Strategy,political regulation and management control in the public sector: Institutional and critical perspectives

This paper mobilizes institutional and critical theories in examining how evolving management control practices, inspired by the balanced scorecard, mediated the process of strategy formation in a Swedish central government agency. Particular attention is paid to how this process was conditioned by external, political regulation of the organization. Contrary to popular conceptions of strategy and strategic management as emerging alternatives to political regulation in the public sector, the study shows how the meaning of the notion of strategy became intricately intertwined with government regulation. Whilst this affirms the tendency of organizations to comply with institutional pressures exerted by dominant constituencies, the analysis also shows how the unfolding strategy discourse gradually narrowed the meaning of the notion of strategy permeating the organization. The extension of an institutional perspective to incorporate more critical insights highlights how this process fostered some “unintended” consequences with a detrimental impact on organizational practices aimed at achieving broader social objectives. In so doing, I draw attention to how the unobtrusive power of evolving strategy discourses conditions conceptions of organizational performance and relevant constituent interests. The implications for future management accounting research combining institutional and critical theories are discussed.     

The balanced scorecard--measures that drive performance

Frustrated by the inadequacies of traditional performance measurement systems, some managers have abandoned financial measures like return on equity and earnings per share. "Make operational improvements and the numbers will follow," the argument goes. But managers do not want to choose between financial and operational measures. Executives want a balanced presentation of measures that allow them to view the company from several perspectives simultaneously. During a year-long research project with 12 companies at the leading edge of performance measurement, the authors developed a "balanced scorecard," a new performance measurement system that gives top managers a fast but comprehensive view of the business. The balanced scorecard includes financial measures that tell the results of actions already taken. And it complements those financial measures with three sets of operational measures having to do with customer satisfaction, internal processes, and the organization's ability to learn and improve--the activities that drive future financial performance. Managers can create a balanced scorecard by translating their company's strategy and mission statements into specific goals and measures. To create the part of the scorecard that focuses on the customer perspective, for example, executives at Electronic Circuits Inc. established general goals for customer performance: get standard products to market sooner, improve customers' time-to-market, become customers' supplier of choice through partnerships, and develop innovative products tailored to customer needs. Managers translated these elements of strategy into four specific goals and identified a measure for each.     

THE RISE AND USE OF BALANCED SCORECARD MEASURES IN AUSTRALIAN GOVERNMENT DEPARTMENTS

This paper examines the rise and use of balanced scorecard performance measurement systems in Australian government departments. Through a survey of all Australian federal, state and territory government departments we find that Australian government departments include a broad set of financial and non‐financial measures within a balanced scorecard approach. Theoretically, our findings lend support for both economic and ‘external’ institutional rationales for the implementation and use of balanced scorecard measures. We find that those government departments reporting greater implementation of balanced scorecard performance measures also report greater benefits for organisational decisions. Our findings shed light on the use, and further potential, of BSC performance measurement systems as part of the management control system in Government departments.     

An experiential approach to learning about the balanced scorecard

The balanced scorecard (BSC) is an integrated strategic performance management framework that helps organizations translate strategic objectives into relevant performance measures. This paper offers guidelines for implementing an experiential approach to learning about the BSC through the study of “real-world” organizations. This approach emphasizes hands-on experience with the team-based, cross-functional, and strategic aspects of management accounting designed to address several educational objectives, including: understanding organizational strategy and critical success factors; gaining insight into how to measure performance; and developing oral presentation and team-building skills. Specific examples of classroom materials to facilitate implementation of this approach in management accounting courses at both graduate and undergraduate levels are also offered.     

The judgmental effects of strategy maps in balanced scorecard performance evaluations

We examine whether supplemental information displays affect decisions made using a common strategic performance measurement system, the balanced scorecard. A distinguishing feature of the balanced scorecard (BSC) is the number and diversity of its metrics. To effectively formulate a decision from such a complex information set, managers must view these measures within their strategic context ( [Kaplan and Norton, 1993] and [Kaplan and Norton, 1996] ). However, academic studies indicate that problems in communication and comprehension of the strategic logic underlying the scorecard hinder its implementation and use ( [Lipe and Salterio, 2000] , [Malina and Selto, 2001] , [Ittner et al., 2003a] and [Ittner et al., 2003b] ). We investigate whether a supplemental information display, in the form of a strategy map, results in performance evaluation judgments consistent with the recognition of relations between performance metrics and strategy. Strategy maps are causal diagrams depicting temporally-separate and non-linear relations between scorecard performance measures and overriding strategic objectives. As predicted, we find that performance evaluation decisions are more consistent with the achievement of strategic objectives when participants are provided with strategy maps.     

The balance on the balanced scorecard a critical analysis of some of its assumptions

In recent years academic scholars have given increasing attention to the importance of strategic measurement systems including both non-financial and financial measures. One of the approaches adopted is that of the balanced scorecard. It is distinct from other strategic measurement systems in that it is more than an ad hoc collection of financial and non-financial measures. It contains outcome measures and the performance drivers of outcomes, linked together in cause-and-effect relationships, and thus aims to be a feed-forward control system. Furthermore, the balanced scorecard is intended not only as a strategic measurement system but also as a strategic control system which can align departmental and personal goals to overall strategy. This paper first examines the extent to which there is a cause-and-effect relationship among the four areas of measurement suggested (the financial, customer, internal-business-process and learning and growth perspectives). The paper then examines whether the balanced scorecard can link strategy to operational metrics which managers can understand and influence. Finally, it discusses and suggests some improvements to the balanced scorecard.     

Using the Balanced Scorecard to Manage Intangible Assets in A Sino-Foreign Joint Venture

The application of the balanced scorecard as a performance measurement tool to convert intangible assets into tangible outcomes is examined using a case study of a Sino-US joint venture — Xinan JV. The balanced scorecard is described in terms of the specific measures that were used to manage various innovation and human resource development processes and initiatives to help the company respond to its strategic challenges. We present some impressions of the managers of the company on how the balanced scorecard facilitated the management of intangibles in the joint venture.     

Accountants for the Public Interest: strategy implementation and performance measurement for a nonprofit organization

This case describes strategic issues and the operations of Accountants for the Public Interest (API), a national organization that is dedicated to making volunteer accounting services available to financially disadvantaged individuals and nonprofit organizations. API is a well-known nonprofit organization that receives financial support from the accounting profession. In addition to discussing strategic decisions facing API, the case covers performance measurement topics commonly integrated in managerial and cost accounting courses. API's Board of Directors (BOD) must make important strategic planning and implementation decisions during a period of change. One Board member has suggested using performance measures to assess API's progress in implementing strategy and achieving goals. Students are asked to develop financial and nonfinancial measures relevant to API's strategy and to show how their suggested measures would appear in a balanced scorecard. Whether CPAs should be obligated to provide volunteer accounting services to the community is another issue that the case requires students to address.     

Performance implications of strategic performance measurement in financial services firms

This study examines the relation between measurement system satisfaction, economic performance, and two general approaches to strategic performance measurement: greater measurement diversity and improved alignment with firm strategy and value drivers. We find consistent evidence that firms making more extensive use of a broad set of financial and (particularly) non-financial measures than firms with similar strategies or value drivers have higher measurement system satisfaction and stock market returns. However, we find little support for the alignment hypothesis that more or less extensive measurement than predicted by the firm's strategy or value drivers adversely affect performance. Instead, our results indicate that greater measurement emphasis and diversity than predicted by our benchmark model is associated with higher satisfaction and stock market performance. Our results also suggest that greater measurement diversity relative to firms with similar value drivers has a stronger relationship with stock market performance than greater measurement on an absolute scale. Finally, the balanced scorecard process, economic value measurement, and causal business modeling are associated with higher measurement system satisfaction, but exhibit almost no association with economic performance.     

Examining the process of performance measurement system design and implementation in two Italian public service organizations

In the last two decades, the adoption of new public management (NPM) practices in the public sector has increased as public sector organizations seek to improve efficiency, effectiveness and public accountability. We present case study findings of a NPM initiative to implement balanced scorecard (BSC) performance measurement systems in two Italian public sector organizations. This study considers the question of whether the BSC development process can be effectively translated into the public sector context. Our findings highlight the importance of aligning the development of performance management systems with a greater understanding of the internal and external environment of public sector organizations. Our results further emphasize the significant role of emergent stakeholders and management culture for the success of NPM performance management initiatives.     

Performance management: a framework for management control systems research

This paper proposes a framework for analysing the operation of management control systems structured around five central issues. These issues relate to objectives, strategies and plans for their attainment, target-setting, incentive and reward structures and information feedback loops. Their central focus is on the management of organizational performance. Because the framework has been inductively developed, its application is `tested' against three major systems of organizational control, namely budgeting, economic value added and the balanced scorecard. In each case, neglected areas of development are exposed and fruitful topics for research identified. It is believed that the framework can usefully be developed further by its use in analysing other instances of management control systems practice, and that case-based, longitudinal studies provide the best route to this end.     

The role of performance measurement and evaluation in building organizational capabilities and performance

This study examines the processes through which the availability of broad-based strategically relevant performance information impacts on the performance outcomes of organizations. We explore the role of evaluation mechanisms in influencing managers’ use of broad-based performance measurement information for feedback and feed-forward control. We hypothesize that these resultant decision-making patterns impact the exploitation and identification of strategic capabilities within an organization and in turn organizational performance. Using a structural equation model, we find support for a model in which the degree of commonality between measures identified as decision-facilitating and decision-influencing is significantly associated with the use of decision-facilitating measures for both feedback and feed-forward control. In turn, the extent to which decision-facilitating measures are actually used by strategic business unit managers impacts on the strategic capabilities of the organization and subsequently its performance. Overall the results suggest that to encourage managers to use the multiple financial and non-financial performance indicators increasingly incorporated in contemporary performance measurement systems it is imperative that performance evaluation schemes are also designed to reflect these measures. To the extent performance evaluation schemes do not reflect such decision-facilitating measures it is less likely managers will use these indicators to effectively manage performance. The resultant performance implications for the organization arise from the impact of these decision effects on the exploitation of existing capabilities and the search for and identification of new strategic opportunities.     

试论平衡计分卡在商业银行绩效评价中的应用 —以某国有银行Z分行为例

平衡计分卡是目前先进的绩效管理工具,在我国商业银行的绩效管理中得到广泛 运用,但主要以定性评价为主。本文以某国有银行Z分行为例,按照平衡计分卡理论进行绩效 考核指标重构,通过计量模型实证检验了财务指标与非财务指标之间的相互关系,并对商业银 行运用平衡计分卡开展绩效评价进行了有益的探索。     

Improving Local Government Performance: One Step Forward not Two Steps Back

This article discusses the various inititatives that have been introduced to measure and improve local government performance in the UK over the past decade. It explains why the Local Government Improvement Programme (LGIP) is the most aligned to the modernization and performance improvement agendas. The author uses a new outcome-based measurement model to assess how the six local authorities which piloted the LGIP responded to the 'areas of concern' identified by review teams. The analysis suggests that there are a number of organizational determinants that underpin successful performance improvement and which could have wider currency for both the UK and European local government sectors.     

Using a robust performance measurement system to illuminate intellectual capital

The central premise of the “fit-as-mediation” view states that knowledge-related factors could determine the usage and design of specific organizational systems, such as management accounting and control systems. This could, in turn, facilitate information processing and bring about positive organizational outcomes. While the influence of knowledge-based assets on measurable performance has been examined extensively in the intellectual capital literature, little is known concerning the role of an organizational control system in fostering the management of intellectual capital as the most strategic asset for organizations. As such, this study primarily aims to explore what role a performance measurement system plays in terms of the diversity of measurement in the relationship between intellectual capital and organizational performance. We incorporate social capital into the general three-dimensional classification of intellectual capital; namely, human capital, structural capital, and relational capital, to provide a more comprehensive measure of intellectual capital. Further, we conceptualize the diversity of measurement by supplementing the original Kaplan and Norton's BSC model with a new perspective, social and environmental measures. Such integration of financial, customer, internal business process, learning, and growth, along with social and environmental measures could result in an overarching and robust conceptualization of performance measurement; a concept that was barely mentioned in previous literature. We conducted a questionnaire survey involving chief financial officers of 128 Iranian public listed companies. Using the partial least squares (PLS), we find that companies with higher levels of intellectual capital emphasize a greater diversity of performance measures. The findings also show that the diversity of measurement mediates the relationship between intellectual capital and organizational performance. This paper may offer guidance to companies concerning the competencies needed for securing positive organizational outcomes from their knowledge resources, such as intellectual capital.     

The Balanced Scorecard in New Zealand Health Sector Performance Management: Dissemination to Diffusion

Many countries are turning to the balanced scorecard to measure and manage performance in the public health sector. Questions remain, however, about the usefulness of this tool for promoting accountability and strategic management in this domain. This paper draws on diffusion of innovations theory and international comparisons to explore the effectiveness of a BSC in New Zealand hospitals. The findings suggest that the NZ hospitals BSC has some way to go in moving from its current status as a mandated reporting requirement to become an effective mechanism for supporting health sector accountability and management.     

Effect of perceived conflict among multiple performance goals and goal difficulty on task performance

Contemporary performance measurement systems, such as the balanced scorecard, often advocate the use of an array of financial and non‐financial measures. Despite many claimed advantages for these systems, recent research shows that the inclusion of multiple performance measures sometimes has undesirable effects. The present study examines one of the potential problems of implementing these systems; namely, the impact of perceived goal conflict on task performance. Using survey data from employees working in multiple call centres in a telecommunication company, we find that perceived goal difficulty increases perceived goal conflict. Additionally, perceived goal difficulty also has a negative, indirect effect of task performance, through the mediating role of perceived goal conflict. Our results have important implications for both the research literature and the designers of performance measurement systems.     

高校财务管理工作体系的构建——基于平衡计分卡视角的探讨

本文尝试将平衡计分卡(BSC)理论引入高校财务工作实际,从客户视角、财务视角、内部业务流程视角、学习与成长视角四个维度构建以"服务"为核心的高校财务管理体系,力求通过创新性和可操作性兼备的方法模型将高校财务管理工作推上新的台阶。     

Post-privatization performance and organizational changes: Case studies from Ghana

A significant number of less developed countries (LDCs), including Ghana, have embraced the World Bank/IMF led economic reforms. Ghana has been implementing these reforms since the early 1980. One of the conditions of the reforms is the privatization of former state-owned enterprises (SOEs). Such privatization activities have however generated debates among academics, practitioners, and policy makers. Research findings so far have been mixed. This paper analyzes the performance of two large privatized companies in Ghana. Both companies have been paraded by the Ghanaian authorities and the international financial community as success stories of privatization. Our objective is to examine how and why these firms have been claimed to be successful. Drawing on the dimensions of the balanced scorecard, we examine the performance of the firms from five main perspectives—financial, customers, internal business process, learning and growth, and the community. The analysis is based on data gathered from diverse sources, namely, semi-structured interviews and discussions with managers of the selected companies and with personnel from key government departments, and analysis of internal and external documents. We conclude that, overall the performance of both organizations improved after privatization under all the performance dimensions examined. These improvements were also accompanied by certain organizational changes, including changes in the accounting and control systems. However we are not claiming that all privatization programs in Ghana have been successful. In fact there are stories in the Ghanaian media of several other privatization failures in the country. Instead what we have demonstrated is the need to explain the performance of privatized firms beyond the myopic macro-level and financial analysis which has been widely adopted by the international financial community and policy makers and we encourage other researchers to adopt such multidimensional approaches.