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Balanced Scorecard Helps Public Sector Follow its Vision Despite Political, Fiscal and Organizational Challenges

Mecklenburg County needed to manage a budget shortfall of $25 million while supporting their newly developed, long-term vision statement.  Regular changes in the political makeup of the Board of Commissioners meant that priorities were shuffled and continuity was an issue.  The County implemented a Balanced Scorecard approach to set long-term priorities and create consistency, transparency and accountability in their governance.

Introduction

Mecklenburg County is the largest and most urban county in North Carolina. Mecklenburg County and all seven municipalities within the County operate with a Council/Commission/Manager form of government.The elected Board of Commissioners is made up ofnine members; sixmembersare elected by district and three are elected at-large.

In 2008, the population of Mecklenburg was estimated to be approximately 902,000 residents, according to the Charlotte Chamber of Commerce, and the operating budget for fiscal year 2007 was $1.33 billion. Over the past decade, the population has increased more than 3% a year on average.

The Challenge

By 2000, Mecklenburg County was facing some tough challenges.

In North Carolina, Counties serve as local agents of the State, and Mecklenburg was facing a $25-million-dollar budget cut because of a State-wide fiscal crisis. At the same time, the sustained population growth over the past decade was creating a demand for new infrastructure projects, such as schools, jails, courts, parks and libraries.

As with most Counties, Mecklenburg also operated in a highly political environment, which meant that priorities could shift with the political majority.  Because Commissioners are elected every two years, it means frequent political swings and concomitant changes in funding allocation for services.

And finally, Mecklenburg had to find a way to support their new vision statement, established in 2000, which promised, “In 2015, Mecklenburg County will be a community of pride and choice for people to LIVE, WORK and RECREATE.”

The Solution

Mecklenburg County needed to build accountability, stability and staff engagement into their endeavors.  They needed to ensure that they were meeting the needs of the community while stewarding scarce resources, withstand the detrimental effects of political discontinuity, translate their new vision statement into specific, achievable goals and find a way to effectively monitor their success (and failure) in meeting those goals.

It was a tall order, but the Balanced Scorecard approach, modified to suit the needs of this public sector entity, helped Mecklenburg to achieve excellence in each of these areas.

Originally designed for private companies, the Balanced Scorecard approach provides a clear description of what companies need to measure in order to “balance” their performance by reporting results in four specific perspectives. For private companies, the financial perspective and, in particular, shareholder value, is the most critical, with additional perspectives being provided by: measurement of the company’s ability to sustain learning, growth and innovation; measurement of the company’s ability to refine and improve internal business processes; and measurement of customer satisfaction.

Mecklenburg adapted the private model to the public sector by placing customer and stakeholder satisfaction at the top of the hierarchy, to reflect the fact their primary responsibility is to stakeholder groups and the people it directly provides services to. The county also renamed the “learning, growth and innovation” perspective as “employee and organizational capacity” to underline the fact that County employees are the primary source of the innovation and creativity that drives improvements in overall capacity and performance.

And finally, Mecklenburg changed the Balanced Scorecard’s “top down” approach to positive change and increased accountability to reflect the fact that each County department is given a high degree of autonomy and is expected to self-govern with strong initiative and minimal supervision. Department directors and staffers one or two levels below the department directorwere included in the goal development process.

Using this modified version of the Balanced Scorecard, the County developed a cycle of strategic activities. This cycle specified a sustainable, comprehensive approach to all the County’s activities: planning, budgeting, performing, measuring and evaluating results. It was based on five components, with accountability built into each one: 1) goals, 2) performance management, 3) budgeting for results, 4) corporate strategies and 5) program alignment.

Next, the County reviewed funding allocation based on what was needed to achieve Balanced Scorecard results, rather than what each department needed. Staff aligned existing departmental programs with the specific Scorecard result they would help to achieve.  The Board then used this information to establish priorities for funding based on the value provided by the services in each program category.Instead of looking at what the community needed, they looked at how effective Mecklenburg County was in providing the service, what kinds of results were produced, and whether it made sense for the County to “be in that business.”  This guided the annual budget allocation.

Then department directors were tasked with achieving goals set within their department’s purview.  Scorecards were used as the primary evaluation tool for department directors, which helped “make it real” to them and motivated them to cascade responsibility for actions in support of Scorecard goals to the staff they managed.

The Result

The Balanced Scorecard has transformed Mecklenburg Countyinto an organization where data-driven decisions fuel a system of widespread accountability and transparency. It has helped themprioritize their activities to achieve maximum efficiency with scarce funds, enabling them to focus on what they do best and measure results accurately.

It has also helped them to stay on-course with their vision statement, giving the Board, regardless of its changing political makeup, the information and tools to make decisions that support that vision.County staff, too, have clearer data to base their decisions on and a consistent methodology and expectation for decision-making to complement their individual expertise and experience.And the community has noticed and responded favorably to the transparency in annual performance reporting and the quality of decisions being made at the Board level.

Within seven years of establishing their vision statement and implementing a Balanced Scorecard approach, Mecklenburg County has achieved approximately 51 percent of its 15-year balanced scorecard goals. In addition, in 2008, nearly all County departments met or surpassed annual agency goals that support the Board of County Commissioners Community & Corporate Scorecard.

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Summary:

Nova Scotia Power Incorporated (NSPI), an investor-owned utility that manages $3.5 billion in assets, was facing industry deregulation and increased pressure to improve client service and customer loyalty.  At the same time, they were going through an internal re-organization, breaking the company into a series of strategic business units. They needed a tool to help them align these discrete units with corporate goals and ensure that they worked together in a co-ordinated and supportive way.  The Balanced Scorecard approach provided NSPI with a way to disseminate corporate goals throughout the organization, bring all business areas into alignment and empower employees to take responsibility for their specific contribution.  The net result was an astonishing 33% increase in productivity, despite a challenging business climate.

Introduction:

Incorporated in 1919, NSPI is an investor-owned utility located in the province of Nova Scotia, Canada.  It is responsible for providing 97 per cent of the generation, transmission and distribution of electricity province-wide, and serves close to half a million residential, commercial and industrial customers. With a staff of 1,700 dedicated professionals, 39 hydro plants (including five thermal and one tidal), four combustion turbine and two wind turbine sites, they generate more than 13,000 gigawatt hours of electricity each year and manage $3.5 billion in generation, transmission and distribution assets.

The Challenge

In July 1996, the CEO of NSPI was facing the deregulation of the electric utility industry.  NSPI had been separated from competing, non-regulated energy companies and positioned as a newly established holding company.  This holding company was tasked with competing in a new and challenging marketplace, and was further hampered by a restriction on raising the price of electricity. Essentially, the company was facing a new competitive landscape and a deep reorganization, but was expected to meet these challenges without access to additional resources.

After reorganizing the company into strategic business units as a way to improve accountability and profitability, the CEO needed a system capable of aligning each discrete business entity with top-level corporate directives by translating those directives into specific, measurable goals for which each unit would be accountable.  That system had to allow NSPI to gauge its success in meeting strategic goals with pinpoint accuracy.

The four strategies identified were to 1) cut costs, 2) build customer loyalty, 3) build the business and 4) develop employee commitment.  These strategies, formulated at the executive level, needed to be fully owned by management and translated into specific, measurable actions and initiatives among the strategic business units and sub business unit levels.

The Solution

The Balanced Scorecard approach is ideal for organizations such as NSPI, which need to 1) disseminate corporate goals throughout a multi-level system, 2) co-ordinate goal-related activities and foster accountability at all levels and 3) test the ongoing implementation and execution of a new strategy to measure success.

NSPI began the process by using a regularly scheduled brainstorm session for their 150 management staff to unveil the Corporate Scorecard.  For two days, management discussed the new tool, reviewed each measure and its strategic significance, asked questions and began outlining their plans for “cascading” the identified corporate goals throughout their strategic business units. The cascading process involved communicating corporate goals downward into all areas of business, and developing appropriate supporting measures and initiatives that could be implemented in support of those goals.

After the two-day intensive session, managers rolled out the implementation of goals appropriate to their specific business units, ensuring that a clear understanding of and accountability for those goals was ensured all the way down the line.

For instance, the overarching corporate goal of increasing customer loyalty was benchmarked at the achievement of a 46% composite index of earned customer loyalty. At the level of the strategic business unit responsible for customer service and marketing, the corporate goal was supported with the unit goal of redesigning a minimum of five customer processes over the year.  For the strategic business unit responsible for information technology, the supporting goal was to increase the number of completed customer service requests to 450 per month.  In this way, corporate goals were supported within business units, and individual business unit goals were designed to support one another laterally across the organization.

The Results

Using the Balanced Scorecard method, NSPI were able to calibrate efforts and initiatives at every organizational level with overarching corporate goals.  Just as importantly, the goals for individual business units supported one another laterally across the organization, ensuring total co-ordination and synergy.  And at every level, the goals were appropriate to and achievable by the particular business area, allowing employees at all levels to own their part in the company’s success.

Additionally, the Balanced Scorecard served as a powerful communication tool, disseminating corporate goals across the organization and providing clear measures of success that all employees could understand and work towards.

Ultimately, the strategy helped the company achieve customer satisfaction and uninterrupted power supply with a 33% productivity improvement.

The Balanced Scorecard approach has proved so successful for NSPI that the company has gone one step further and developed a template that links corporate goals to personal Balanced Scorecards for individual employees. These personal Scorecards incorporate key elements of compensation and personal development and give employees a summary of how their individual actions feed into corporate objectives, and show them clearly how their successful efforts in these areas will further their own careers as well as organizational goals.

Trademarks mentioned in this article belongs to the respective owners.

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