- card was also used to measure
effectiveness in achieving these strategies,
across the four key perspectives financial;
customer; process and innovation; and people
and learning. Ac- cordingly measures were
developed for each of these perspectives as
follows (LGA Annual Reports 200001,
200102):
Financial MeasuresKey Financial
Outcomes/Future
Financial
Capability/Well- Managed Assets;

Customer
MeasuresA
Satisfied
Community/Effective Program Outcomes/
Customer Service;

 Process and Innovation Measures

Continuous Process Improvement/Innovation/Strategic Alignment (delivering
value for money services); and
People and Learning Measures
Capable
Employees/Satisfied Employees/Well
Pla- nned Workforce.
In conducting this study, annual reports and
unpublished materials from the LGA were
re- viewed and interviews were organised
with the Strategic Policy and Planning
Manager, and the Senior Executives in
charge of each of the LGA programs and
LGA divisions. As outlined above, during
the interviews, questions were asked in the
following areas: history and devel- opment
of BSC application for performance
monitoring, key milestones of this process,
de- velopment of performance indicators,
data col- lection and communication,
problems related to the system, required
improvements, extent of employee/staff
involvement in the process, level of
importance to the LGA of having a system,
impacts of the system, and so forth.

The LGA commenced BSC planning and

implementation in the mid 1990s, and based
its scorecard structure on key outcomes for
the community (see Appendix 2 for objectives of the BSC within the LGA). The
process
started
by developing
key
performance indica- tors (KPIs) in the four
BSC perspectives. In developing the
performance indicators, the ex- ecutive
management team, and managers from
divisions, branches and programs were involved. A data warehouse was used for data
col- lection and communication at different
levels, and the system was devised to work at
strategic, tactical and operational levels.
Communicating the BSC concept to the operational staff and getting them to embrace
these concepts was not an easy task because
of differences in their interests and
motivations. Therefore, significant changes
were needed in the system over a period of
time. For exam- ple, in the early 2000s,
strategy-mapping activ- ities were performed
(see Exhibit I) and later the lines of strategy
were developed (see Ex- hibit II), based on
Kaplan and Nortons (2001a, 2004a, 2004b)
concepts of strategy map- ping. To facilitate
this process, the LGA built

software to support the scorecard system and

linked it to other information systems. In spite
of significant improvements made in its
imple- mentation over a period of time, there
has been a need to continually fine-tune the
system. To be able to initiate a new project
and organise funding, the managers were
required to develop a detailed proposal
outlining the project objec- tives, their
associated outputs, budgets, time- lines and so
forth. Such proposals were sub- jected to a
rigorous process of internal eval- uation akin
to a competitive bidding process for funding.
To ensure that each program was linked with
appropriate outcomes, a mecha- nism was put
in place to determine which pro- portion of
the outcome was produced by that particular
program, and this became the basis for the
budget allocation for the programs.
Scorecard thinking in the organisation
moved forward rapidly, after which the
corporate scorecard was reshaped and
cascaded down to all divisions within the
organisation. Informa- tion from the scorecard
system was used to facilitate quarterly
strategic discussion at exec- utive and
divisional team level, and later the office
responsible for coordinating scorecards
consolidated their research behind the LGAs
vision and desired outcomes. This included an
organisation-wide push to clarify the future
op- erating environment, challenges, barriers
and critical success factors for the
organisation.
The strategy maps (see Exhibit I) which
sup- port these are run by cross-program
teams, whose membership derives from
across all si- los of the organisation. This new
form of score- card enables the LGA to move
its strategic fo- cus from vertical silos to
horizontal teams. The scorecard specifies
clear outcomes (as distinct from outputs see
Exhibit II) for the com- munity plus strategies
for achieving them and how those strategies
are performing. Neverthe- less, the complex
structure of the LGA neces- sitated a long
drawn out process where the de- velopment of
the BSC involved passing through many
prototypes and iterations. Ultimately, this led
to some departure from the original BSC
philosophy to a new system of strategic

perfor- mance management which still embeds

many of the program and divisional scorecards
di- rectly or indirectly. Consistent with the
find-

ings of Umashev and Willett (2008), the

shift from one system of performance
management to another can be attributed to
the difficulty of cascading down the
scorecard measures to the lower levels of the
organisation.
In general, the LGAs scorecard approach
was designed to address the long term sustainable demands and needs of the
respective stakeholders for each of the four
perspectives ie, people and learning
employees; customer
the community; process and innovation
management; and financial ratepayers and
other financial contributors. To this end,
wider consultation with stakeholders
involved:
dealing with a number of diverse and
po- tentially conflicting outcomes that a
com- munity must address for political
and leg- islative reasons;
open debate on the future operating
environment and requiring explicit calls
on trade-offs (rather than go out and be
ex- cellent at everything);
setting new standards for the
operating en-

vironment or system;
providing decision-makers with no
alter- native but a focus on outcomes for
the community rather than the soft option
of outputs;
linking outputs to outcomes in a
meaningful way;
creating joint accountabilities across
de- partments and divisions; and
addressing
the
growing
sustainability
agenda which is a demand generated by
both the community and elected
represen- tatives of government.
In determining whether this approach has
been successful, a summary of the main
findings relating to each of the seven main
themes is presented in the following section.
Findings
In relation to the introductory questions concerning the major components of the performance monitoring system, most managers of
programs and divisions stated that they were
us- ing a Planning and Performance System
(PPS)

within the BSC framework incorporating a

program or division report card which focuses
on actual against budget performance and
Key Performance Indicators (KPIs). Many
man- agers also commented on the
importance of a team approach through the
Executive Man- agement Team (EMT)
Report (monthly) focus on financial
performance which is prepared by division.
However while most programs and divisions
commented on the BSC being em- bedded in
the system, it was also apparent that some
programs had substantially modified the BSC
approach and were starting to use other
systems. This may be an indication that the
BSC was not readily applicable to all of the
LGA diverse programs and divisions.
Inability to successfully implement the BSC
can also be attributed to a number of other
things which are discussed in the following
sections.
As to how the system works at the strategic, tactical and operational levels, most managers stated that cascading was a very important issue. For example one manager stated
that at the strategic level, themes and direction for the community is important; and vision for the communitys future makes things
clear. Cascading of LGA vision is essential at
division and program level. Another manager
commented on the role of operational KPIs
for program outcomes, and the importance at
the strategic level of connected and engaged
communities. In fact many managers
referred to the LGAs emphasis on positive
outcomes (and the need to develop
meaningful measures for these) and its goal of
strengthening
communities.
This
demonstrates that servicing the needs of key
external stakeholders was a ma- jor
consideration in the implementation of the
BSC. Moreover the needs of internal
stakehold- ers were also taken into account as
evidenced by program managers comments
such as Pro- gram KPIs are devised at
tactical level through an individuals
performance plan, and service level
agreements with providers (divisions). Some
managers also spoke about the impor- tance
of alignment of various projects and goals

with strategy, as well as alignment of strategy

with outcomes.
In relation to whether the BSC system does
actually work and why, managers had vary-

ing opinions as evidenced by the following

responses:
Its getting better conceptually it is sound.
If it does not work well at the program level,
it
is
because
of
poor
conceptualisation/understanding of outcomes
and organisational structure.
Its working OK in parts but there are issues.
There is a cultural dislike on the people side.
It does not work therefore it is being
reviewed. There are problems in getting the
measures and baselines right, and in working
out the linkage between outputs and
outcomes.
It serves a purpose not sure how effective it
is. It could improve a long way.

Although this variance of opinion was not

unex- pected due to the diversity between
the various LGA divisions and between
programs, some common themes did
emerge. These were is- sues concerning the
lack of clarity particularly in relation to
cascading the BSC links, organi- sational
culture, and defining linkages between
outputs and outcomes.

In response to whether the system had any

specific problems, the managers expanded on
some of their reasons as to why the system
does not work, viz:
There should be some logic of what people
think and do, but the link between the outcome
indica- tors and service delivery indicators is
not clear. This demonstrates some possible
difficulties in cascading down performance
scorecards.
The number of measures is more than can be
handled comfortably. This suggests that there
may be a problem in setting key outcome measures.
The system is skewed towards the Financial
per- spective, and though this perspective
operates well, this approach is less effective
strategically, and not of great use operationally.
There is a problem in distinguishing between
output measures and outcome measures, and a
great deal of difficulty in measuring this. There
should be more linkage of outcomes back to the
program on a linear basis, not on the basis of
multiple outcomes.
The system can be time consuming as there are
competing priorities for managers.

It could be improved in terms of ease of use,

presentation of reports by software and overall
efficiency.

Thus, the main problems identified by the

man- agers include links between measures,
handling the number of metrics used to
measure perfor- mance, the difficulty of
measuring outcomes, the amount of time
consumed, difficulties re- lating to ease of use
and presentation, and lack of effectiveness
and efficiency.
In relation to the seven main themes in the
planning and implementation of the BSC, the
following responses were prominent:
1. The planning phase of the BSC (theme
one)
Interviewees claimed that planning was
one of the most challenging phases involved in establishing a new system
such as the balanced scorecard, and
making it work. A typical response was
that this (planning) is the hard part as it
involves good service delivery and
providing value for money. Some
managers commented on the sheer
complexity and extensive level of
consultation involved, as reflected by
this response: There is a big deal of
complexity and vagueness in the people side that involves negotiating with
other stakeholders, councillors, policy
ar- eas, providers, and executives.
Many re- spondents also reflected on the
difficulty in obtaining the expertise to
develop or maintain KPIs; and in
resolving a lack of consistency in
overall framework from project to
project.
2. Deployment, assessment and review
stage (theme two)
The most prevalent comments here related to the difficulties involved in establishing and revising KPIs in a changing
environment. As one manager stated:
Developing KPIs is not an easy job. For
example a KPI for call centre response is
20 seconds about 80% of the time, and
this can be difficult to implement.

Another manager commented that if

there are external changes, KPIs need to
be re- vised. If something goes wrong
with the

system, then we should be able to flag

where they went wrong but the current
sys- tem does not do this.

In relation to other assessment and review issues, most managers concerns

centred on difficulties in integrating systems across diverse programs and divisions, and the challenge to make the review process more timely and efficient.
3. Leadership and motivation for performance management (theme three)
There was a mixed response as to
whether leadership was effective in
terms of es- tablishing and
implementing the balanced scorecard.
For example, some managers thought
that the leadership was very
supportive and facilitated
participation; while others viewed the
leadership as be- ing more
authoritative and top down. As to
whether there was much consultation,
one manager reflected that there is no
choice as the BSC is the required
system, but better outcomes are
achieved through spending enough
time in the specific pro- gram; and

another manager thought that the

system works at the corporate and
strategic level because it is enforced
ie, for compliance, but it could be
better. As far as motivation was
concerned there was general
consensus that there was some room
for improvement as reflected by
comments such as motivation is an
issue as there are consequences if we
do not meet the KPI targets; and
some peo- ple are motivated but not
all of them. Nevertheless, some were
more optimistic about the longer term
as evidenced by comments such as
with the reforms in KPIs, things will
get much better.
4. Communication mechanisms (theme
four)
Most managers agreed that there was
adequate communication of KPIs developed by the program which were
discussed at the strategic planning level.
Furthermore, there were some positive
as- sessments about the effectiveness of
the
communication
system.
For
example, one manager commented that
it (the system)

works well because the people who can

manage the components being reported
are involved in the reporting and feedback process. There is an open and
direct communication loop.
However, there was general consensus
that the use of too many indicators and
format inconsistency across projects
ren- dered communication mechanisms
inef- fective and made comparisons
difficult. This lack of consistency may
have also contributed to difficulties in
cascading the scorecard to other levels.
As one manager stated it is not yet clear
to the staff and line managers (how) the
issue of connec- tions (works) direct
cascade or hierar- chy of performance
measures across the planning hierarchy.
In general, the respondents agreed that
although communication at the strategic
level may have been satisfactory, this did
not necessarily filter down to other
levels. For, example, one manager stated
that this works from a strategic point of
view, but sometimes communication to
operational areas is poor as they dont
know what they do relates to strategy.
5. Measurement, data collection techniques, and the role of knowledge
man- agement (theme five)
There was general consensus that there
were workload and resource issues related to the accurate measurement of
data and the use of appropriate data
collection techniques as reflected by
comments such as the Program has
some freedom for data collection, but
the main limitations are workload and
resources and there is a huge impact on
limited resources. Some managers
considered that the mea- surement and
collection of data is the biggest
challenge we face in the scorecard
system. Another manager commented
that there are issues relating to
measure- ments aspects, (as there is)
huge trouble with data; and limited
resources is another problem. Some
managers also thought that there were
also issues concerning the integrity of

the data as reflected by these comments:

there are validity and accu-

racy issues as the data is susceptibility

to manipulation; and the use of old
data makes it very difficult to measure
and collect. Closely aligned to this
were con- cerns about the manual
methods used for data collection. One
manager stated that there were system
limitations as there was too much
reliance on manual collec- tion of data,
which also led to confiden- tiality
issues; and another said that data
collection should be automated.
Finally, there were concerns about the
amount of data and the system
required to success- fully manage it.
One manager stated that there were far
too many metrics which lead to
difficulties in measuring them; and
another thought that there was no
good knowledge management system
to handle complex issues.
6. Managers responses to how the employee reward system and incentives
work (theme six) were remarkably
consis- tent in showing that mainly inkind rather than monetary rewards
were the norm, as reflected below:

The employee reward system is localised

based on their standards and behaviours
that managers encourage. Rewards
include employee of the week, prizes in
kind, coffee and vouchers, movie passes;
There are no bonuses, as it is extremely
difficult to re- ward based on
performance, due to regula- tory
restrictions; The performance planning system involves employee feedback
and band improvements. There is no
other additional reward no bonus; It is
diffi- cult in the public sector to introduce
finan- cial reward systems; For
contracts based on performance, there are
non-tangible re- wards such as training
and flexible work- ing arrangements;
Individual rewards are usually nonfinancial, such as Excellence of
Performance Awards for Customer Services, Innovation, Social Responsibility
(going the extra mile), Zero Harm /Workplace Health and Safety, Learning and
De- velopment.

This in-kind employee reward system

would appear to be the only option in the
LGA, as many managers commented on

the restrictions placed on monetary rewards within this regulated public sector
system.
However, some managers thought that
the incentive and reward systems may
have sometimes focused more on
sanctions and punishment rather than
more positive as- pects. For example,
some managers ob- served that although
there was merit in the incentive and
reward system, in many cases people
get punished if numbers are bad.
7. In relation to theme seven as to
whether this experience is transferable
to other internal public sector divisions
and business units, managers views
were consistent in showing a high
degree of involvement of other internal
(other programs and divisions) and
external
players
(eg,
communities/government de- partments)
when their particular pro- grams
formulated KPIs for the BSC as
reflected in the following comments:
Yes, we try to influence associated entities through financial partnerships and
economic forecasting, which are evidence
based; We are trying to develop metrics and convince other related agencies.
We also run random workshops on aspects of cognitive edge which has a set
of methodology for stakeholders; All
our work involves internal and external
stake- holders through negotiation; It
is not just about formulating but about
finding out what their (other public sector
units) re- sponsibilities are. KPIs on their
own do not have much impact; Service
Level Agree- ments (SLAs) and other
ongoing commu- nications are made with
other public sector units involving the
community, politicians, and the State
Government.

In summary, it is clear that there are many

challenges faced by the LGA in BSC implementation. First, there appears to be a need
for clearer planning guidelines, particularly in
the light of the sheer complexity of the LGA
and the difficulties in developing KPIs.

Second, it would seem that there is a need for

more fre- quent assessment and review in a
timely and

efficient manner. Third, it would appear that

there needs to be a better system for
motivat- ing staff, through refinements in
performance evaluation such as KPIs. In
addition, managers considered that system
improvements could be achieved through
more consistency and accu- racy in
measurement and data collection techniques, more manageable levels of metrics,
and a more sophisticated knowledge
manage- ment system. Finally, managers
identified the need for more appropriate
employee reward and incentive schemes that
encourage motivation to perform within the
scorecard
framework,
and
more
understanding of alignment issues when
considering transferability to other inter- nal
public sector divisions and business units.
In response to an additional question concerning to what extent their staff were
involved in the process of monitoring
performance, and what level of staff were
involved (managers and non-managers), the
following responses were given:
Yes, the program manager is closely involved
with partners, and there are some formal fund-

ing agreements; Mostly senior level staff are

involved and the process is very interactive
generally at the line manager level, leadership
team level, and branch management team
level; There is a high level of involvement,
and eval- uation process concerning policy for
all of those in the program and all the
stakeholders; All project managers and
officers are involved to- gether with a small
core of technical staff. Sub Program Managers
delegate some of their tasks to specialists.

As to the responsibilities of each level,

respon- dents agreed that Project Directors
were re- sponsible for overall strategy and
outcomes at the highest level; Project
Managers for moni- toring the Performance
Indicators directly, and Team Leaders within
the programs for mea- suring and monitoring
KPIs for their area of responsibility.
Thus, in most cases all levels of
management (and in some cases external
stakeholders) were involved in monitoring
performance. However, there were some
programs which relied on a smaller more
specialised team. As noted ear- lier this may
reflect the diverse nature of the programs
within the LGA. In a related question

on the importance of performance

monitoring, managers were unanimous in
stating that this was critical to the success of
the program.
Conclusions, Limitations and Further
Research
Balanced Scorecard implementation in the
pub- lic sector clearly has its own unique
challenges which stem from the nature of its
accountability
to
citizens
within
communities rather than to shareholders. This
study has shown that the LGA experienced
problems in relation to each of the seven
major themes encompassing the planning
phase; deployment, assessment and review;
leadership and motivation; communi- cation
mechanisms;
measurement
techniques;
reward and incentive schemes; and
transferabil- ity to other internal public sector
divisions. This is not surprising when it is
realised that the LGA has many divisions and
programs, and de- signing a BSC for such a
complex
organisation
would
involve
challenges of the highest order. The
development of KPIs would certainly be more
demanding for a public sector organisa- tion
as often performance is not as easily measured compared to a private sector
organisation, particularly in relation to non
financial perfor- mance (Kaplan and Norton
2001b). This also highlights the difficulty in
meeting the needs of the LGAs various
stakeholders whose main concern may centre
on expectations of the LGA providing better
community service rather than improved
financial performance. In addition, the
introduction of a new BSC system in a
complex environment presents real challenges
in leadership and motivation of employees,
es- pecially where this is implemented
through a top down approach leading to a lack
of buy- in by middle and lower levels of
management (Othman et al. 2006). The
complexity of the LGA coupled with a top
down approach to im- plementation also led
to communication prob- lems and difficulties
in measurement. It was also acknowledged by
most managers that it was difficult to link

rewards and incentives with performance in a

large LGA where per- formance was often
difficult to measure in the first place. The
interviews with managers of

programs and divisions show that the LGA

faces other challenges including issues relating to difficulties in measuring outcomes
rather than outputs, the tendency to use poor
results as punitive measures, lack of a profit
motivation to change, technological
constraints, and lack of staff skills.
However, as reported earlier, there is also
evidence that the LGA has learned from
its experience with BSC implementation.
For example, the managers emphasised that
there is now a more concerted effort to
deliver more favourable outcomes through
needs surveys and dialogue with key internal
and external stakeholders. In addition, the
creation of ex- ecutive management teams
and efforts to in- volve more levels in
devising performance in- dicators combined
with better linkages between programs and
divisions has led to some im- provements in
cascading of strategy and com- munication
within the LGA. More importantly, there has
been a growing understanding over time that
the implementation of a BSC based on a
one size fits all approach is not appropriate (Johanson et al. 2006) for many

programs and divisions within a diverse and

complex lo- cal government authority.
The findings of this study are based on secondary source information and interviews
with the senior managers of the programs and
divi- sions of the LGA. This means that the
views expressed may be based on a top down
ap- proach which thus represents a limitation
of this study, as one of the major criticisms of
the balanced scorecard is that as a strategic
control model it can be a highly mechanical
and hi- erarchical top down method (Norreklit
2000). In order to develop a broader
understanding
of
the
performance
management system, it will be necessary to
extend this study further at the intermediate
and lower levels of the rele- vant programs
and divisions. This will involve interviewing
more operational level program managers to
identify the difficulties associated with BSC
implementation in their respective levels and
to investigate how other types of indicators
capture the different BSC perspec- tives, and
how they are linked with the outcome
measures

Sharma and Gadenne

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Appendix 1. Interview Framework

1. What are the major components of the
performance monitoring and management system?
2. How does the system work?
3. Why does the system work?
4. What problems does the system have?
5. What are the main challenges in the
im- plementation of the BSC?
6. How does the employee reward system
work?
7. Is this experience transferable to
other
program/division/government
insti- tutions?
Basis: Kim (1997).
Appendix 2. Objectives of the BSC Within
the LGA
In general, within the LGA the scorecard approach:

18

deals with a number of diverse 3and

po- tentially conflicting outcomes that a
local government agency must address
for polit- ical and legislative reasons;
opens debate on the future operating
environment and requires explicit calls on
trade-offs (rather than go out and be excellent at everything);
changes the rules of the operating
environment;
provides decision-makers with no
alterna- tive but a focus on outcomes for
the com- munity rather than the soft
option of out- puts;
links outputs to outcomes in a
meaningful
way;
creates joint accountabilities across
de- partments and divisions; and
addresses
the
growing
sustainability
agenda which is a demand generated by
both the community and elected
represen- tatives of government.

Exhibit I. Example of Strategy Mapping

BSC Perspectives

Strategies
Program Outcomes (eg, sustainable water use)
O

Financial

Customer and Community

Process and Innovation

People and Learning

This is a process of tracking the problem in a matrix of BSC components and strategies adopted in
each BSC perspective.

Exhibit II. Example of Line of Strategy

Outputs
O1

O2

O3

Outcome (eg, safe

community)
O4

O5

For each output, the measures are developed, and by considering the vital few outputs that have
a big influence in the outcome, a much-simplified relationship between outputs and outcome is
identified.

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