New Zealand Local Government Organization Accounting Essay

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This paper will discuss on the implementation of balanced scorecard in public section from different countries, Hongkong, German, New Zealand, Unites state of America and Canada. 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 (Rozhan Othman / Deryl Northcott, Tuivaiti Ma'amora Taulapapa) 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). 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/ Deryl Northcott, Tuivaiti Ma'amora Taulapapa)

BSC overview.

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 /

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) : 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.

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 straightforwardly adapt the study of BSC in 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 (K.J. Euske,Kaplan 2001).

Differences of private, public and non-profit organizations are impact on the design and effective of BSC. The majority of previous successful BSC implementation is 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 is allocated from central government when private organization gains from sale revenue, fees and charges. Incentive and reward linkage with BSC is not made to motivate a good intention of employee to achieve to target objective Yee-Ching Lilian Chan / K.J. Euske. Public sector implementation users need to study and develop from other organization experiences, which the study should concentrate on public sector.( Deryl Northcott, Tuivaiti Ma'amora Taulapapa)

There are many post research and implementation case study for private sector but it is no use for applying the success or issue 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.

(Barry Bozeman) 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 BSC implementation 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 (Deryl Northcott, Tuivaiti Ma'amora Taulapapa)

Implementation of balanced scorecard in Public sector organization.

The study of BSC implementation in Non-profit organizations in Hongkong, New Zealand, USA and Canada, and Germany are faced with the barrier only few that achieve. All the mentioned countries intend the use of BSC to develop organizations as performance management tool.

Welfare Organization Hong Kong (WOHK)

Hongkong 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). 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.

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 help indicate if the resource use are 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 (Allen Kwokwah Yeung, Julia Connell).

(Deryl Northcott, Tuivaiti Ma'amora Taulapapa )

New Zealand Local Government Organization (LGO).

New Zealand adopting BSC for 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 id New Zealand local government organizations use the BSC as a performance management tool , 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, Pg85)


The study found three main barriers to achieve BSC adoption.

Communication was not sufficient and well delivered; some participants still not understand their role to BSC.

Unable to identify an appropriate number of KPIs and define the customer.

There is a poor Causality link in BSC strategy model.

focuses on three main characters which are Management, Strategy and Employee. Effective BSC adoption should combine with good communication from top-down, appropriate KPIs and reasonable causal chain. (Kaplan) In Public and non-profit, 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. (Paul R. Niven pg 227/ Deryl Northcott, Tuivaiti Ma'amora Taulapapa )information to communicate to every employee in each particular area effectively via various channels. Make sure everybody comprehended target objective and each individual should know both company direction and also proper individual action. The manageable numbers of KPIs is one of the main reasons, public and private organization structure is unique and different in many ways. (Kaplan Pg 8,12)

Customers in private sector are buyer, company sell and gain profit from the selling price set over its value. K.J. Euske. 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 their own customer.


The German research; balanced scorecard implementation in German non-profit organizations.

The research focus on discussing of 20 German non-profit organizations that experienced on BSC implementation. Questionnaire and follow-up interview were use for gathering data from the study, which the questions are listed below.

Q1. To what extend are the minimum requirements of the balanced scorecard met by the non-profit organizations interviewed and how far advanced is their experience?

Q2. What are the main benefits of the balanced scorecard?

Q3. What are major implementation obstacles?

Q4. Which performance indicators are used and which are lacking?

Q5. What are enabling factors for a successful implementation?


BSC adoption in German non-profit organization needs further development and study, unbalanced measurement system between non-financial and non-financial, lack of casual linkages and incentive or reward link still need to improve. In non-profit organizations, the pay-for performance system was limit on its use, unlike in private sector that the incentive or performance evaluation links with pay that can help drive the implementation of BSC. Measuring tools, goal and a regulated social service are difficult to interfere in Germany.

Performance measurement and adoption of balanced scorecards: A survey of municipal governments in the USA and Canada

A survey of Implementation on BSC of municipal governments in the USA and Canada pointed out the failure of BSC adoption. The top five reasons from the survey are (Starts from the highest score),

1 Lack of linkage of balanced scorecard to employees' rewards

2 Management is too busy solving short-term impending organizational problems

3 Inadequate executive sponsorship

4 Case for changes is neither clear nor compelling

5 Too difficult to decompose goals for lower levels in organization

Yee-Ching Lilian Chan)BSC was created from those who had irrelative organization experiences or related background. As in USA and Canada municipal governments, they decide the developing requirements, time frame and targets but not working on implementation process or concern about organization limitations and required supports.

There is one thing in common between private and public sector which is the human resources is the key to drive the organizations. However, the differences are also high and strongly affect the success of BSC implementation.

(Measuring Business Excellence

Emerald Article: Public, private, not-for-profit: everybody is unique?

K.J. Euske)

Performance measurement and adoption of balanced scorecards: A survey of municipal governments in the USA and Canada

A survey of Implementation on BSC of municipal governments in the USA and Canada pointed out the failure of BSC adoption. The top five reasons from the survey are (Starts from the highest score),

1 Lack of linkage of balanced scorecard to employees' rewards

2 Management is too busy solving short-term impending organizational problems

3 Inadequate executive sponsorship

4 Case for changes is neither clear nor compelling

5 Too difficult to decompose goals for lower levels in organization


Bsc in non profit, must limit their spending to budgeted amounts, cannot measured how close they maintain spending to budgeted amounts, or even if they restrain spending so that actual expenses are well below budgeted amount.

Success for non and gov should be measurd how effectively and efficiently they meet the needs of their constituencies, tangible objectives mys be defined for customer and constituencies. Financial considerations can play an enabling or constraining role, But will rarely be the primary objective.

Public employees generally don't focus on the outcome of their work. They conditioned to think about process, For another measures aren't always easy to develop, They tend to measure their work volume, Not their results. If they working hard, They believe they are doung all they can.


Issues and challenges of implementing a balanced scorecard in public sector organization.

BSC with various perspectives to cover all possible relevant factor to achieve the strategic goal set by manager. However, to use bsc in public sector organizations need a scorecard adjustment (niven). There are only fews numbers of study of post study on the public sector. The structure and requirement of each public organizations 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. (Euksa)

As many BSC implementation for public sector organizations had failed to reach the their goals, the similar issues and obstacles occur in many public sector organizations implemented the use of BSC from many countries.

As evidenced in the literature, the BSC having

been widely adopted in the private sector is now

gaining increasing acceptance within the public

sector as a strategic performance management

system. However, for government organisations

that seek to create superior value through

the BSC, there are significant challenges in the

implementation of the BSC. The main issues

include motivation for performance management,

leadership, communicationmechanisms,

goal-setting processes, measurement, data collection

techniques, employee reward systems

and relating outputs to outcomes (Niven 2002).

In addition to these challenges, there are also

major barriers in applying the scorecard to

the public sector which stem from the difficulty

that many public sector organisations

have in articulating their mission and associated

strategies. According to Kaplan and

Norton (2001b) many of the strategies articulated

consist of lists of programs and initiatives

rather than outcomes that the organisation

is attempting to achieve. Moreover, it is important

to recognise that public sector organisations

require different strategies than their

counterparts in the private sector as their main

purpose is to satisfy the needs of their community

constituents (as stakeholders) rather than

focus on financial outcomes (Umashev and

Willett 2008). Within this context, Kaplan and

Norton (2001b) advocate a modified BSC

frameworkwhere the public organisation'smission

is featured at the highest level of the scorecard

underpinned by three high-level perspectives

- costs of providing services (including

social costs); value/benefit of the service (including

positive externalities); and support of

legitimising authorities (including the legislature

and voters/taxpayers) (see Figure 1).

To achieve best practice in the use of the

BSC, Kaplan and Norton (2001a) emphasise

the importance of both good design and effective

implementation. In relation to good design,

Niven (2002) outlines the essential steps in both

the planning and development phases which

include developing objectives for the BSC, determining

the appropriate organisational unit,

gaining executive sponsorship or leadership,

building the BSC team, formulating the project

plan, developing a communication plan, gathering

and distributing background material, de


or confirming mission, values and

strategy, conducting executive interviews, developing

objectives and measures in each of the

BSC perspectives, gathering employee feedback,

developing cause-and-effect linkages, establishing

targets for measures, and developing

an ongoing BSC implementation plan. In relation

to effective implementation, Niven (2002)

suggests that cascading of strategy, linking the

BSC to compensation, and maintaining the

BSC through constant review and automated

systems are critical elements.

The main problems associated with implementation

of the BSC system in public organisations

as identified by previous studies involve

difficulties in cascading of scorecard measures

and issues of leadership (Umashev and

Willett 2008); employee motivational schemes

and training in performance management techniques

(Kloot and Martin 2000); and organisational

factors such as top management


information systems related issues

(Cavalluzzo and Ittner 2004). However 'there

This FROM Main source. A handful of prior studies have pointed to positive outcomes from BSC use in LGOs,

such as: clarifying strategic goals; integrating goals across departments; setting

performance measures within a more strategic context; narrowing measures to those

most meaningful and manageable; complementing financial measures of past

performance with operational measures that drive future performance; and providing a

link between the organisation's mission and strategy (Kloot and Martin, 2000; Chan,

2004; Niven, 2006). However, it has also been noted that local government BSC

implementations face challenges, such as poor information systems, poor measures,

and problems with defining the customers and their needs (McAdam and Walker, 2003;

Wisniewski and Olafsson, 2004). Given the significant size of many nations' local

government sectors, these findings appear scant and further research into BSC

implementations and outcomes in LGOs seems warranted.

Conclu this one from HK Moreover, causality between KPIs and BSC were adapted to right suit the organization by rearrange the BSC and give attention on training and effective communication to create the same understanding within organization. The flexibility when face an issue when found issue.

Alan C. Maltz, Aaron J. Shenhar and Richard R. Reilly

The lack of focus on a company's human resources dimension is perhaps the most notable

weakness in both The Balanced Scorecard and the Success Dimensions models. Several companies

noted the issue of a lack of people orientation in The Balanced Scorecard.