IfM - Institut für Management GmbH  +43 662 66 86 280

The Balanced Scorecard

Robert Glöckl, B.A. MOP. The aim of this paper is to contribute to strategic public management by summarizing the application of the Balanced Scorecard (BSC) and its benefits for governmental organizations

Introduction Objectives and Methodology The Balanced Scorecard in Public Sector Organizations The BSC in Practice Conclusion Quellennachweis & Literaturverzeichnis

Gesamtausgabe der Impulse hier anfordern


The balanced scorecard is a strategic planning and management system that is applicable to different kinds of organizations. It is broadly used across sectors and more and more in the public sector. Meanwhile it also became the favoured strategic planning tool of governmental organizations. It provides a method of aligning business activities to the vision and strategy of the organization, monitoring organizational performance against strategic objectives, and improves internal and external communication. The balanced scorecard is not a simple dashboard of performance measures but rather a comprehensive planning and management system that covers the whole organization (Kaplan, Norton, 1992). It is designed to focus effort on an organization’s strategy, performance and results. Used not only as a measurement tool, but as a strategic management tool, it enables organizations to clarify their vision, formulate a strategy and to translate the strategy into action. The balanced scorecard comprises two separate elements. On the one hand there is the vision and mission of the organization that includes the set of strategic objectives from which a strategy map is formed. On the other hand the scorecard is the advancement of this process into a dashboard of measures, and a more detailed action plan that can be monitored and reviewed on a regular basis. The balanced scorecard includes a series of measures that let managers know how well the organization is performing. It uses a framework and language in common with other strategic planning processes. The scorecard will help translate strategy into action.

Objectives and Methodology

Focusing on strategy is challenging in all kinds of organizations. There are several reasons why the public sector might find strategic emphasis especially difficult. Some of those factors that prevent focus on a strategy in the public context are for example political changes like elections or changes in tax revenues. In fact many organizations define strategies and create strategic plans but then ignore it because daytoday issues have to be prioritized. This can be particularly critical in government entities because public priorities can shift quickly and unexpectedly (e.g. disaster or terroristic act, just to mention some up-to-date matters). Developing a balanced scorecard will enable public organizations to identify and monitor the key measures that lead to long-term strategic success. The scorecard will also alert managers to the need to make course corrections due to changes in the external environment. This article provides a description of how a public sector scorecard should look like respectively how to build one and demonstrates challenges of implementing it.

The research approach applied is an exploratory research. After pointing out the particularities of the modified architecture of a BSC for public sector organizations as originally developed by Kaplan and Norton in the 1990s, a second focus of this article lays in analysing challenges of implementing it by reviewing the current state of research concerning BSC implementation in governmental organizations.


Performance measurement is not a new management tool in the public sector, but the arrival of New Public Management has created an increased interest in performance measurement techniques (Bowerman et al., 2002). In the first part of this chapter the modified architecture of the BSC for governmental organizations is going to be displayed as theoretical background. Subsequently this chapter summarizes challenges and problems of BSC implementation based on the analysis of secondary sources.

The Balanced Scorecard in Public Sector Organizations

Today the balanced scorecard is the most widely applied performance management system. It was originally developed as a performance measurement system in 1992 by Dr. Robert Kaplan and Dr. David Norton at the Harvard Business School. Unlike earlier performance measurement systems, the BSC measures performance across a number of different perspectives – a financial perspective, a customer perspective, an internal business process perspective and an innovation and learning perspective. Through the use of the various perspectives, the BSC captures both leading and lagging performance measures, thereby providing a more “balanced” view of an organization’s performance. Leading indicators include measures, such as customer satisfaction, new product development, on-time delivery, employee competency development, etc. Traditional lagging indicators include financial measures, such as revenue growth and profitability (Vichore, 2013).

Increasingly the balanced scorecard is also applied by non-profit and government organizations but most public organizations had difficulty with the original architecture of the balanced scorecard that placed the financial perspective at the top of the hierarchy (Kaplan and Norton, 2001a). Given that achieving financial success is not the primary objective for most of these organizations, many rearrange the scorecard to place customers or constituents at the top of the hierarchy because their success has to be measured by their effectiveness in providing benefits to constituents. The balanced scorecard helps public organizations select a coherent use of nonfinancial measures to assess their performance with constituents.

In fact, Kaplan and Norton (2001a) stated that non-profit and government agencies should consider placing an over-arching objective at the top of their scorecard that represents their long-term objective such as a reduction in poverty or illiteracy, or improvements in the environment. Then the objectives within the scorecard can be oriented toward improving such a high-level objective. High-level financial measures provide private sector companies with an accountability measure to their owners, the shareholders. For a non-profit or government agency, however, the financial measures are not the relevant indicators of whether the agency is delivering on its mission. The agency‘s mission should be featured and measured at the highest level of its scorecard.  Placing an over-arching objective on the BSC for a non-profit or government agency communicates clearly the long-term mission of the organization.

Even the financial and customer objectives, however, may need to be re-examined for governmental organizations (Kaplan and Norton, 2001a). Take the case of regulatory and enforcement agencies that monitor and punish violations of environmental, safety, and health regulations. These agencies, which detect transgressions, and fine or arrest those who violate the laws and regulations, cannot look to their „immediate customers“ for satisfaction and loyalty measures. Clearly not; the true „customers“ for such organizations are the citizens at large who benefit from effective but not harsh or idiosyncratic enforcement of laws and regulations. Figure 1 shows a modified framework in which a government agency has three high-level perspectives:

Balanced Scorecard

In Figure 1 the mission for a government organization is shown as being directly related to the provision of valuable and beneficial services which satisfy the legislature, voters and taxpayers, and also demonstrate operational efficiency. Recognition of the interdependency between financial and non-financial performance is central to the Kaplan and Norton model, and Figure 1 shows that the achievement of the mission is dependent upon good performance across a range of dimensions. Consequently the value of the services provided (in the eyes of the legislature and voters as conceived by Kaplan and Norton) is a result of not just operational efficiency and cost control, but also the qualitative dimensions of process management, learning and growth. This view complements the academic literature on the public sector which highlights the role of qualitative information as an indicator of effectiveness (Půček and Špaček, 2014).

The BSC in Practice:

Evidence from the Public Sector Although there have been only a few studies of BSC applications in the public sector, recent evidence suggests that public sector use of the BSC has met with varying degree of success (Niven, 2006). However the reasons for BSC success or failure in the public sector are still under-explored. Only a few studies have identified factors that practitioners perceive as critical to the successful implementation of public sector BSCs, or see as resulting in unsuccessful or non-implementation. Success factors include top management commitment, an emphasis on performance excellence, adequate training, a simple BSC, clear organizational strategy and goals and adequate resourcing. Key reasons for non-implementation include inadequate information systems, inadequate sponsorship of the BSC by senior managers and a lack of time, while unsuccessful implementations are attributed to poor linkage to employee rewards, uncertainty about the choice of suitable key performance indicators, and organizational resistance to change. Northcott and Taulapapa (2012) stated that many of these suggested reasons for BSC success or failure in public sector organizations are relatively non-specific since they could apply equally in the private sector. According to them, a knowledge gap appears to exist in regard to the factors that hinder BSC implementation specifically in the public sector. Further on it has to be mentioned that some areas of the public sector (e.g. the healthcare area) have been examined more whilst other areas have been relatively neglected. The literature review has identified several under-developed areas regarding BSC implementation in public sector contexts. First, few studies have examined how the BSC is modified in practice to suit public sector contexts. Associated with this is the question of whether re-orientating public sector BSCs away from financial goals complicates the understanding of causality between key performance indicators within its four dimensions, thus reducing its value as a performance management tool. Second, there has been relatively little attention to practitioners’ views on the factors leading to the successful, unsuccessful or nonimplementation of public sector BSCs. In particular, few of the suggested success (or failure) factors seem to reflect issues and challenges specific to the BSC’s use in public sector contexts. Third, the government sector is under-represented in studies of BSC practice. This is despite the fact that governmental organizations might be expected to benefit from BSC use because they are obliged to specify strategic goals that balance multiple aims and stakeholders, and to be accountable for achieving related key performance indicators (Northcott and Taulapapa, 2012). The findings of the study of Northcott and Taulapapa (2012) reveal that modifying the BSC to suit the public sector is far from straightforward in practice. Local government managers struggled to adapt to the BSC’s outcomes-based philosophy, define their “customer”, identify appropriate BSC dimensions and select a workable number of useful key performance indicators – all necessary steps in translating the BSC to suit their organizations’ needs. Many of these challenges are specific to the public sector, created by its lack of defined customers and clear financial goals. Others, such as selecting appropriate key performance indicators, are a concern for any organization implementing a BSC, but are made more problematic by the complexities of the public sector context. Therefore the challenge of adapting the BSC framework needs special consideration in public sector organizations.


The BSC has gained widespread acceptance as a useful strategic management tool for all kinds of organizations. But strategy is not only what the organization intends to do, but also what it decides not to do, a message that is particularly relevant for public organizations (Porter, 1996). Most of the scorecards of organizations in the public sector feature an operational excellence strategy. The organizations take their current mission as a given one and try to do their work more efficiently; at lower cost, with fewer defects, faster etc. However, public organizations can be also strategically orientated and build competitive advantage in ways other than pure operational excellence. But it takes vision and leadership to move from continuous improvement of
existing processes to thinking strategically about which processes and activities are most important for fulfilling the organization‘s mission. The researched literature on BSC implementation
in the public sector reveals that this could be a long way to go. Many managers still simply implement a balanced scorecard as if it was a recipe rather than understand what a balanced scorecard is supposed to achieve. While the technique described in professional literature accumulates the experience of many people and represents a form of best practice, it should not be copied blindly under the assumption that one size fits all. In particular, the four major dimensions (financial, customer, internal processes, and innovation and learning) can and should be modified to fit an organization. This is particularly true when the organization is a governmental. Another problem that organizations frequently make is jumping too fast into a measurement program and making the program too complicated. Deriving meaningful measurements, gathering reliable data, developing useful analytical techniques, and educating managers about how to use the data are all difficult steps. It has been further observed that organizations, where managers do not have experience with performance management, typically underestimate the difficulties of implementing a balanced scorecard.

Quellennachweis & Literaturverzeichnis