The Performance Management Strategic Framework in the Context of Strategic Planning and Management (Balanced Scorecards, Key Performance Indicators)
This section evaluates the benefits of the performance management strategic framework developed earlier by comparing its main components to common methods of strategic management, notably the balanced scorecard, key performance indicators, benchmarks, and lean management. We emphasize the advantages of the proposed framework in terms of integrating workers (and citizens) into the decision-making process, which encourages the development of learning organizations. In particular, the proposed framework obviates the shortcomings related to the adoption of traditional strategic management methods in public organizations.
Strategic Management Using Balanced Scorecards, Key Performance Indicators and Benchmarks, and Lean Management in the Public Sector - A Critical Review
A major characteristic of the public sector is the complex environment in which it operates. As explained in previous chapters, this complexity creates acute problems of planning, accountability, communication, and implementation (Lapsley and Skxrbxk 2012). Most strategic management approaches do not have sufficient tools to handle such complexity, resulting in the major difficulties in adopting strategic management techniques in the public sector (Arnaboldi et al. 2015). Furthermore, in many cases public organizations implement clumsy performance management systems that are unsuited to the key human actors engaged in the delivery of services. Indeed, such techniques often do not refer to social welfare as a main goal, disregard the approach of multiple goals, and use top-down planning and implementation schemes that focus on outcomes rather than processes, thus failing to integrate workers and citizens into the mechanism. All of these missing elements are essential for managing and reforming the public sector efficiently and effectively.
Two leading managerial techniques - key performance indicators and benchmarking - have similar characteristics and are often used in concert. They are both technologies that emerged in response to the lack of the commercial bottom line for performance assessment in public services. Yet, efforts to establish a managerial approach that emphasizes value for money or efficiency and effectiveness in the public sector have usually failed. Thus, a global model of performance measurement in the public sector cannot be created based on these concepts (Arnaboldi et al. 2015). In effect, efforts to devise a public sector bottom line have degenerated into the creation of many partial performance indicators (Lapsley and Pong 2000). These partial indicators are not planned in a way that connects inputs, outputs, and outcomes logically as the policy design approach requires. Furthermore, usually there is no hierarchy of performance indicators that form an articulate statement of performance. The decision to identify key performance indicators for performance assessment focuses on what can be measured rather than capturing the leading aspects of organizational performance (Bevan and Hood 2006). As explained earlier, both logical relations between indicators and the hierarchy between them can be planned effectively using the strategic performance management framework developed in this chapter.
A similar analysis applies to the benchmarking technique, which transforms key performance indicators of the organization into a comparable scale. When one organization’s performance is compared with others on a comparable scale, the expectation is that if the organization is underperforming, it will try to improve to achieve the level of its peers (Grace and Fenna 2013). However, even though public service organizations are not in competition and therefore open, in principle, to sharing performance information, they do not necessarily have the same goals or methods of operations that can be transferred from one organization to another. This concept of the contested field in which the actors’ own interests prevail over a common or shared purpose remains a major obstacle to effective benchmarking (Siverbo 2014).
Another technique of strategic management is the balanced scorecard, which has prompted widespread interest in the public sector in recent decades. This management technique offers a broader focus than narrow financials by including the consideration of additional factors such as internal processes, customers, and learning (Kaplan and Norton 1992). Unlike the proliferation of partial and so-called key performance indicators, this configuration seems to link corporate financial planning and strategic planning. However, critics note that the four dimensions of the balanced scorecard understate the complexity of many public organizations and offers little more than lists of metrics (Norreklit 2000). Viewing citizens as customers and emphasizing the bottom line of profits rather than social welfare make applying the management techniques of the private sector to that of the public sector quite difficult. The literature also indicates that integrating the balanced scorecard systems with accounting information systems has proven problematic (Hoque 2014). While the balanced scorecard has had immense popular appeal, it appears to be a management fad that may be falling out of fashion. In contrast, the strategic performance management framework developed in this chapter offers a comprehensive approach for designing appropriate management techniques.
Lean management, however, has become the performance management technique of choice for many public services. Lean management was developed by Toyota in the 1960s as the Toyota Performance System (Womack et al. 1990). It is based on the standardization of work into repeatable processes and the elimination of unnecessary stages in the production process to eradicate waste and reduce costs in a process of continuous improvement. As with other managerial reforms, lean management was first applied in the United Kingdom in universities, hospitals and health care, and local government (Radnor et al. 2006). Government ministers touted the potential of lean thinking for reducing public sector waste (Murden 2006). Health care has been at the forefront of attempts to implement lean management. However, even in the private sector, there have been reservations about the efficacy of lean management at Toyota itself, where cost reductions came at the expense of safety (Frean and Lewis 2010). When attempting to apply lean management to the public sector, many issues arise. To what degree do public services resemble automobile factories? In addition, in the public sector there is a great deal of interdependence in service delivery, which may create problems when trying to standardize public services. Cost reduction may also be a problematic goal in the delivery of welfare services if it is the sole consideration. Indeed, there is evidence that attempts to implement lean management in the National Health Service have been an abject failure, which may be attributed to the lack of supportive information systems at the project level, interunit level, and organizational level (Kinder and Burgoyne 2013). Others point to the lack of a comprehensive service model to inform its adoption and design (Radnor and Osborne 2013).
It follows from this critical review that when public sector organizations adopt strategic management techniques that are used routinely in the private sector, the probability of malfunctions and failure increases substantially. As we discuss below, the strategic performance management framework detailed in this chapter provides solutions to these problems.
