Wednesday, November 4, 2015

Strategic Planning in Government and the Balanced Scorecard

The Balanced Scorecard is presented as a tool that enables managers to adopt a holistic approach in strategy formulation rather than remaining constrained by the traditional method of making strategic decisions purely under financial considerations, e.g. revenue, profit, earnings per share. Specifically, the Balanced Scorecard links the financial perspective with important operational realities: how the customer views the company's performance, the internal strengths and weaknesses of the company's business processes vis-a-vis competition and customer expectations, and the company's ability to constantly learn and innovate in real time so as to prepare for the future and stay on top of the game. The catch is though, these linkages are readily discernible in the operational model of a for-profit company which produces certain products or renders certain services to a certain number of customers over a given period of time, revenues thus generated providing the economic basis for the company's survival and justifying the complex linkages analyzed in the Balanced Scorecard. In my experience, however, as a government functionary in a developing country, most government departments just rely on top-down annual fiscal allocations to continue operations. There are no stimulants such as external competition or responsibility to shareholders to spur such in-depth analysis of the organization's internal and external environments as the Balanced Scorecard demands. Often, and owing primarily to a captive client base and weak political and legal systems as in a developing country, government departments hardly care about what their clients think of them. It is the clients who need them, and not vice versa.

In such a setting as described above, the Balanced Scorecard method for measuring performance can only be meaningfully deployed if a department's annual funding is linked with performance. This in itself can become problematic because funding for such vital institutions as the police, the fire service, schools and hospitals can never be totally linked to performance. Also, performance measurement and evaluation requires a great deal of political will and resource investment which is often lacking. In this context, I believe it is of foremost importance for governmental organizations to first introspectively discover their core values and purpose of existence as recommended in 'Building Your Company's Vision'. Then they must set truly ambitious long-term goals (the BHAG) for themselves, e.g. Pakistan will be the top exporter of mangoes to Europe and America by 2025. Once these essentials are clarified, organizations can set about identifying their clients as vital to achieving the BHAG and setting the smaller goals and performance measures towards the larger outcome. The financial perspective could then be how efficiently and effectively in terms of internal practice and innovative approaches the organization utilizes its fiscal allocation towards meeting client expectations as it ultimately strives towards the BHAG and associated shorter-term objectives.

The City of Charlotte presents a good model for the meaningful implementation of the Balanced Scorecard. It also underscores the paramount significance of political will and commitment to change in transitioning towards measurement-based performance and strategy in a governmental setting.

Muhammed Haider

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