local government in british columbia: is it time for a ... · balanced scorecard measures...

Local Government in British Columbia: Is it Time for a More “Balanced”

Approach?

December 7, 2002

Many thanks to my family, particularly Masami, for all of your patience and encouragement . . . and lastly my eternal gratitude to Takayoshi Ando for his inspiration.

Table of Contents

Table of Contents..................................................................................................1 Abstract.................................................................................................................2 Introduction ...........................................................................................................4 Research Objective...............................................................................................5 Research Questions .............................................................................................5 Research Design ..................................................................................................6 Literature and Review of Related Theory..............................................................7

Community Charter............................................................................................7 Background.....................................................................................................7 Objectives and Implications of the Draft Community Charter........................13

Strategic Measurement and Management Systems in British Columbia..........14 Background...................................................................................................14 District of Maple Ridge..................................................................................14 Central Okanagan Regional District..............................................................18 Conclusions Regarding Existing Frameworks...............................................22

The Balanced Scorecard .................................................................................25 Background...................................................................................................25 Ability to Clarify and Translate Vision and Strategy ......................................27 Ability to Communicate and Link Strategic Objectives and Measures ..........32 Ability to Plan, Set Targets, and Align Strategic Initiatives............................34 Ability to Enhance Strategic Feedback and Learning....................................37 Critique of Balanced Scorecard ....................................................................40 Application to Public Sector ..........................................................................43 Application to Local Government ..................................................................47

Research Results................................................................................................51 Recommendations ..............................................................................................58 Bibliography ........................................................................................................60

Karl Newholm – Applied Project Local Government in British Columbia: Is it Time for a More “Balanced Approach? Page 1

Abstract

In response to a rapidly changing environment for local government in

British Columbia, the Provincial government has recently introduced the draft

Community Charter. If the legislation is adopted, local governments in British

Columbia will be provided with unprecedented powers to provide new services

and generate new sources of revenue. However, the Provincial government

wishes to counterbalance these increased powers by including provisions for

greater accountability. Consequently, the draft legislation requires local

governments to identify and measure annual objectives within an annual report.

Local government in British Columbia will need to develop strategic

measurement and management systems to respond to a rapidly changing

environment and to respond to unique challenges found within different

communities. The Balanced Scorecard provides an excellent framework for a

strategic measurement and management system. It has been used successfully

within local government jurisdictions where elected officials have articulated a

clear vision and strategy. However, the four perspectives offered by the

Balanced Scorecard may need to be modified to include key stakeholders that

are found within any community.

There exist strategic measurement and management systems within local

government in British Columbia that will be able to respond to the changes


contemplated by the draft Community Charter. The District of Maple Ridge and

the Central Okanagan Regional District have both incrementally developed

“homegrown” systems to meet the unique circumstances and challenges found

within their respective communities. These systems continue to evolve, but

already contain many of the themes found within the Balanced Scorecard.

The proposed legislation is problematic if the Provincial government seeks

a large degree of standardization for its requirement for the annual reporting of

objectives and associated measures. Such a requirement will provide

accountability for the tactical decisions that local governments make, but will

provide limited insights into strategic decisions. Consequently, the Provincial

government should work with the UBCM, Local Government Management

Association, Government Finance Officers’ Association, business and other

interests to develop a series of critical questions that local government will be

required to answer in regard to strategic, operational, and short and long term

issues. If not, standardization of performance measures could act as a constraint

to the development of strategic responses to local government challenges and

will serve as an additional bureaucratic burden for local governments that have

chosen to implement strategic measurement and management systems that are

designed to implement strategic outcomes.


Introduction

The Provincial government has recently introduced draft legislation that

will fundamentally alter the way that local governments operate and change the

relationships that local governments have with their constituents. The draft

Community Charter provides broader powers and new revenue sources to local

government in British Columbia. However, as a counterbalance to these broader

powers, the Provincial government has included provisions for an annual report

that requires, among other things, indications of annual objectives and

associated measures.

Kaplan and Norton suggest that organizations need to have an accurate

understanding of their goals and the methods for attaining those goals. Their

Balanced Scorecard measures organizational performance across four different

perspectives: financial, internal business processes, customers, and learning and

growth. They suggest that the Balanced Scorecard “translates an organization’s

mission and strategy into a comprehensive set of performance measures that

provide the framework for a strategic measurement and management system.”

(Balanced Scorecard 2)

What are the objectives and implications of the draft Community Charter?

Does the Balanced Scorecard provide a framework for a strategic measurement


and management system for local government that will respond to the changes

contemplated by the draft Community Charter?

Research Objective

The purpose of this research is to establish the objectives and implications

of the draft Community Charter and determine whether the Balanced Scorecard

provides a framework for a strategic measurement and management system for

local government that will respond to the changes contemplated by the draft

Community Charter.

Research Questions

1. What are the objectives of the draft Community Charter?

2. What are the implications of the draft Community Charter?

3. Does the Balanced Scorecard provide a framework for a strategic

measurement and management system for local government that will

respond to the changes contemplated by the draft Community Charter?


Research Design

This project was completed through the exploratory research of secondary

data:

• A review of literature relating to the draft Community Charter was

conducted to determine its possible implications.

• Case studies of two local government jurisdictions in British Columbia

were developed to determine their success with customized strategic

measurement and management systems.

• A literature review of Balanced Scorecard was completed by reviewing

several books by noted authorities on the subject.

• A series of journal articles that offered a critique of the Balanced

Scorecard were analysed.

• A literature review detailing how the Balanced Scorecard has been

implemented in the public sector was completed by reviewing several

books by noted authorities on the subject.

• A review of the success of the implementation of the Balanced Scorecard

in two local government jurisdictions was completed by conducting a

review of documents published by the City of Charlotte, North Carolina

and the City of Bankstown, Queensland, Australia.


Literature and Review of Related Theory

Community Charter

Background

One of the first initiatives of the newly elected Liberal government in

British Columbia was to adopt the Community Charter Council Act that

established a twelve-member body responsible for preparing legislation to

replace the existing Local Government Act. The basis for the legislation was the

Provincial government’s belief that: “(a) municipalities should have greater

autonomy, (b) municipalities should have a wider range of tools to reduce

reliance on property tax revenues, and (c) the Provincial government should not

reduce its costs by transferring responsibilities to municipalities.” (Community

Charter Council Act)

However, the Provincial government suggests that this combination of

broader powers and new revenue sources needs to be counterbalanced by

greater accountability to the public. At an open cabinet meeting of the Provincial

government on May 22, 2002, the Honourable Ted Nebbeling, Minister of State

for the Community Charter, stated that there was a need to require local

governments to report to its citizens. He drew the analogy of a board of directors

reporting to its corporate shareholders and suggested that this new requirement


would result in citizens feeling more involved and elected officials more

accountable. Nebbeling identified the need for the creation of benchmarks and

an annual report that would be presented at an annual meeting where “that

report will be discussed and the direction for the following year will be set.”

(Province of British Columbia)

On May 28, 2002, the Provincial government tabled the draft Community

Charter and released a document entitled: “The Community Charter: A New

Legislative Framework for Local Government.” The document suggests that

there are several changes that the Provincial government is contemplating for

local government in British Columbia. Extracts from the document provide an

insight into those changes and reveals the rationale behind the inclusion of

objectives and measures in the draft Community Charter.

“With more local autonomy comes a focus on accountability. The

principles of the Community Charter balance municipal rights with a

strong sense of municipal responsibility. The Charter recognizes

that municipalities need wide-ranging capacity and more flexibility

to meet the needs of their diverse communities effectively. At the

same time, the Charter recognizes that, by using broad legislated

authority, municipalities will have an impact on many individuals,

groups, businesses and other organizations. The Charter seeks to

balance municipal governments’ need to act, with the rights of


those who will be affected. Citizens should expect open,

accountable and transparent local governments. They should know

what their municipality’s goals are, what it is doing, and what it has

accomplished. They need opportunities to become directly involved

in some decisions and to have access to information about

significant decisions before they are made.” (Ministry of

Community, Women’s, and Aboriginal Services 6)

“The Charter will improve the municipal system by replacing the

rule-based tradition of prescriptive legislation with an approach that

focuses on system objectives and outcomes. . . . . . . In turn, the

emphasis on objectives and outcomes will provide a tool to assess

municipal decisions that have external effects.” (Ministry of

Community, Women’s, and Aboriginal Services 8)

“New requirements for annual reporting to citizens are an essential

component of the overall accountability of the municipal system.

However, in order for this accountability tool to be effective, the

reports must be relevant to a diverse range of groups affected by

municipal actions. Of primary significance in this regard is reporting

in relation to municipal objectives, measures and accomplishments.


The Charter is founded on a principle that municipalities are

accountable to the public, not the province. Therefore, the draft

Charter does not call for reporting to the province but rather to

citizens. The draft legislation proposes a very flexible requirement

in relation to such reporting. Specifically, the legislation does not

prescribe details of how a municipality must report its

accomplishments to its citizens. However, it is recognized that

accountability may be enhanced through some standardization that

allows citizens, business and other interests to compare their

municipality with other jurisdictions. As a consequence, it is

intended that further work be undertaken to maximize the

usefulness of annual reports and the comparability of information

between municipalities.

Consistent with the spirit of the Charter, the province looks to the

local government community to find ways that such reporting can

best be achieved. The province will facilitate a working group

consisting of representatives from UBCM, Local Government

Management Association, Government Finance Officers’

Association, and business and other interests in order to work

towards best practices in relation to annual reporting of objectives,

measures and accomplishments.” (Ministry of Community,

Women’s, and Aboriginal Services 14)


Early commentary on the draft Community Charter suggests that the

legislation is a response by the Provincial government to a rapidly changing

world for local government in British Columbia.

Donald Lidstone of Lidstone, Young, Anderson, a law firm specializing in

local government law, suggests that Federal and Provincial governments are

withdrawing from areas of public policy and service due to current debts and

deficits. Consequently, local governments are “forced, by legislation or

practicality, to fill the void.” Furthermore, he suggests that “the Community

Charter principles and concepts respond to the early warning signals that the

sense of community and history of service afforded by municipalities are being

threatened by outdated empowering legislation, federal and provincial off-loading,

capital investment deficits and globalization.” (Lidstone - 2001 9)

Moving away from the “one hundred and seventeen detailed, express,

prescriptive sections of the Local Government Act,” (Lidstone – 2002 1) the draft

Charter provides local government with broader powers to address issues within

respective local government jurisdictions. The main advantage of these broader

powers is that local governments will have the flexibility to tailor local solutions to

local challenges. (Ministry of Community, Aboriginal, and Women’s Services 6)

For the first time, local government will be able to provide any service that they

wish, subject to the Charter and constitutionality. (Lidstone - 2002 2)


To address the cost of providing any new or existing services, the draft

legislation provides for sources of revenue that were unavailable to local

governments in the past. Over the years, local governments have been

progressively delivering a greater number of services that had been traditionally

delivered by the federal or provincial governments. However, the revenue

streams used to fund these services has been generally restricted to property

taxes and user fees. Don Lidstone suggests that local governments are

approaching a critical time:

“In some places, property taxes have hit a glass ceiling. Services

such as public recreation are threatened by the absence of

adequate financial resources. Municipalities do not have the

money they need to replace infrastructure, promote or allow growth,

treat sewage and drinking water, sustain transportation and transit

systems, or provide the off-loaded services.” (Lidstone – Charter

15-16)

Given the literature on the draft Community Charter, what the overriding

objectives and associated implications?


Objectives and Implications of the Draft Community Charter

What are the objectives of the draft Community Charter? Firstly, the draft

Community Charter will provide broader servicing and revenue generation

powers to enable local government to develop local solutions to the unique

challenges that are found within the respective communities. This represents a

significant transition from a relationship that was based upon prescriptive

legislation to one that is based upon objectives and outcomes. Secondly, the

draft Community Charter will counterbalance greater local autonomy with

stronger requirements for accountability in the form of an annual report to citizens

that will provide insights into a municipality’s objectives and performance.

What are the implications of these two objectives? Firstly, the transition

away from prescriptive legislation provides local governments in British Columbia

with unprecedented flexibility to define the services that they wish to provide,

determine the strategic directions that they wish to follow, and establish desired

strategic outcomes. Local governments in British Columbia will be given the

opportunity to not only develop local solutions to local challenges, but also the

opportunity to differentiate themselves from other communities. Secondly, the

requirement for greater accountability through the annual reporting of objectives

and outcomes will require an increased understanding of performance

measurement.


Consequently, to respond to these changes, local governments in British

Columbia will need to develop effective systems for strategic measurement and

management to meet the objectives of the draft Community Charter. However,

before analysing the Balanced Scorecard as a framework for a strategic

measurement and management system, an analysis of existing local government

frameworks in British Columbia is warranted.

Strategic Measurement and Management Systems in British

Columbia

Background

Unfortunately, there exists little data regarding the use of strategic

measurement and management systems in British Columbia. It is assumed that

the use of such systems is generally restricted to larger local governments.

However, the District of Maple Ridge and Central Okanagan Regional District are

two examples of larger local governments that have employed such systems.

District of Maple Ridge

Located forty-five kilometres outside the City of Vancouver, the District of

Maple Ridge (the “District”), has been recognized by the Ontario Ministry of

Municipal Affairs as a benchmark for performance measurement in British


Columbia. The District provides services to approximately sixty-three thousand

constituents. An interview with Paul Gill, General Manager, Corporate and

Financial Services, revealed that the District has had some positive experiences

with strategic measurement and management.

Over the past ten years, the strategic measurement and management

system at the District has evolved to its present form. Originally, each

department produced its own set of business plans; however, management of

the District believed that there was an opportunity to establish some common

themes between the business plans. Additionally, management believed that the

development of a strategic plan for the organization would provide greater clarity

for elected officials and staff alike. Lastly, in order to determine whether the

District was going to make any progress toward meeting the objectives outlined

in the strategic plan, the District developed a performance measurement system.

Most importantly, the elected officials of the District understand its role in

the development of strategy and policy. At the beginning of each elected term, a

consultant is retained to work with the Council to understand the importance of

role definition. Annually, management staff meets with the Council to determine

whether there are any desired changes to the strategic plan. Business plans,

developed by the departments, support the objectives of the strategic plan. The

Corporate Management Team recognizes cause and effect relationships

between objectives. If there are objectives that are common between


departmental business plans, a team comprised of members from different

departments is formed to develop a business plan for the objective.

Currently, the District does not set targets for their objectives. The District

believes that it is important to establish trends, as it will make the subsequent

targets more relevant. Consequently, the District is intending to introduce targets

in the future. However, the District recently conducted a survey of its

constituents that provides it with some benchmarks.

On an annual basis, management reports to the Council on how the

organization is doing in achieving its objectives. A gap analysis is conducted by

assessing the importance of each objective on a scale of one to five and

determining progress on a scale of one to five. Furthermore, each department is

asked to identify one or two key internal processes that could be reviewed to

achieve financial or customer relationship breakthroughs. Subsequently, the

department works with a team of internal specialists to conduct the review.

One comment of interest was that several years ago the District had hired

a consultant to provide presentations on the Balanced Scorecard concept, but

most found it to be confusing. Consequently, the District developed its own

performance measurement system. (Gill)

The Business Planning Guidelines issued by the District reveal greater

detail into the strategic measurement and management system. It suggests that


business plans are an important means of communicating a department’s

alignment to the organization’s strategic plan, goals and objectives, core

businesses, distribution of resources, and key performance measures (District of

Maple Ridge 4)

Performance indicators are provided to the elected officials on a quarterly

basis as a means of measuring the “effectiveness and efficiency of local

government services on a regular basis.” Furthermore, the performance

indicators provide an objective assessment of where improvements need to be

made in service delivery. Lastly, the District is committed to conducting bi-annual

citizen surveys as a means of assessing citizen satisfaction. (District of Maple

Ridge 7)

In conclusion, the District of Maple Ridge has recognized the importance

of receiving strategic policy direction from elected officials, cause and effect

relationships between objectives, the measurement of the efficiency and

effectiveness of the services that it delivers, measures and associated targets,

strategic alignment among all levels of the organization, determining customer

expectations, and developing employee skill sets.


Central Okanagan Regional District

The Central Okanagan Regional District (the “CORD”) serves

approximately one hundred and fifty thousand constituents in Kelowna and

surrounding areas.

In 2001, the management staff of the organization decided to implement a

performance based budgeting system. Accordingly, the Director of Finance

made a presentation to the elected officials regarding the strengths of such a

system. It is believed that the Regional Board, consisting of ten elected and

officials, supported the system because it would provide tangible information

regarding the services that the organization provides to its constituents as

opposed to anecdotal information. Consequently, a budget analyst was hired to

implement the system as well as perform other functions within the Finance

Department. An existing draft corporate strategy was used as the basis for

corporate objectives. Furthermore, the organization developed a comprehensive

growth management strategy following extensive public input.

CORD pursues a strategy of striving to meet customer needs while

remaining fiscally responsible, providing operational excellence, and a high

standard of customer service. The performance based budgeting system is

intended to relate to the overall strategy of the organization. The budget analyst


believes that the system will provide background information required to support

any desired cultural changes within the organization to meet the Regional

Board’s strategic objectives. This is supported by the fact that the strategic

planning process and the budgeting process are linked together.

The performance based budgeting system is different from traditional

performance measurement systems in that its cost drivers are designed to

highlight internal processes that need to be changed or introduced to achieve

financial or customer relationship breakthroughs. Furthermore, management has

recognized the relationship between employee learning and growth and the

ability to meet financial, customer, and process objectives. (Rilkoff)

Management is considering the following types of measures for the

organization:

“Community measures – measures that we contribute to, but do not

necessarily have control over – these would be growth

management issues – air quality, housing density, etc.

Corporate measures – high level, high profile measures, that we

have direct control over, perhaps similar to Ontario’s Municipal

Performance Measurement Program.


Program measures – more detailed measures used mostly for

internal management purposes, and budget discussions.” (Rilkoff

Letter)

As a method of communicating information both externally and internally,

the system is proving to be very effective. Internally, for management and the

Regional Board, the organization will be generating a performance measures

report on a quarterly basis. Externally, if adopted by the Regional Board, the

organization will be communicating the community and corporate measures to its

constituents.

The system does not yet have a formal process for establishing cause and

effect relationships between organizational objectives. Any cause and effect

relationships are established at the department level and are incorporated into

the system through the budget process.

Historically, various committees of the Regional Board have formulated

recommendations for annual organizational objectives. These recommendations

have been forwarded to the Regional Board for consideration during the

formulation of the organization’s annual budget. The performance based

budgeting system will compel the committees to ask themselves why they wish to

recommend a particular objective and whether it is consistent with the

organization’s overall strategy.


In CORD, the budget analyst met with each senior manager to discuss the

theory behind establishing measures. Subsequently, some of the managers met

with their staff to develop suggested measures. Others, due to time constraints,

developed measures based on information that was already being measured or

developed measures desired for decision making, without staff input. All of the

suggested measures were discussed with the business analyst who worked with

the senior managers to determine the ease of collecting the data and the

relevance of the measure in relation to the cost of collection. Currently, targets

are being established on an ongoing basis. The expectation is that at least one-

third of the measures will have associated targets by the end of the year.

At this point, the performance based budgeting system has been applied

to all parts of the organization, at the Department Head/Senior Staff level.

Currently, information is being forwarded to the staff who will be responsible for

collecting and reporting the data for the quarterly reports. Over time, the

managers and the budget analyst will be meeting with all of staff to explain the

process. Additionally, the budget analyst intends to make use of the

organization’s Intranet to communicate the corporate strategy and the

department plans. It is too early to determine whether the performance based

budgeting system has impacted the management system. However, early

indications suggest that some employees are beginning to think about their

activities and determining whether things can be done differently.


The budget analyst has experience with managing in a Balanced

Scorecard environment and using key performance indicators in the private

sector. She suggested that implementation in the private sector is easier than

the public sector because of the number and diversity of services offered by the

CORD. Consequently, there is the need for community, corporate, and program

measures in order to make the system manageable for the organization. (Rilkoff)

In conclusion, the CORD has recognized the importance of receiving

strategic policy direction from elected officials and linking its budget development

process with organizational strategy. Furthermore, cost drivers are linked to

internal processes to highlight areas that may lead to financial or customer

breakthroughs. Additionally, the organization has recognized the importance of

developing its employees to meet its financial, customer, and process objectives.

Furthermore, the CORD is utilizing its performance measurement system as

means of communicating strategy on both an internal and external basis. Lastly,

the system ensures that objectives are aligned with the organization’s strategic

direction.

Conclusions Regarding Existing Frameworks

The strategic measurement and management systems at the District of

Maple Ridge and the Central Okanagan Regional District can be considered


“homegrown” as neither jurisdiction has elected to use an “off the shelf” system

like the Balanced Scorecard. In both instances, their strategic measurement and

management systems were developed incrementally in response to a need to

implement strategic directions from the elected officials. Each system continues

to evolve most likely in response to unique circumstances within each community.

Both organizations have expressed satisfaction with the systems that they have

in place. However, will the systems meet the objectives of the draft Community

Charter?

In both instances, the organizations have developed strategic

measurement and management systems that are designed to implement

strategies that have been articulated by the elected officials. Importantly, the

respective strategies have been developed with input from the community.

Consequently, each jurisdiction should be able to respond to the objective of

providing local solutions to unique challenges within their communities with the

broader servicing and revenue generation powers that the draft Community

Charter offers because the development and articulation of strategy is an existing

practice. Additionally, both jurisdictions have incrementally developed systems

to ensure the implementation and measurement of objectives that support the

respective strategies. Lastly, both jurisdictions use their strategic measurement

and management systems to communicate results to constituents, thus

increasing awareness and accountability.


However, given the “homegrown” status of these frameworks, it may be

difficult to directly apply them to other local governments in British Columbia.

Notwithstanding, there are common themes in both jurisdictions that should form

part of any strategic measurement and management system designed to

respond to the changes contemplated by the draft Community Charter.

1. The elected officials have articulated a clear strategy.

2. Cause and effect relationships between objectives are analyzed.

3. Both the efficiency and effectiveness of the services are measured.

4. Objectives are being measured and associated targets are being

developed.

5. The strategy is communicated both internally and externally.

6. Employees are aligned with the strategy.

7. Customer expectations are determined by surveys.

8. Employee skill sets are developed to achieve process improvements.

9. Internal processes are examined to highlight areas that may lead to

financial or customer breakthroughs.

If the strategic measurement and management systems found in Maple Ridge

and the Central Okanagan Regional District cannot be applied as a framework

for local government in British Columbia, does the Balanced Scorecard provide a

better model?


The Balanced Scorecard

Background

In 1992, Robert Kaplan and David Norton introduced the Balanced

Scorecard model. It suggests that organizations need to understand the internal

and external, and short-term and long-term implications of strategic decisions to

be competitive in the Information Age. Norton and Kaplan contend that the use

of the Balanced Scorecard will enable companies to translate the mission and

objectives of the organization into a set of comprehensive performance

measures that will guide implementation of strategic decisions. Ever since it was

introduced, there have been increasing numbers of public sector institutions

using the Balanced Scorecard model.

Norton and Kaplan maintain that for companies to be competitive in the

Information Age, transformational change is required not only in the application of

performance measurement systems, but also in management systems.

(Balanced Scorecard 6) The Balanced Scorecard enhances a management

system by accomplishing four critical management processes:

1. Clarifying and translating vision and strategy

2. Communicating and linking strategic objectives and measures

3. Planning, setting targets, and aligning strategic initiatives


4. Enhancing strategic feedback and learning (Balanced Scorecard 10)

Figure 1 illustrates the relationship between the four critical management

processes.

Clarifying and Translating the Vision and Strategy • Clarifying the vision • Gaining consensus

Communicating and Linking • Communicating

and educating • Setting goals • Linking rewards to

performance measures

Planning and Target Setting • Setting targets • Aligning strategic

initiatives • Allocating resources• Establishing

milestones

Strategic Feedback and Learning • Articulating the

shared vision • Supplying strategic

feedback • Facilitating

strategy review and learning

BALANCED SCORECARD

Figure 1


The purpose of this section is to examine the theory behind the Balanced

Scorecard, its criticisms, its application within the public sector, and its

application within local government.

Ability to Clarify and Translate Vision and Strategy

Strategy plays a key role in determining the competitiveness of organizations.

Norton and Kaplan suggest that in order to be competitive there is a need to

determine a strategy that differentiates the organization from its competitors.

Consequently, the organization may choose to pursue a strategy of product

leadership, customer intimacy, or operational excellence. (Strategy 86-87) Each

strategy results in organizations having to focus its attention on different key

business processes:

1. Product Leadership – Invention, Product Development, Speed to

Market.

2. Customer Intimacy – Solution Development, Customer Service,

Relationship Management, Advisory Services.

3. Operational Excellence – Supply Chain Management, Operations

Efficiency: Cost, Quality, Cycle Time, and Capacity Management.

(Strategy 91)


Although organizations may successfully develop an intended strategy, there

are several problems related to the implementation of that strategy. Niven

suggests the following challenges that organizations face when trying to

effectively implement strategy:

1. The Vision Barrier – Only 5% of the workforce understands the

strategy.

2. The People Barrier – Only 25% of managers have incentives linked to

strategy.

3. The Management Barrier – 85% of executive teams spend less than

one hour per month discussing strategy.

4. The Resource Barrier – 60% of organizations do not link budgets to

strategy. (Niven 9-11)

The Balanced Scorecard system is designed to overcome these barriers

through the translation of strategy into measurable objectives, organization-wide

understanding of the strategy, resource allocation to support the strategy, and

learning about strategy. (Niven 17-19) In short, the Balanced Scorecard allows

an organization to translate its strategy into operational terms. (Strategy 31)

However, it is imperative that strategy is not viewed as a separate

management process. Strategy should be viewed as “one step in a logical

continuum that moves an organization from a high-level mission statement to the


work performed by frontline and back-office employees.” (Strategy 72) Figure 2

demonstrates the step by step process of ensuring that strategy is translated into

operational terms.

MissionWhy we exist

Core ValuesWhat we believe in

VisionWhat we want to be

StrategyOur game plan

Balanced ScorecardImplementation and Focus

Personal ObjectivesWhat I need to do

Motivated and Prepared Workforce

Effective Processes

Delighted Customers

Satisfied Shareholders

Strategic Outcomes

Strategic InitiativesWhat we need to do

Figure 2

Effective clarification and translation of strategy requires that objectives be

established among four perspectives: financial, customer, internal process, and

learning and growth. The financial perspective enables the organization to

determine whether it will emphasize revenue and market growth, profitability, or


cash flow generation. Establishing objectives for customer relationships allows

an organization to clearly determine service levels and targeted customers. The

Balanced Scorecard differs from traditional performance measurement systems

through the establishment of objectives for improvements to processes.

Formulation of these objectives identifies the need to introduce new processes

and improve upon existing processes to achieve the objectives that were

established under the financial and customer perspectives. Lastly, the learning

and growth perspective provides the justification for “significant investments in

reskilling employees, in information technology and systems, and in enhanced

organizational procedures. These investments – in people, systems, and

procedures – generate major innovation and improvement for internal business

processes, for customers, and, eventually, for shareholders” (Balanced

Scorecard 11-12)

Niven suggests that the most effective way to determine performance

objectives is to ask the following questions within each perspective:

1. Financial perspective – What financial steps are necessary to ensure

the execution of our strategy?

2. Customer perspective – Who are our targeted customers, and what is

our value proposition in serving them?

3. Internal Process perspective – To satisfy our customers and

shareholders, at what processes must we excel?


4. Employee Learning and Growth perspective – What capabilities and

tools do our employees require to help them execute our strategy?

(Niven 106)

Lastly, a Balanced Scorecard enables the creation of joint accountability for

the overall success of an organization among business units. Norton and Kaplan

suggest that the functional structure of organizations can lead to difficulties in

teamwork. They state that:

“When executives from different functional perspectives, especially

in companies that historically operated with strong functional silos,

attempt to work together as a team, there are blind spots – areas of

relative ignorance around which it is difficult to form teams and

create consensus and the contribution and integration of different

functional units.” (Balanced Scorecard 12)

In conclusion, the Balanced Scorecard recognizes the importance of

strategy in the competitiveness of organizations. However, organizations fail to

effectively implement strategy due to a lack of understanding about the strategy,

a lack of incentive to execute the strategy, a lack of communication about the

strategy, and lack of resources to support the strategy. By translating the

strategy into financial, customer, internal process, and learning and growth

objectives, the Balanced Scorecard enables an organization to develop


consensus about what needs to be accomplished to effectively implement the

strategy.

Once an organization’s strategy and objectives have been defined, how

can they be communicated throughout the organization?

Ability to Communicate and Link Strategic Objectives and Measures

The Information Age is resulting in an unprecedented amount of

information that is available to the members of an organization. The Balanced

Scorecard serves as a vehicle for communicating the organization’s strategy to

all levels of the organization. Each business unit is cognizant of the overall

direction of the organization and has associated objectives that are aligned with

overall organizational success. (Balanced Scorecard 13)

In order for intangible assets to realize their potential, they must

understand the strategic direction that the organization is pursuing.

Consequently, the strategy must be communicated in an understandable format

to its employees. Norton and Kaplan suggest that the communication of an

organization’s vision and strategy to its employees should be viewed as an

internal marketing program with the objective of creating awareness and altering

behaviour. (Balanced Scorecard 202) These processes should involve:


“education (creating strategy awareness) and are followed by

testing that employees understood the message (strategy mind

share), checking that employees believe the strategy is being

followed (strategy loyalty), and, finally, determining how many are

teaching others about it (becoming a strategy missionary). Each of

these states of mind and commitment could be measured, just as

companies do with their customers.” (Strategy 216)

The importance of developing performance measures is that it allows an

organization to determine whether it is meeting the objectives that it has

established to undertake its strategic direction. (Niven 114) Effective

measurement of performance requires the use of both lagging and leading

performance measures. This will enable an organization to test the cause and

effect relationships by identifying the “activities that are the drivers (or lead

indicators) of the desired outcomes (lag indicators). (Strategy 76)

In conclusion, the Balanced Scorecard communicates an organization’s

strategy to all levels of the organization. To determine whether the organization

is achieving its strategic direction, performance measures link objectives to the

organization’s strategic direction. This permits everyone in the organization to be

aware of how his or her operational successes are contributing toward the

organization’s strategic success.


Once the strategy has been communicated, how is it translated into

performance targets and how are resources allocated?

Ability to Plan, Set Targets, and Align Strategic Initiatives

Senior executives within an organization need to establish targets that will

transform the organization. These targets should be set for three to five years

out. (Balanced Scorecard 13) As opposed to simply making easily obtainable

adjustments to a particular process, the Balanced Scorecard challenges

management to improve processes that a fundamental to the organization’s

strategic success. However, it is critical to examine customer expectations to

determine what their expectations are for outstanding performance. (Balanced

Scorecard 14)

Niven suggests that there are three types of targets that could be

associated with objectives and performance measures. Firstly, long-term targets

should be set that are designed to transform the organization. Secondly,

midrange targets, more specific in nature and projected over a three to five year

period, should supports the long-term targets by establishing stretch goals for

key activities within the organization. Lastly, short-term targets should be

established on an annual basis to provide feedback on the organization’s

progress toward meeting its long-term and midrange targets. (Niven 180–187)


One of the key features of the Balanced Scorecard is the need to develop

cause and effect relationships between the four perspectives. (Balanced

Scorecard 30) Niven suggest that the best way to establish these cause and

effect relationships is to ask a series of “if/then” statements. (Niven 21-22)

Norton and Kaplan suggest that these cause and effect relationships can “tell the

story of the business unit’s strategy.” They use the following example to

demonstrate a sequence of hypotheses:

“If we increase employee training about products, then they will

become more knowledgeable about the full range of products they

can sell; if employees are more knowledgeable about products,

then their sales effectiveness will improve. If their sales

effectiveness improves, then the average margins of the products

they sell will increase.” (Balanced Scorecard 149)

Only half of the companies surveyed by Norton and Kaplan linked their

strategic planning process with their budgeting and performance review

processes. Consequently, as the traditional budgeting process serves as the

prime source of control within an organization, management becomes

preoccupied with achieving short-term financial targets. Norton and Kaplan

suggest that the traditional budgeting process still has a place within the

management of organizations, as its strength lies in the ability to plan and control

tactical decisions. However, the Balanced Scorecard addresses its main


weakness: an inability to plan and control strategic decisions. They suggest the

following process for linking the strategic and tactical decisions:

1. “Translate strategy into a Balanced Scorecard, defining the strategic

objectives and measures.

2. Set stretch targets for specific future times for each measure. Identify

planning gaps to motivate and stimulate creativity.

3. Identify strategic initiatives and resource requirements to close the

planning gaps, thereby enabling the stretch targets to be achieved.

4. Authorize financial and human resources for the strategic initiatives.

Embed these requirements into the annual budget. The annual budget

comprises two components: a strategy budget to manage discretionary

programs and an operating budget to manage the efficiency of

departments, functions, and line items.” (Strategy 280-282)

In conclusion, the Balanced Scorecard enables an organization to establish

targets that will transform the organization into one that meets or exceeds its

customers’ expectations for outstanding performance. Furthermore, it aligns

strategic initiatives by ensuring that the cause and effect relationships between

objectives are clearly understood. Lastly, the Balanced Scorecard links the

strategic planning process with the traditional budgeting process to ensure that

resources are allocated toward the tactical decisions that support the

organization’s strategic direction.


Once performance targets have been established and resources have been

allocated, how do organizations ensure that they can continue to respond

strategically within an ever-changing environment?

Ability to Enhance Strategic Feedback and Learning

The Balanced Scorecard enables managers to determine whether the

organization’s strategic direction is being implemented. Norton and Kaplan

suggest that many management meetings are dominated by operational reviews

and tactical issues. As suggested earlier by Niven, 85% of executive teams

spend less than one hour per month discussing strategy. The Balanced

Scorecard provides strategic feedback and an opportunity to learn whether the

organization is going in the right direction.

Norton and Kaplan believe that managers should perform three key functions

when analyzing strategy: controlling the strategy, testing the strategy, and

adapting the strategy. Controlling the strategy involves interpreting the

performance measures to determine whether strategic initiatives are on target.

The Balanced Scorecard allows management to view strategy through the four

different perspectives; consequently, the focus shifts away from an exclusive

concentration upon budget variances. With regard to testing and adapting the

strategy, Norton and Kaplan suggest three possible methods:


1. Analytic methods: hypothesis testing and dynamic simulation

2. Examine impact of external discontinuities

3. Identify and support emergent strategies

Several companies have begun to use statistical analysis to test the

assumptions that were developed as a result of the formulation of cause and

effect relationships. For example, Sears discovered that:

“employee attitudes drove not just customer service but also

employee turnover and the likelihood that employees would

recommend Sears to family, friends, and customers. The statistical

relationships revealed how improvements in training and

employees’ understanding of the business translated into higher

revenues.” (Strategy 310)

An organization’s external environment can rapidly change. However, if

everyone in the organization understands and is aligned with the strategy, the

organization can draw upon its employees to alert senior management about

external changes that will impact the strategy. Consequently, communication

methods need to include opportunities for senior management to receive input

from employees regarding any opportunities or threats facing the organization.

(Strategy 303-315)


If employees have a clear understanding of an organization’s strategy,

they may find new ways of achieving predetermined strategic objectives.

Consequently, new strategies may emerge from within the organization. Senior

management needs to encourage innovation and establish communication

methods to allow consideration of new strategies. In some instances, some of

the emergent strategies may result in senior management altering strategy and

changing or adding measures to the Balanced Scorecard. This learning process

allows management to test earlier assumptions and alter them as a result of an

emergent strategy. (Strategy 307–316)

In conclusion, the Balanced Scorecard allows organizations to test cause

and effect relationships between financial, customer, internal process, and

learning and growth objectives to determine the efficiency and effectiveness of its

strategic direction. Through analysis of these cause and effect relationships,

recognition of external changes in the organization’s environment, and

responsiveness to emergent strategies, an organization is able to obtain strategic

feedback and adapt as required. Although the Balanced Scorecard has several

strong points, have there been any criticisms of the framework?


Critique of Balanced Scorecard

Critics of the Balanced Scorecard have pointed out that 70% of attempts

to implement the Balanced Scorecard fail due to poor design and difficulty

associated with implementation. With respect to problems relating to poor design,

Neely and Bourne suggest that it is critical for organizations to resist the

temptation to design a performance measurement system by asking, “What

should we measure?” Instead an effective performance measurement system

needs to be based upon a series of cause and effect relationships that describe

the organization’s strategy. Failure to do so will result in a performance

measurement system that lacks validity, logic, or rationale. Neely and Bourne

conclude that the “net result, of course, is that the performance measurement

system fails, quite simply because the new set of measures make no sense.

They do not reflect the organization’s strategy and they do not help people to

understand what the organization’s priorities are.” (Neely and Bourne 2-3)

Difficulties associated with implementation relate to politics, infrastructure,

and focus. Firstly, with regard to the political aspects of implementation,

organizations must be cognisant of the anxiety that many employees experience

with performance measurement systems. Organizations need to ensure that the

system is not viewed as a means of punishment, but rather a means of improving

conditions. Secondly, with respect to infrastructure, organizations often lack the


capacity to process data from disparate sources. Thirdly, with respect to focus,

given the length of time required to implement performance measurement

systems, participants can become bored or frustrated with the process. (Neely

and Bourne 3-5)

The process of determining performance measures is valuable as it allows

management to resolve differences of opinions regarding performance priorities

and the associated relationships. (Mills et al 1121) The Balanced Scorecard is

valuable as a framework for performance measurement, but lacks an ability to

provide “guidance on how the appropriate measures can be identified, introduced

and ultimately used to manage the business (Mills et al 1120) Bourne suggests

that books and articles on the Balanced Scorecard tend to describe the process

of setting key business objectives, but fail to demonstrate how to design

appropriate performance measures. It is important to assess the type of

behaviour that the performance measure will produce and whether this behaviour

is desirable. (Bourne and Neely 2-3)

Mike Bourne suggests that the scope of the Balanced Scorecard is limited

because it does not include several important stakeholders. It lacks a people

perspective, a supplier perspective, a regulator perspective, a community or

environmental perspective, and a competitor perspective. Furthermore, he

argues that:


“the scorecard is not a truly strategic measurement framework as it

only focuses on “translating the strategy into action”- the

implementation of the strategy. The scorecard is designed to

answer the question “Is the chosen strategy being implemented?”

but fails to ask the question “Is the chosen strategy the right

strategy for our business?”” (Bourne, Emperor’s 50)

Lee and Ko believe that the use of a SWOT analysis will aid the

implementation of a Balanced Scorecard by identifying the key performance

indicators for the four perspectives. A SWOT analysis will force an organization

to determine the most appropriate strategy by establishing links between its

internal capabilities and its external environment. The Balance Scorecard can

then be used to implement the desired strategy. (Lee and Ko, 70-71)

The Balanced Scorecard has been touted as a system that will clarify and

translate vision and strategy; communicate and link strategic objectives and

measures; plan set targets, and align strategic initiatives; and enhance strategic

feedback and learning, within private sector organizations. However, it has been

criticized for difficulties relating to implementation and its inability to determine

strategic direction. How has it been applied within the public sector?


Application to Public Sector

Within the private sector the fundamental reason for the existence of an

organization is the creation of a profit for its shareholders. However,

organizations in the public sector do not have such a clear-cut objective. Hence,

there is an even greater need for the Balanced Scorecard in the public sector so

that expectations can be determined and a system is in place to measure

whether those expectations are being met. (Olve, Roy, and Wetter 4-5) Norton

and Kaplan maintain that public sector organizations generally use the financial

perspective as a constraint as opposed to an objective. However, success

cannot be defined by whether budgets were met or cost reductions were

achieved. Rather, success needs to be defined by the effectiveness and

efficiency of services. (Balanced Scorecard 179)

Niven suggests that all of the elements of the Balanced Scorecard are

applicable to the public sector although some modification is required. Principally,

the biggest difference between the public sector and the private sector is that the

public sector organizations exist to achieve missions designed to improve society.

In contrast, private sector organizations operate primarily to achieve financial

success. Consequently, public sector organizations need to increase the role of

the mission and the customers within the Balanced Scorecard and reduce the


weight of financial indicators. (Niven 293) Figure 3 illustrates Niven’s redefinition

of the Balanced Scorecard to suit the public sector.

MISSION

To achieve our vision, how must our people learn, communicate and work together?

To satisfy our customers, financial donors, and mission, what business processes must we excel at?

To achieve our vision, how must we look to our customers?

If we succeed, how will we look to our financial donors?

Figure 3

One of the criticisms that Niven raises with regard to the development of

strategy in the public sector is that organizations tend to end up with a listing of

programs used to justify funding. He suggests that this is reflected in the rise of


quality initiatives in the public sector during the 1980’s and 1990’s. However,

what has been missing in with these initiatives is the understanding as to why the

organization exists and what it hopes to achieve. Consequently, he insists that a

public sector organization’s mission should become the focal point of the

Balanced Scorecard so that the organization can attempt to convey why it exists

and what it is attempting to accomplish. The mission needs to contemplate

whom the organization is going to serve and how it will provide its services.

(Niven 298)

The internal process perspective within the public sector needs to be

aligned with the customer perspective. Again, this is very different to traditional

approaches in the public sector. Historical concentrations on achieving

operational efficiencies within the public sector have had little regard for meeting

the expectations of customers. An alignment between the internal process

perspective and the customer perspective may allow public sector organizations

to develop customer intimacy or product leadership goals. Furthermore, the

emerging trend toward utilizing public-private partnerships to provide services to

the public warrants the use of performance measures to assess whether the

service is meeting the customer’s needs. (Niven 299)

Often, in the public sector it is difficult to determine who the customers are

for a particular service. For the most part, the general population has to be

viewed as the customer base. Consequently, the financial and customer


perspectives need to be modified to measure the costs that are incurred, the

value that is created, and the support of taxpayers. The costs that are incurred

for a particular service should include not only the direct costs of providing the

service, but should also attempt to quantify the social cost of providing the

service. The objective of the organization will be to minimize both the direct and

social costs of achieving its objectives. With respect to the establishment of the

value that is created for its customers, a public sector organization may struggle

with the establishment of both output and outcome measures for vague quality of

life objectives. However, the benefit of determining these measures is that

elected officials will be able to more effectively weight the benefits of particular

services against their costs. The support of a public sector organization’s

customers is critical. If the organization fails to meet its customer’s expectations,

it may lose support for continued funding. (Strategy 136–137)

With respect to the learning and growth perspective, Niven maintains that

the public sector needs to measure the development of employees. He suggest

that, “Motivated employees with the right mix of skills and tools operating in an

organizational climate designed for sustaining improvements are the key

ingredients in driving process improvements, working within financial limitations,

and ultimately driving customer and mission success.” (Niven 299)

Lastly, Olve, Roy, and Wetter contend that local governments have a

great deal of flexibility in how resources are allocated. Viewing constituents and


potential constituents as interest groups, local governments can implement

strategies that will differentiate it from other local governments. The Balanced

Scorecard can assist a local government to position itself with respect to

retaining and attracting constituents and enticing the relocation of businesses.

(Olve, Roy, and Wetter 306)

In conclusion, the literature indicates that Balanced Scorecard is designed

to shift public sector organizations away from defining success by simply meeting

financial targets. Rather, the Balanced Scorecard enables public sector

organizations to determine whether it is achieving its mission to better society

through the delivery of effective and efficient services. Furthermore, the

Balanced Scorecard requires public sector organizations to improve processes

that will meet or exceed the expectations of its customers. Lastly, the Balanced

Scorecard can assist a public sector organization in implementing a strategy that

will differentiate itself from other public sector jurisdictions. How has the

Balanced Scorecard been applied within local governments?

Application to Local Government

The City of Charlotte, North Carolina is the most celebrated example of a

local government that has employed the Balanced Scorecard. However, the City

believes that the Balanced Scorecard should be regarded only as a tool to

implement strategy, because the elected officials, as makers of policy, need to


determine a vision and associated strategy. To assist the elected officials in

determining an appropriate strategy, the City hired a facilitator to establish a list

of strategic priorities. At a strategic retreat, the elected officials determined five

strategic priorities from the previously established list. (Schumacher)

The organization considers the use of the Balanced Scorecard to be a

success in that it has been able to maintain services without raising taxes. Pam

Syfert, the City Manager, states:

“Has it "worked?" Change is ongoing, of course, but the key pieces

of our strategy are in place, and what we know now leads us to

believe the results have served our citizens well. We believe the

community is better informed. We know that more citizens are

engaged. We believe our workforce is providing quality services.

We know it is being done at a competitive cost. We believe elected

officials have a broader concern for regional issues as well as City

needs. We know there is the political will to implement innovative

initiatives and prepare for future issues.” (City of Charlotte iv)

However, Syfert suggests that environmental scanning, public

participation, and cooperation with business sector led to the creation of the

vision for the organization. (City of Charlotte 3-4)


Lisa Schumacher of the City of Charlotte Budget and Evaluation Office

indicates that the organization has successfully employed the Balanced

Scorecard by ensuring that employees view the Balanced Scorecard as a tool for

communicating, learning and decision making as opposed to a mean of

punishment. Additionally, with regarding to the organization’s capacity to

process data related to the measures, it has limited the number of measures to

avoid overburdening data collection resources. Lastly, she states that although

the Balanced Scorecard was a new concept, the organization had been using

performance measurement for thirty years. Consequently, participants did not

become bored or frustrated with its implementation. (Schumacher)

In 1993, the Local Government Act for Queensland, Australia introduced

the requirement for an annual report that “must contain an assessment of its

performance in implementing its corporate and operational plans.” Recognizing

the permanency of the requirement, the City of Bankstown in Queensland

adopted the Balanced Scorecard as a management system that would add value

to the strategic management process. (City of Bankstown 1)

Similar to the City of Charlotte, the City of Bankstown has recognized the

need for the elected officials to establish the organization’s vision and strategy.

Consequently, the elected officials conduct an annual strategic planning exercise

and the organization has established a “Policy Unit of multi-disciplined officers . . .

to work solely on issues of strategic significance. (City of Bankstown 2) The


Balanced Scorecard has resulted in a management system that is based upon

achieving the desired outcomes that have been established by the elected

officials. The result is a culture that has lessened its dependence upon

departmentalization and instead works together to achieve the organization’s

desired outcomes. (City of Bankstown 3)

The organization contends that the use of the Balanced Scorecard has

resulted a management system that:

1. Defines clear, prioritized strategic outcomes

2. Identifies the processes by which objectives and outcomes are

achieved

3. Links the planning and budget process

4. Develops a better understanding of the business Council is in, and

5. Improves communication across the organization. (City of Bankstown

3)

The two organizations appear to be satisfied with the use of the Balanced

Scorecard as a strategic measurement and management system. However, both

jurisdictions emphasize the importance of having the elected officials develop a

clear strategy that is based upon input from constituents.


Research Results

The Balanced Scorecard should be used as a framework for local

governments in British Columbia to develop a strategic measurement and

management system to respond to the changes contemplated by the draft

Community Charter.

Firstly, the Balanced Scorecard recognizes the importance of strategy in

the competitiveness of organizations. However, organizations fail to effectively

implement strategy due to a lack of understanding about the strategy, a lack of

incentive to execute the strategy, a lack of communication about the strategy,

and lack of resources to support the strategy. By translating the strategy into

financial, customer, internal process, and learning and growth objectives, the

Balanced Scorecard enables an organization to develop consensus about what

needs to be accomplished to effectively implement the strategy.

Secondly, the Balanced Scorecard communicates an organization’s

strategy to all levels of the organization. To determine whether the organization

is achieving its strategic direction, performance measures link objectives to the

organization’s strategic direction. This permits everyone in the organization to be

aware of how his or her operational successes are contributing toward the

organization’s strategic success.


Thirdly, the Balanced Scorecard enables an organization to establish

targets that will transform the organization into one that meets or exceeds its

customers’ expectations for outstanding performance. Furthermore, it aligns

strategic initiatives by ensuring that the cause and effect relationships between

objectives are clearly understood. Lastly, the Balanced Scorecard links the

strategic planning process with the traditional budgeting process to ensure that

resources are allocated toward the tactical decisions that support the

organization’s strategic direction.

Fourthly, the Balanced Scorecard allows organizations to test cause and

effect relationships between financial, customer, internal process, and learning

and growth objectives to determine the efficiency and effectiveness of its

strategic direction. Through analysis of these cause and effect relationships,

recognition of external changes in the organization’s environment, and

responsiveness to emergent strategies, an organization is able to obtain strategic

feedback and adapt as required.

Lastly, the Balanced Scorecard shifts public sector organizations away

from defining success by simply meeting financial targets. Rather, the Balanced

Scorecard enables public sector organizations to determine whether it is

achieving its mission to better society through the delivery of effective and

efficient services. Furthermore, the Balanced Scorecard requires public sector

organizations to improve processes that will meet or exceed the expectations of


its customers. Finally, the Balanced Scorecard can assist a public sector

organization in implementing a strategy that will differentiate itself from other

public sector jurisdictions.

However, if local governments chose to use the Balanced Scorecard, they

need to ensure that the elected officials have developed a clear vision and

strategy. Ideally, the vision and strategy should have been formulated with input

from constituents so that the local government has an understanding of the

challenges that are unique to that particular community. Consequently, local

governments in British Columbia will need to employ a variety of strategic

planning tools like, SWOT analysis, External Factor Evaluation Matrix,

Competitive Profile Matrix, Internal Factor Evaluation Matrix, or Quantitative

Strategic Planning Matrix to develop a clear vision and strategy. These tools

should be regularly employed to ensure that the organization’s vision and

strategy continues to be the right one.

Lastly, the four perspectives offered by the Balanced Scorecard need to

be examined to determine whether additional perspectives should be added to

include key stakeholders.

If local governments in British Columbia are looking for proof that

performance measurement and management systems are effective, they can

look towards the work that the District of Maple Ridge and the Central Okanagan


Regional District have done in designing strategic measurement and

management systems to meet local circumstances. Each jurisdiction has taken

an incremental approach to designing a “homegrown” system that meets the

needs of the community.

Both have gained support and consensus from their elected officials for

the use of performance measures to implement strategy decisions. Their

performance measurement systems highlight processes that need to be

improved to achieve financial and customer breakthroughs. Furthermore, their

systems recognize the importance of the development of employees, internal and

external communication of strategy, cause and effect relationships between

objectives, measurement of the efficiency and effectiveness of services, strategic

alignment of all levels of the organization, determining the expectations of

customers, and linking strategy with the annual budget process. Common

themes found within the “homegrown” strategic measurement and management

systems are consistent with those found within the Balanced Scorecard.

With respect to the proposed Community Charter, the literature clearly

suggests that the draft legislation has two basic objectives: to provide greater

autonomy to local government and to require greater accountability through the

mandatory reporting of annual objectives and outcomes.


The implications of the first objective are that local governments in British

Columbia will need to define and articulate vision and strategy to respond to the

unique local challenges that each community will face in the upcoming years.

Furthermore, local governments will need to design strategic measurement and

management systems to ensure that strategic outcomes are being achieved.

With respect to the second objective, if the Provincial government is

committed to its earlier references to standardization and comparability within the

mandatory reporting requirements, there will be increased accountability with

regard to the tactical decisions that local governments in British Columbia make.

However, a report investigating corporate reporting and disclosure concluded

that it is impractical to develop a generic set of reporting standards: “It is widely

believed that performance measures are context and strategy specific. Hence

requiring organisations to report against a standard set of measures will simply

result in additional bureaucratic burdens being placed on them.” Alternatively,

the report suggests that organizations should be encouraged or required to

answer a series of critical questions relating to strategic, operational, and short

and long term issues “through fact based evidence of their own choosing.” The

requirement for fact based evidence will lead to the development of appropriate

performance measures. (Neely et al 1-3)

Consequently, the annual reporting requirements suggested by the

Provincial government will provide little insight into the long-term strategic


decisions that local governments have made or whether long term desired

outcomes are being achieved. Consequently, the reporting requirements will

strengthen accountability and facilitate benchmarking but will not foster the

strategic measurement and management systems required to meet the first

objective. The desire to seek standardization of reporting will result in local

governments having the ability to compare the efficiency of services, but will not

allow them to determine the effectiveness of services. Or, in other words, the

reporting requirements will assist local governments in making tactical decisions,

but will not encourage strategic decision making. In effect, the second objective

could act as a constraint to the first objective and will serve as an additional

bureaucratic burden for local governments that have chosen to implement

strategic measurement and management systems that are designed to

implement strategic outcomes.

The short timeframes for reporting may make it difficult for some local

governments to stimulate transformational change within their organizations.

Additionally, the annual reporting requirements in the draft Community Charter

do not differentiate between lagging and leading performance measures.

Consequently, if a local government relies exclusively upon lagging performance

measures, it may not be able to identify problems until after the annual report has

been produced.


The draft Community Charter describes the need to communicate

objectives externally, but does not address the more critical issue of

communicating objectives internally in order to achieve strategic alignment. With

respect to external communication, it is doubtful that the minimum requirement

for an annual public meeting will enable local governments to sufficiently

translate the expectations of constituents into strategy.

Lastly, the research revealed that there are several barriers to the

successful implementation of strategy. Furthermore, there are common public

sector concerns regarding performance measurement. It is doubtful that the

Provincial government’s mandatory requirement for the implementation of

performance measures will overcome these barriers and concerns. If these

barriers and concerns are not overcome, the process will merely become a

perfunctory exercise of compiling objectives and measures that serve no

strategic purpose.


Recommendations

1. The Provincial government should to work with the UBCM, Local Government

Management Association, Government Finance Officers’ Association,

business and other interests to develop a series of critical questions that local

government will be required to answer in regard to strategic, operational, and

short and long term issues. The Provincial government should permit local

governments to develop custom performance measures, unique to the

respective communities, to respond to these critical questions.

2. The Provincial government needs to work with the UBCM, Local Government


business and other interests to develop a handbook for local government

elected officials to help them understand the importance of articulating clear

vision and strategy both externally and internally.

3. The Provincial government needs to work with the UBCM, Local Government


business and other interests to develop an understanding of strategic

planning tools like, SWOT analysis, External Factor Evaluation Matrix,

Competitive Profile Matrix, Internal Factor Evaluation Matrix, or Quantitative


Strategic Planning Matrix to assist in the articulation of a clear vision and

strategy and to determine whether the organization’s vision and strategy

continues to be the right one. .

4. Local governments in British Columbia need to develop an understanding of

the need to develop strategic measurement and management systems to

implement the vision and strategic direction that has been articulated by the

elected officials.

5. Local governments in British Columbia need to include citizen input in the

development of strategy to ensure that strategic initiatives truly reflect the

challenges faced by each community.

6. Local government in British Columbia should adopt the Balanced Scorecard

as a means of implementing a strategic measurement and management

system. However, the Balanced Scorecard should only be introduced after

the elected officials have articulated a clear vision and strategy for the

organizations. Furthermore, the four perspectives suggested by Norton and

Kaplan may need to be modified to include key stakeholders.


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Charlotte’s Roadmap to Change and Improving Performance Management. April 2000.

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www.legis.gov.bc.ca/37th2nd/3rd_read/gov12-3.htm District of Maple Ridge. Business Planning Guidelines – 6th Edition. May 2002. Gill, Paul. Personal interview. 30 May 2002. Kaplan, Robert S., and David P. Norton. The Balanced Scorecard: Translating

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Lee, S.F., and Andrew S.O. Ko. “Building Balanced Scorecard with SWOT

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http://www.civicinfo.bc.ca/Local_Content/legal-information/3664.pdf

http://www.civicinfo.bc.ca/Local_Content/legal-information/3664.pdf

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Charter: A New Legislative Framework for Local Government.” Internet. 9 Nov. 2002. Available: http://www.mcaws.gov.bc.ca/charter/pdfs/ccpaper_final.pdf

Neely, Andy, and Mike Bourne. “Why Measurement Initiatives Fail.” Internet. 9

Nov. 2002. Available: http://www.blindtiger.co.uk/IIA/uploads/2c9103-ea9f7e9fbe--7cab/2000MBEWhyMeasurementInitiativesFail.pdf

Neely, Andy, et al. Measuring Corporate Management and Leadership

Capability. Cranfield School of Management. Niven, Paul R., Balanced Scorecard Step by Step: Maximizing Performance and

Maintaining Results. New York: John Wiley & Sons, 2002. Olve, Nils-Goran, Jan Roy, and Magnus Wetter. Performance Drivers: A

Practical Guide to Using the Balanced Scorecard. Chichester: John Wiley & Sons, 2000.

Province of British Columbia. “Transcript Of The Open Cabinet Meeting

Wednesday, May 22, 2002.” Internet. 9 Nov. 2002. Available: http://www.gov.bc.ca/prem/down/tran/open_cabinet_meeting_may22_2002.htm

Rilkoff, Marilyn. Personal interview. 28 May 2002. Rilkoff, Marilyn. Letter to Vanessa Sutton. 8 May 2002. Schumacher, Lisa. Personal interview. 30 October 2002.


http://www.mcaws.gov.bc.ca/charter/pdfs/ccpaper_final.pdf

http://www.blindtiger.co.uk/IIA/uploads/2c9103-ea9f7e9fbe--7cab/2000MBEWhyMeasurementInitiativesFail.pdf

http://www.blindtiger.co.uk/IIA/uploads/2c9103-ea9f7e9fbe--7cab/2000MBEWhyMeasurementInitiativesFail.pdf

http://www.civicinfo.bc.ca/132.asp?documentid=3631&r=3630&r=3631&r=3567&r=3445&r=3355&r=3343&r=3588&r=3322&r=3323&r=3326&r=3324&r=3321&r=3325&r=3337



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