The Buzz Over Balance
The balanced scorecard is the latest private-sector managment trend to hit governments. What's it all about?
When Joe Dear, the governor's chief of staff, was struggling to get Washington state's salmon-recovery effort off the dime last year, he decided it might be worthwhile to chase after the latest management trend. So Dear huddled with several nationally known gurus who were pushing something called the "balanced scorecard" to see if they could help.
Already somewhat familiar with the theories behind the BSC, Dear was hoping that, in practice, it might help move his group of intergovernmental partners toward something resembling concrete action. "We had multiple agencies engaged in endless policy debates," he says. While there wasn't any disagreement about the fundamental goal of the effort--restoring salmon stocks--nobody was really willing to step up and take on any specific piece of the problem, he adds. "So we used the balanced scorecard to ask the question: `If you were to create an organization devoted to recovering salmon, what would that organization's internal performance measures look like?' That got all these agencies to get out of their stovepipes and start looking at how each would fit into that organization."
Dear has no illusions about the enormity of the task or the potential for ultimate success--salmon restoration is about the most daunting environmental and natural resources issue facing the Pacific Northwest today. But he believes that without a tool like the balanced scorecard, the state would be getting no traction at all on the issue.
While a handful of public officials such as Joe Dear are beginning to apply the BSC to what they do, there is a considerably larger group of public-sector managers out there who are still trying to figure out what the balanced scorecard is all about. A more common experience, in fact, is that of Mike Sponsler, a division director in Indiana's Mine Reclamation Bureau. As a manager who prides himself on keeping up with current best practices, Sponsler views the latest three-letter management panacea with some skepticism. "At this point," says Sponsler, "I'm just not sure what it has to offer, but maybe that's just because I don't understand what it is."
Indeed, when it comes to the BSC, being confused is about as far as many public-sector managers seem to have been able to get. Perhaps more than any other management trend to roll from the private sector into the public sector in recent memory, the BSC has people flummoxed. Few managers who've heard of it really seem to understand what it is, and every government that is trying to implement it seems to have its own take on how to do that.
What does the practice really consist of? Does it offer any advantages over what many managers have begun embracing in the past five years, which can probably best be described simply as managing for results? Even more fundamentally, is the BSC just managing for results with some consultant-designed bells and whistles cobbed on in order to make it make it sound new, different and more saleable?
Even those who have more than passing familiarity with the balanced scorecard hold varying opinions about BSC's efficacy. Some regard the BSC as a logical and useful set of new tools that can be pulled out of the managing-for-results kit bag in order to support and enhance an organization's drive toward meeting performance goals. Others regard the BSC as an unnecessarily complicated and mechanical overlay of superfluous or redundant measures in areas of internal organization and operation--areas that really ought to be driven more by common sense and sound management practices than some new management fad.
What exactly is the balanced scorecard? It is the brainchild of Robert S. Kaplan, an accounting professor at the Harvard Business School, and business consultant David P. Norton, who together have turned the scorecard into something of a national consulting cottage industry. As outlined in their 1996 tome, "The Balanced Scorecard," Kaplan and Norton contend that focusing on bottom-line results just isn't good enough when it comes to putting an organization on the track toward long-term success. They argue that organizations need an additional set of internal performance measures to ensure that the enterprise is developing both the type of customer focus and internal capacity it needs to sustain that long-term success.
So Kaplan and Norton recommend that organizations add three separate sets of measures to "balance" out the focus on the bottom line. Along with basic results (financial results in the case of the private sector; policy and program results in the case of the public sector), they recommend measures specifically devoted to gauging customer satisfaction, as well as measures that will help to anticipate future customer needs and desires; a set of measures related to the efficiency and effectiveness of internal administrative function-- including systems for delivering high-quality products and services (as well as mechanisms designed to anticipate future customer needs and desires); and, finally, measures related to the competencies, capabilities and general satisfaction of employees.
Take, for example, a state social services department that has established reduced caseloads and increased self-sufficiency for the families it serves as two bottom-line measures of departmental effectiveness. That social services department would then turn internally to measure whether the organization is operating in a way that supports such results. First, it might do client or customer satisfaction surveys to see if the department is operating in a user- friendly way. Second, it might measure the speed and efficiency of something like client intake or job placement services to figure out if some tinkering--or an overhaul--is required to improve in those areas. Also, as part of that internal administrative change, the department might want to also come up with some forecasting system for anticipating client needs down the road. And third, it might ask employees whether they're getting the training and support they need to do their jobs in light of the department's goals and objectives.
As governments have begun implementing the BSC, they have done some tinkering with those discreet categories--adding, shifting and adapting. But for the purposes of a basic explanation of BSC, it is a four-legged table, calling for discreet sets of measures in the areas of organizational results; customer needs and satisfaction; internal administration; and human resource management.
But does government really need a whole new superstructure of such internal measures in order to perform up to snuff? There are those who view the BSC as little more than taking what ought to come naturally to an organization and turning it into a complicated management formula. "It's common-sense stuff," says Dale Weeks, point person for performance measurement in the Minnesota Department of Revenue. "I don't know that you need a 300-page book to tell you how to do this. Once you've got your strategic plan and you're focusing on results, I think it's just a matter of stepping out and looking at different ways of doing things."
For example, once his department decided that voluntary compliance with state tax laws was a fundamental goal of the department, Weeks says, it was pretty obvious that the department better start reaching out to its customers--the taxpayers of Minnesota--to figure out ways of encouraging and supporting that. It wasn't much of a leap, after that, to look at basic taxing policy and internal organizational processes to see if they, in turn, encouraged voluntary compliance. That led quite logically to the question of whether the department's staff felt equipped to respond, given the organization's new focus on compliance and customer, and given the attendant policy changes and changes in organizational and administrative practices that the new focus called for.
Even in Charlotte, North Carolina--considered the public-sector mecca of applied BSC--City Manager Pam Syfert cautions against viewing the balanced scorecard as a whole new way of doing business. "You wind up in a big discussion about methodology when what you should be focusing on is what you want to get done and how you're going to accomplish it," she says.
Ultimately, whether the balanced scorecard is really something worth getting excited about--or distracted by--seems to depend on who applies it and why. Some organizations seem to be able to align themselves more organically behind results without needing the internal framework provided by something like the BSC; other organizations seem to benefit from the structure placed on them--or within them--by using the scorecard. Deborah Kerr, who is helping implement a scorecard approach to management in the Texas State Auditors Office, thinks it's the rare shop that isn't going to need the internal management discipline of a scorecard. "I may have five directors in my agency and three manage intuitively and two don't. Then you're out of balance." The BSC, argues Kerr, ensures a connection between mission and day-to-day function across an organization.
Which is essentially why Syfert says she was drawn to the BSC: It offered a clear way to connect bottom-line results with whether citizens felt well served, with the way departments were organized, with whether staff felt they had the skills they needed to meet the tripartite goals of customer satisfaction, smooth-running departments and a city that was meeting its basic performance goals. "For us, just having a series of bottom-line performance measures didn't make sense. We wanted a way to communicate and connect those measures to citizens and employees."
For example, the Charlotte transportation department's mission is: "To provide a safe and efficient transportation system of roads and transit, which also serves other goals of the urban area, including economic vitality, environmental compatibility and quality of life." Specific performance measures related to that mission include everything from evaluation of traffic-calming efforts to assessing the quality of street surfaces. To link those measures to the CDOT's everyday function, the city instituted a balanced-scorecard approach that covers four areas: customer, finance, internal processes and human resource development.
In the customer category, for example, the city began to survey citizens about service quality, and also to measure things such as commute times. In the area of finance, the city began comparing its costs to those of other jurisdictions. Under internal administrative processes, the city instituted activity-based-costing analyses for certain CDOT jobs and projects. Under human resources, the city surveyed employees asking whether they felt they had the skills and management support needed to do their jobs well.
Taken as a whole, says Syfert, the BSC has served to knit the city's performance-based governing effort together--top to bottom, inside and out, cost to outcome.
But even in those jurisdictions where the BSC has been successfully applied, selling it wasn't simple. As valuable as the BSC has been to getting Washington's salmon-recovery efforts moving forward, Joe Dear notes, it wasn't easy convincing trend-weary managers that it could help. "I had managers saying, `Oh no, another management flavor of the month. I thought we were working on quality. And what happened to performance agreements?'"
Dear's response to those managers was to tell them that the BSC represented evolution--not revolution--in management trends. But it is the sort of confusion and potential exasperation expressed by his managers that has some seasoned performance-measurement veterans worried that the BSC is muddying the results-based-governance waters in a potentially harmful way.
Performance-measurement stalwarts such as Harry Hatry, author of the seminal handbook "How Effective Are Your Community Services?" and, just recently, "Performance Measurement: Getting Results," are afraid that the BSC could confuse and discourage public-sector managers who thought that a fundamental focus on outcome measures was going to be the final stop on the management trend merry-go-round. "While I agree with the basic principles of the balanced scorecard, I worry that the way it's being described and interpreted in the field could cause some mischief," says Hatry. "There has been considerable effort and progress made on performance measurement; a reasonably common language has evolved around it, along with a growing recognition of a basic hierarchy of performance indicators." Along comes the BSC with a new vocabulary and its multi-tiered, inside-out approach to performance measures, and Hatry worries it might sidetrack governments that might be ready--finally--to place real performance over an obsession with process.
In particular, Hatry is concerned about the word "balanced." "It implies that all these areas are of equal value. But we've been trying to get public officials to focus on service outcomes. I think with the BSC there's a danger of a return to an over-emphasis on internal process," says Hatry. "Equal attention is fine, but not equal weight." (In fact, some jurisdictions experimenting with BSC-like management efforts have actually removed the word "balanced" altogether from the name, describing their strategy, instead, simply as implementing a "scorecard.")
Finally, translating what was developed as a private-sector management model to government application hasn't been a neat and clean process, either. For one thing, government's bottom line isn't usually profit as assumed by the original form of the BSC. In fact, it is very frequently citizen--or customer--satisfaction, which the BSC in its business-applied form views as an internal and separate area for measurement. Furthermore, with BSC's heavy emphasis on customer satisfaction, the pure application of BSC presents obvious problems for those government agencies in the law enforcement and regulatory arena. Issues of financial and social cost, likewise, represent a dilemma when adapting the BSC to the public sector.
But how much mischief the balanced scorecard actually ends up doing ultimately depends on how well managers understand it, and the extent to which they've thought out its potential value in light of organizational character and mission. Jeffrey Tryens, executive director of the Oregon Progress Board, and a veteran of the battle to make performance measures meaningful in government management and budgeting, thinks that organizations that are already performance- measurement savvy can probably take what's potentially helpful about the balanced scorecard and adapt it.
For those not so wise in the ways of results-based governance, however, Tryens does worry that the balanced scorecard--with its emphasis on an interlocking superstructure of internal measures--might overwhelm an organization, sinking it in a quagmire of process analysis when what that organization really ought to be doing is rising above the muck of process in order to focus on results. "I'd say for a jurisdiction that already has a solid understanding of what they want to accomplish and how they're going to approach performance measurement, it can be a good organizing tool," says Tryens. "But I could see where it might be quite a confusing entry point for people who are just beginning to look at this stuff."
As it turns out, though, the balanced scorecard can be pretty confusing even to performance-measurement veterans. Indiana's Mike Sponsler, who can rattle off the difference between outputs, inputs and outcomes with the authority of the performance-measurement pro that he is, says he's intrigued by the BSC, but that he still needs to be convinced that it will add value to his operation.
The person assigned the job of doing that convincing is Sponsler's chief management trend scout Bob Stum, who says he's been to enough training sessions on the BSC to know that at this point, he's far from a BSC expert. "I'm pretty much feeling my way along a bit at a time," says Stum.
In fact, Stum says his first shot at developing an organizational chart based on his understanding of the BSC bears a remarkable likeness to a very famous painting: "It looks like Van Gogh's `Starry Night,'" laughs Stum. Still Stum has faith that the balanced scorecard has intrinsic value even if that value might currently be shrouded in the heavens. And Mike Sponsler, who has a copy of Stum's organizational chart up on his wall, says he's keeping an open mind.
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