Learning And Growth Perspective Accounting Essay



This paper will discuss on the implementation of balanced scorecard in public section from different countries, Hong Kong and New Zealand. Aim to evaluate the issues and challenge of these implement under different circumstance. There is a mandate for Public sector organizations to improve the strategic goals, quality services, effective use of financial resources (Othman, 2006 / Northcott and Taulapapa, 2012) and this is not only a requirement for any specific country. The balance scorecard (BSC) seem to propose the reliable tool for contribute performance measurement and improvement. But there are only few numbers of post study and research in public sector. Clear instructions on the use and create an effective BSC for public sector was never made. BSC is providing a measurement model with causal links together include financial and non-financial matters which are learning and growth, internal business process, the customer, and financial (Kaplan and Norton, 1996). These four scorecard arranged having them link casualty together in hierarchy pattern. However, Adjusting BSC for the proper use in public organization is important. Adjusting and Rearrange of BSC for public and non-profit sector is need to right suit organization structure. The top of hierarchy of private sector is in financial perspective, private sectors always aim to gain more profit or revenue, Retain customer and gain new one. However, in public sector the aim is to increase public satisfactions, safety, welfare, and so on, which are basically in non-financial aspect. (Niven, 2006; Northcott and Taulapapa, 2012)

BSC overview.

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The balanced scorecard is a tool for performance measurement and strategic planning. It captures the relevant factor to organization performance into difference perspective, both financial and non-financial aspect. BSC combine of four perspectives that cover all relevant factors to measure organization performance. (Kaplan and Norton, 1996).

Financial perspective

This perspective is the goal to increasing profit, increase shareholder wealth, reducing cost, effective use of resources. However in non-profit or public organizations this perspective aim to utilize the source or budget effectively (Niven, 2006) : Sample of KPI ; Income compare with numbers of employees, profit from investing compare with resources use.

Customer perspective

Focus on the ability to motivate people to invest or buy our product, make them satisfy with services, ability to retain current customer. : Sample of KPI ; annual sale per number of customer, percentage of losing current customer, numbers of complaint.

Internal business/process perspective

Identify and developing process to add value to customer. This perspective Sample of KPI; Expense in managing compare with income, time taken to produce goods, delivery on time, expense on information system, average time to make decision.

Learning and Growth Perspective

This perspective is the key lead to successful of the organization; this is a long term benefit rather than immediate benefit. This perspective Sample of KPI ; employee turn-over rate.

(Kaplan and Norton, 1996).

Differences factor regarding BSC implementation between public and private sector.

There are many research and successful evidence of BSC implementation by private sector, but it is not readily fit public, non-profit organization environment. It is no use to straightforward adapt the study of BSCin private sector to public sector as there are many differences. The benefit use of BSC in private sector is tool for improving and to reach the target and goal of organization, the goal of private sector are basically are annual profit or revenue and gain more loyal customer for future revenue. While Public sector has difficulty on applying BSC since the external performance reporting are strongly impact and the organization structures are individual and unique, it difficult to find the post study that very similar to their case and able to rely on (Euske, 2003; Kaplan 1996).

Differences of private, public and non-profit organizations are impact on the design and effective of BSC. The majority of previous successful BSCimplementation was in private sector where the financial matters are on the top of hierarchy. The differences are both financial and non-financial related. The financial matters in public sector are that the main revenue was allocated from central government when private organization gains from sale revenue, fees and charges. Incentive and reward linkage with BSC was made to motivate a good intention of employee to achieve to target objective (Chan, 2004; Euske, 2003) Public sector implementation users need to study and develop from other organization experiences, which the study should concentrate on public sector.(Northcott and Taulapapa, 2012)

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Post research and case study for private sector are plenty but it was no use for applying the successful issue solving for public sector. Hence the study pointed out that there are many differences between private and public sector and also each of the public sectors is unique.

Rainey and Bozeman (2000) describe the comparison between Public and Private Organizations that

- Goal in public organization is more complex and difficult to measure.

- The objective is difference, Public organization aim for serve social need.

- Profit company use manager to run the project while non-profit ask for volunteer

- Public sector source of fund allocate from central government.

Moreover, (Euske 2003) mentioned other differences, for instance, revenue; constraint political influence; markets; scope of impact; public scrutiny; authority limits; performance expectations; incentives; and so on. According to (Kaplan), Perspectives on working of public employees tend to be focused on the volume of work alone. The quality of results is not considered. However there are also similarities across sectors, which are summarized into four categories, finance function; human resources; information technology and general function. some manager might argue with unsuccessful is because the difference and unique of public sector. However, these similarities should maximize and be considered by manager; some post of similar organization may implement and apply successfully. (Euske, 2003) The key to achieve the BSCimplementation are in the same direction which are, top management commitment, employee buy-in; an emphasis on performance excellence; adequate training, simple BSC, clear organizational strategy and goals, link to incentive schemes and adequate resourcing (Northcott and Taulapapa, 2012)

Implementation of balanced scorecard in Public sector organization.

The study of BSCimplementation in Non-profit organizations in Hong Kong and New Zealand were faced with similarly barriers. But New Zealand study started on BSCadopting from original Kaplan and Norton, While Hong Kong relied on modified BSC by Niven at the very beginning of implementation process.

BSCis a performance management and measurement tool with various perspectives to cover all possible relevant factors to achieve the strategic goal set by manager. However, to use BSC in public sector organizations need a scorecard adjustment (Niven, 2006). There are only few numbers of post studies on the public sector. The structure and requirement of each public organization are difference and widen. Finding one case study that identically matches with the organization would be hardly possible but if we focus on the similarities of post study and the most in common requirements and data. (Euske, 2003)

New Zealand Local Government Organization (LGO).

The study of New Zealand adopting BSC in local government organizations use two research methods to collect data, which are postal questionnaire and follow-up interviews. After interview, the BSC users claimed that they got more experienced in BSC system and each local government organization is continuing to develop the BSC system. However, the BSC questionnaire ask question about general awareness in the use of BSC, The benefit of BSC as performance management tool, Successful factors and obstacles.

The postal questionnaires were addressed to the Chief Executive Officers/City Managers of 73 city and district council. The study aimed to collect data from who are really aware of all management initiative and able to give the useful information. Questionnaire combine of short, closed-end and open-end in limited of 13 question to avoiding the risk that the questionnaire would pass to other to complete.

Follow-up interviews were conducted few months after an implementation finished. The interview was tape recorded and last not over one hour. It was conducted with four CEOs, two of them use it over four years, one had implemented last year and one was never use it.

The results regarding four keys research shows that, LGOs were aware of the BSC but the size of organization was relate to the adoption. Smaller organizations feel less relevant to the implementation. Three BSC users claimed that the performance measurement indicator for staff should be made and link with incentive payments. The measures do not communicate what employees should be doing in their day to day activities to achieve the desire outcome. Manager must identify what customer is targeted. (Kaplan and Norton, 1996 p85)

LGOs answer to the questionnaire regarding the barriers to successful BSC implement were that, the organization use other performance measurement system, the size of organization was too small, Lack of information, time and top management support. Moreover the other two reasons given were more links to the barrier in processing aspect of BSC implementation. First, problems with adapting the BSC to suit public sector organizations. Second, problems with mapping causality. (Northcott and Taulapapa, 2012 p 177-78)

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Mapping the casual chain of financial and non-financial perspectives. The linkages help to indicate the success factors, cause and effect between others perspective within scorecard (Kaplan and Norton, 1996,). The causal chain always begins from bottom (learning and growth) give an effect step-by-step to the top. However it pays no attention to any other feedbacks but the one from lower linked perspective. (Bianchi and Montemaggiore, 2006; Kaplan and Norton, 1996). Defining Customers in private sector are straightforward to those who pay for goods or services, company sell and gain profit from the selling price set over its value or exchange with some services. (Euske, 2003) On the other hand Customer in public sector is a challenge, unique and difficult to define. Who is the customer? Non-profit organization serve with various service, each particular service have own customer. (Northcott and Taulapapa, 2012)

Welfare Organization Hong Kong (WOHK)

WOHK is a public service in Hong Kong providing communal service. The main services include day-care services such as nursing and rehabilitation services to the elderly. By the time of this study, there was around 270 full-time staff serving 8500 registered members. (Yeung and Connell, 2006)

Hong Kong empirical study is based on Niven's BSC model that modified the original BSC model from Kaplan and Norton. His modified model focuses on its use in public sector and non-profit organization (Niven, 2006). They selected one pilot case study on the Welfare Organization Hong Kong (WOHK) out of 17 social service organizations. The study uses an interview sample of twelve individual which include all level of employees. From Director, Deputy Director, four task force members, consisting of the heads of key services, and six front-line staff at the various service centers. The sample interviewees were asked five questions in first section relating to an understanding of the objective, benefit of its use, successful and unsuccessful factors, and if implementation of BSC were to occur again. Results shows the different views of objective by level, senior level view BSC as an strategic planning tool, mid-level understand BSC as tool to unify thinking while frontline think it use for planning framework. (Yeung and Connell, 2006)

WOHK BSC implementation was success by follow the applicability of Niven's BSC. The first key success factors for WHOK are putting training in the most important factor and followed by communication and the third was strongly emphasis on the clear direction and strategy shared to every staffs at all levels. However, WOHK also mentioned the barrier, the first use of old simple indicator at beginning to measure the effectively use of utility and resources. The indicator was not helping indicate if the resource uses worth enough, then they switch to use Niven's BSC model to articulate the strategic goal and measure. The second barrier was also with KPIs, They did not know the right KPIs to measure and indicate the training (Yeung and Connell, 2006; Julia Connell).


As many BSC implementations for public sector organizations had failed to reach their goals. Some who successful implemented also faced the similar issues and obstacles. This challenge occur in many public sector organizations implemented the use of BSC from many countries. However, if look at the WOHK BSC implementation case. Communicate to every employee at all levels to comprehended organization direction. Not only Top management buy-in but also employees, Course training employees were made. The difficulties of Measurement, non-financial measurement measuring is measuring intangibles, for example; employee's performance, customer satisfactions, service quality, and so on. (Wisniewski, Ólafsson, 2004). Kaplan and Norton (1996) claimed that "Success for non-profit organization and government should be measured how effectively and efficiently they meet the needs of their constituencies, tangible objectives may be defined for customer and constituencies. Financial considerations can play an enabling or constraining role, but will rarely be the primary objective.


Balanced scorecard adoption in non-profit organization needs further development and study, unbalanced measurement between financial and non-financial, lack of casual linkages and incentive or reward link still need to improve. In non-profit organizations, including the limit use of reward pay or incentive (Greiling , 2010). Developing of performance measurement should be arising from understanding of cause and effect of the linkage. "It should describe the relationship between the outcomes sought by the organization and the performance drivers of the strategy." (Othman, 2006 p. 3)

In Public and non-profit organizations, constant communication within organization is needed to create a good understanding. What are the organization goals and how everybody should aim to achieve its, and what is expected from them to execute. (Niven, 2006; Northcott and Taulapapa, 2012) Information communicates with every employee should be clear, deliver right message to each particular area and use appropriate channels to deliver message. Cascading the scorecard to each individual department to help developing and setting scorecard in order to meet organization targets (Moullin, Soady, Skinnerm, Price, Cullen, Gilligan, 2007). Make sure everybody comprehended target objective and each individual should know both company direction and also proper individual action.

Defining customer is one of the big challenge, customer and financial perspective in public sector are difference from private sector. Public sector fund are from central government while in private are from customer. Customer in private sector can be targeted and specified while in public sector it is still difficult to identify. However, if we consider the source of fund as input from customer in private sector and output to service customer in public sector. Niven (2006) states that "How do we add value for customers while controlling costs?"

The differences of private and public sector only tell the difference between of BSC users and many already aware of it. Some author came up with ideas and theory in adopting the scorecard to compatible with public organization. There is a time to focuses and do more research on the similarity. The similar factors of implementation successful organizations and the resemblance between unsuccessful BSC implemented organizations. Then grouping them into two groups and makes a comparison.