Developing a performance measurement tool to monitor the performance of a public sector agency : a balanced scorecard approach

The world has seen unparalleled pressure put on the public sector to improve the speed and quality of service delivery, whilst simultaneously employing measures to cut the costs. South Africa and the Eastern Cape have not been immune to this as there have been complaints and demonstrations from various national and provincial stakeholders demanding more and improved services. The Department of Economic Development, Environmental Affairs and Tourism (DEDEAT) in particular has employed the services of public entities in its quest to realise government’s socio-economic developmental objectives and ease some of the service delivery pressures. These agencies are unfortunately struggling to deliver and the Department is unable to play the oversight role it is legislatively mandated to carry out. The main reason for this seem to be the lack of the capacity to objectively track and measure the performance of these agencies. As they say “you cannot manage what you cannot measure”. This is despite the fact that there is a shareholders’ compact and many other measures in place to enable performance monitoring. Also, the public sector is known to have inherent and unique performance management challenges like broad and vague objectives which lead to too many measurements, a propensity to focus on the “easy to measure” but often irrelevant indicators at the expense of critical outcomes and a short-term orientation that is usually fuelled by political expediency. Against this background, this study sought to make use of a comprehensive and dynamic performance monitoring framework, namely the Balanced Scorecard (BSC), to explore its potential use in assisting government to monitor the performance of public agencies, in particular the Development Finance Institutions (DFI) in South Africa. The proposed framework helps government to focus on the performance drivers of future value, and what decisions and actions are necessary to achieve critical outcomes. The aim of the study therefore is to develop an adjusted BSC framework to monitor the activities of a public sector agency and thus demonstrate how a BSC framework could be used to monitor a public agency by the government department. The study is evaluative in nature and is divided into three sections. Section one is presented as an Evaluation Report. It sets the scene, discusses briefly the key theoretical concepts, outlines the research methods used and presents the findings followed by a discussion and recommendations. Section two delves into the literature in more detail, providing a more extensive review of the literature that informed the investigation, whilst section three provides a more extensive description of the research methodology employed in the study. To achieve the aims of the study, the research drew from the work of various authors in the field including that of Bigliardi, Dormio and Galati, 2011; Bititci, Garengo, Dörfler, and Nudurupati, 2012; Julyan, 2011; Kaplan and Norton, 1992, 1993, 1996, 2001, 2004 and 2006; Niven, 2003 and 2008 and Northcott and Taulapapa, 2012. Also, five BSC perspectives - including the programme specific “equity” perspective - were used to develop an interview schedule. These were used to formulate the key performance objectives and indicators, based on the stakeholder’s responses. These respondents have experience within the programme as administrators, beneficiaries and funders. The research employed purposive sampling with semi-structured in-depth interviews and document analysis as primary and secondary instruments for data collection. In essence, five officials from the agency, one from DEDEAT and two co-operatives participated in the research. The results indicate a general appreciation of and gravitation towards outcome based measures, even though the government culture of focusing on outputs is still prevalent. The results of the study indicated that, generally, a government - public agency BSC based performance monitoring framework would have the following features: Customer objectives and programme mission as the main goal and this will provides clarity at all levels on who the customers are and what are their primary requirements. Clear, visible and stringent financial controls as the agency is administering public resources. Few carefully selected processes and systems that have a direct and positive impact on the customer objectives. Deliberate and consistent efforts to promote the participation of designated groups in the economy of the country. Comprehensive indicators on capacity building as “mission based-organisations rely heavily on skills, dedication and alignment of staff”. Overall, the study concludes that the make-up of the BSC is beneficial to the public sector and in monitoring the public sector agencies for the following reasons: It helps the agency to focus on customers and their needs. It forces the agency to engage and communicate strategic intention with both internal and external stakeholders and thus synchronize competing stakeholder needs. It forces the agency to limit the number of indicators and therefore select the few value adding measures that are aligned to customer outcomes. Through its cause and effect relationship, the agency is compelled to align all the resources, activities and processes to the main goal of the entity. All these help to minimize the principal agent problem, as the use of the BSC can bring clarity on strategy and expectations, provided it is supported with regular communication