© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. The Concept of Balanced Scorecards in the Public Sector Prof. Tony Bovaird University of the West of England “Quality Management in the Public Sector” Vilnius March 2006

Origin of Balanced Scorecard ª The original Balanced Scorecard (Kaplan and Norton, 1992) was focused on reporting performance and very private-sector oriented ª Now, it is a tool for strategy development and testing and is applicable for public and nonprofit sectors, as well

3 A GOAL SETTING TOOL + A DEVICE TO BUILD CAUSE AND EFFECT WITHIN YOUR BUSINESS STRATEGY Financial Customer Operational and process Learning and innovation FinancialCustomer Operational and process Learning and innovation Figure 3.2 General flow of the Balanced Scorecard. (SOURCE: The Balanced Scorecard, David Norton, Renaissance Strategy Group, Lincoln, MA, and Robert Kaplan, Harvard Business School).

4 Balanced scorecard: principles There should be a follow-through from objectives, through performance indicators to targets Objectives, PIs and targets should be cascaded down from the top of the organisation/partnership to all other levels The results areas should be specified in terms of the key stakeholders – these are expected to include: Funders or shareholders (financial results) Service users (external customer results) Staff (internal customer results) Managers (process improvement results) … (learning and innovation results) In a public sector context, we would expect to include a wider range of stakeholders and also to assess results in terms of THEIR improved outcomes

5 The increasing popularity of the Balanced Scorecard “We thought that EFQM was the holy grail and would provide all the answers to our problems but we are now recognising that it is a diagnostic tool and not a strategy or a business planning model” Quote from a 2003 report by Steve Johnson, Inland Revenue on the combined use of the BSC and EFQM

6 The new trend: combined use of the BSC and EFQM EFQM articulates linkages which help to identify the causes of poor performance. It helps to foster a more comprehensive understanding of quality in organisations. However, with its ‘left to right’ thinking it focuses on internal processes. The BSC starts with the results of an organisation and links them to strategy. It requires the establishment of complex linkages which may be difficult to establish The measurement systems to be developed for a BSC framework also presents considerable challenges to many organisations