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An Empirical Framework for Assessing the Balanced Scorecard Impact on Sustainable Development in Healthcare Performance Measurement

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Performance appraisal has become an essential tool for healthcare managers due to the frequent and rapid changes in the healthcare sector. Sustainable performance management implies increasing organizations’ efficiency and effectiveness while considering all vectors of sustainability. This study examines the impact of digital transformation, accounting information systems, and strategic human resource management improvements on organizational performance and sustainable development. The paper uses the balanced scorecard (BSC) for organizational performance assessment. The paper proposes a theoretical model that integrates the traditional and digital information systems and human resources engagement with the BSC dimensions for sustainable organizational development. The theoretical model is tested in an empirical study involving a questionnaire-based survey of 387 employees with management experience in the healthcare sector. Based on structural equation modeling, the research results showed that the efficiency and effectiveness of strategic human resources management and the accounting information system significantly positively affect the BSC dimensions. Furthermore, the use of BSC in measuring organizational performance has significant effects on sustainable development, with the internal process dimension being the most influential.

1. Introduction

The trend toward sustainable development causes many organizations in the healthcare sector to choose performance evaluation systems that capture all dimensions of performance [ 1 ]. Patients and other stakeholders pay more attention to evaluating sustainable performance, given that the economy based on knowledge and digitization creates value, primarily through intangible assets, which are extremely difficult to evaluate. Until the 1990s, organizations used performance evaluation methods based only on financial accounting data and using only financial criteria. Intangible (intellectual) assets generate more added value and significantly contribute to competitive advantage, being unquantifiable from a financial perspective. Intangible assets represent the knowledge and skills of human resources, the capabilities of accounting information systems, and the innovative features of digital technologies used in organizational activities. The significant advantage of intangible assets lies in the difficulty of imitation by similar organizations. The main disadvantage consists of the difficulty of the performance evaluation of intangible assets [ 2 ]. Traditional methods, oriented toward financial measures, did not provide information that would allow solving problems or capitalizing on opportunities related to customers, quality, and personnel [ 3 ]. Therefore, multiple opinions appeared in performance evaluation regarding the need to measure intangible assets using non-financial criteria [ 4 ].

As a result of this trend, organizations have chosen to adopt multidimensional approaches to performance evaluation in line with organizational strategy [ 5 ]. Organizations evaluate actual performance using multidimensional performance evaluation methods suitable to the structure and diversity of assets [ 6 ]. Since the 1990s, organizations have implemented various multidimensional performance assessment methods considering intangible (intellectual) assets: Performance Prism, Performance Pyramid, Skandia Navigator, Performance Measurement Matrix Model, and Balanced Scorecard (BSC).

The BSC allows the translation of an organization’s strategic objectives into performance objectives. Within the BSC, the evaluation of organizational performance has four dimensions: the financial dimension (FD), the customer dimension (CD), the internal process dimension (IPD), and the learning and growth dimension (LGD) [ 7 ]. Later, various authors found that the BSC can be used not only as a performance evaluation method but also as a strategic management model [ 8 , 9 ].

Organizations increasingly use the Balanced Scorecard in the healthcare sector due to increasing complexity and the need to implement efficient management systems to measure performance [ 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 ].

Digital transformation has facilitated using of a complex tool such as the Balanced Scorecard. Although digital technologies have expanded a lot, especially in the last three years in the context of the COVID-19 pandemic, the potential of digital technologies remains significant and is not sufficiently valued [ 20 ]. This potential must be exploited through the involvement and engagement of human resources in healthcare, particularly young professionals [ 16 , 20 ]. Only strategic human resource management organizations achieve a complete integration of digital strategies with human resources strategies [ 16 ]. A challenge for effectively implementing a digitized Balanced Scorecard is the interoperability of traditional and digital information systems [ 20 , 21 , 22 ].

The framework proposed by Palozzi et al. [ 23 ], Health Technology Balanced Assessment, integrates BSC with Health Technology Assessment (HTA) to foster hospital-based health technology management to align strategy and action. However, no clear instrumental framework allows an integrated implementation of BSC with HTA. The model proposed in the paper provides the necessary tools to integrate the BSC with the HTA, analyzing the relationships between digital transformation, accounting information systems, strategic human resources management, and BSC dimensions. The instrumental framework for BSC optimization is a gap found in the literature concerning healthcare, which the paper addresses through a proposed theoretical model tested in the empirical study. Therefore, the paper aims to examine the direct impact of digital transformation, the improvement of the accounting information system, and the strategic human resources management on the organizational BSC performance dimensions and the indirect impact on the sustainable development of organizations in the healthcare sector. By examining these causal relationships, the paper strengthens the role of BSC in sustainable development, having as input vectors the digital transformation, the improvement of the accounting information system, and the strategic human resources management optimization.

The findings provide hospital managers with the necessary tools for sustainable development through digital and informational transformation and the engagement of human resources in strategic processes.

The paper consists of six sections. The Section 2 carries out a literature review. In Section 3 , the paper highlights the research design and methodology. Section 4 reveals the results after the analysis and interpretation of the collected data, and Section 5 and Section 6 include the discussions, theoretical and managerial implications, research limitations, and conclusions.

2. Theoretical Background

2.1. performance assessment using bsc.

Performance evaluation quantifies production factors’ contribution to organizational performance [ 24 ]. The main reason for performance evaluation is to increase performance concerning the previous period and similar organizations [ 25 ]. In addition, psychological research on performance appraisal has emphasized performance improvement through transformational feedback, which focuses on developing organizational capacity to perform [ 26 ].

According to Kaplan and Norton [ 5 ], BSC is a management tool that helps an organization operationalize its strategy. The BSC translates the vision and strategy of an organization into performance indicators from a strategic measurement and management system. BSC represents a valuable tool that facilitates the strategies’ implementation and the development of strategic objectives [ 27 ]. The BSC creates an equilibrium between traditional financial and non-financial indicators: customers, the organization’s internal processes, and learning and organizational development processes. Since the BSC includes financial and non-financial variables, its approach is balanced. BSC dimensions contribute to organizational operations with strategic objectives. Neely and Bourne [ 28 ] show that BSC success depends on how the indicators are defined and implemented. Chaudron [ 29 ] believes that BSC balances long-term and short-term objectives. Most employees are unaware of the organizational strategy and objectives; therefore, they do not understand their role in achieving the organization’s purpose. As a result, employees strictly fulfill their assigned individual goals [ 30 ] due to the absence of cooperation among employees in achieving the organization’s strategies and goals. Moreover, many employee reward systems focus on individual or team success rather than on achieving organizational goals [ 31 ].

According to Frigo and Krumwiede [ 32 ], BSC can contribute to better strategic human resources management because it ensures the interconnection between personal and organizational objectives and assesses the effects on organizational performance. The organization can achieve long-term objectives by converting the vision and strategy into individual objectives and quantitative and qualitative indicators, generating an optimal framework for communicating the vision and strategy to all employees [ 5 , 9 , 33 ].

As a result of strategic performance evaluation capabilities, BSC has a crucial role in strategy analysis and implementation and in assessing organizational goals [ 27 , 34 , 35 , 36 , 37 , 38 , 39 ]. In the last two decades, various researchers addressed the implementation of BSC by leading companies in various sectors [ 38 ], including the public sector [ 35 , 40 , 41 ] or the healthcare sector [ 14 , 16 , 19 ].

2.2. Digital Transformation

The use of digital technologies and innovations in healthcare organizations significantly impacts organizational performance [ 9 ] due to increasing accessibility, speed, transparency, innovativeness, and trust. The level of implementation of digital technologies defines the level of digital transformation (DT) of activities and significantly affects the decision-making process by increasing the speed of decision-making and reducing errors [ 42 , 43 ]. In addition, many organizations integrate new digital technologies into the accounting information system used by managerial accounting [ 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 ]. Therefore, accounting management tools know an increasingly accelerated digital transformation [ 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 ].

DT consists of implementing new digital technologies in a business model, improving organizational processes, redesigning the value creation chain, and better satisfying customer needs [ 27 , 66 , 67 ]. Formulating a strategy in the DT field is not enough to successfully implement digital transformations because the implementation of digital technologies and their strategic integration is a broader concept [ 27 , 68 ]. However, since DT is an organizational transformation much more than digital technologies, the success of DT depends on the integration into organizational processes and the acceptance of these technologies by employees. Consequently, DT initiatives must be integrated into accounting information systems and aligned with strategic human resource management to fully integrate into an organization’s strategy.

BSC essentially represents a new organizational approach involving new ways of thinking, innovation, and organizational change. Various researchers [ 69 , 70 ] analyzed the relationship between DT and the application of BSC at the level of various organizations, while Yamamoto [ 71 ] and Zanon et al. [ 72 ] studied BSC use as a potential method for DT. DT provides the BSC with accuracy and easier use, given the complexity of the indicators included in the BSC [ 73 , 74 ]. Implementing IT solutions based on artificial intelligence, Big Data, and the Internet of Things can address this complexity. Digital BSC can make managers’ work more accessible. Data (Big Data) collected by information systems and physical sensors of the Internet of Things technology are then processed and interpreted with the help of artificial intelligence capabilities. Artificial intelligence offers the possibility of quick repetitive decisions without human intervention and facilitates the adoption of strategic decisions.

The BSC model aims to reduce the gap between strategy and implementation and eliminate redundant activities. Consequently, implementing a strategy in the field of DT would be supported by using BSC. DT positively influences BSC dimensions, particularly FD [ 27 , 68 , 70 ]. The BSC implementation can be made much easier with the help of digital technologies integrated into the organization’s strategy and the performance evaluation system [ 23 ].

Monitoring the DT effects is very important to assess the change produced within the organization, be it positive or negative, and the influences on performance and sustainable development. Tracking these changes with the help of the BSC facilitates the analysis of the actual situation, not just some financial indicators, the earlier identification of the operational problems, and the faster finding of solutions to solve the problems. Therefore, the indicators used to evaluate innovative activities must be quantifiable, reliable, simple, and meaningful because the decisions depend on these indicators [ 75 , 76 ]. Furthermore, innovative organizations encourage experimentation, reward successes, and actively support their employees’ training and growth [ 73 , 74 , 77 , 78 , 79 ].

Previous research [ 27 , 70 , 71 , 72 , 73 , 74 , 77 , 78 , 79 ] shows a positive relationship between innovation achieved through DT and BSC dimensions. On this basis, the first hypothesis is the following:

DT has a significant positive effect on BSC dimensions.

2.3. Accounting Information System

A healthcare organization’s accounting information system (AIS) collects and processes data and provides financial and operational information. AIS mixes accounting, financial and managerial approaches with the capabilities offered by software specialized in managing organizational information [ 80 ].

The advantages of the AIS efficiency and effectiveness are the following: improvement of the quality, quantity, and speed of information circulation increased adaptability to a constantly changing economic environment, operational management improvement, communication channel optimization, and increased opportunities regarding external relationships. As a result of increasing informational capabilities, organizations have more opportunities for diversification [ 81 , 82 , 83 ]. According to Ditkaew [ 84 ], the AIS quality significantly influences business performance.

Verboncu and Zalman [ 85 ] show that performance measures of organizational efficiency and effectiveness; these concepts can measure BSC dimensions. Therefore, responsible accounting information systems should measure performance in all aspects, not only the financial aspect. Thus, organizations’ accounting information systems can improve in the long term to evaluate non-financial performance, contributing to the organization’s sustainable development [ 85 ]. The continuous adaptation of accounting information systems to technological modifications leads to a workplace redesign. The role of professionals translates from data collection and process activities to complex decision-making tasks, problem-solving, and tactical communication with internal and external stakeholders [ 86 ]. On this basis, the second hypothesis is the following:

The AIS improvement has a significant positive effect on the BSC dimensions.

2.4. Strategic Human Resources Management

In the contemporary economy, and even more so in organizations in the healthcare sector, human capital represents an intellectual capital consisting of knowledge, skills, and competencies through which an organization can obtain a competitive advantage [ 33 , 87 ].

Strategic human resources management (SHRM) primarily influences the learning and development dimension within the BSC and the internal process dimension of a firm’s organizational performance [ 32 , 88 ]. Findikli et al. [ 89 ] and Amer et al. [ 90 ] show that SHRM can improve ‘employees’ motivation by ensuring performance increases. In addition, human resource strategies significantly positively impact organizational performance [ 91 ], affecting the organization’s customer relations and financial results [ 92 , 93 ]. Therefore, human resource is an essential and valuable asset for every organization, difficult to replicate or replace, contributing to sustainable performance.

The potential of digital technologies must be harnessed through the involvement and engagement of human resources in healthcare, particularly of young professionals who are more open to using technologies in any activity [ 16 , 20 , 90 ]. Furthermore, only through an SHRM can organizations integrate digital strategies with human resources strategies and contribute to optimal BSC implementation [ 90 , 93 ].

Amer et al. [ 90 ] consider that the engagement of healthcare staff in implementing BSC could solve the problem of reluctance regarding digital transformation, increasing the satisfaction levels of employees. At the same time, Amer et al. [ 90 ] find that the involvement of health personnel in BSC implementation will improve all BSC dimensions.

On this basis, the third hypothesis is the following:

The SHRM improvement significantly positively affects the BSC dimensions.

2.5. Impact of BSC on Sustainable Development

Financial and non-financial performance is essential for every organization regarding sustainable development objectives. The model of organizational transformation through digital transformation must also include the objectives of sustainable development [ 27 ]. To evaluate non-financial performance as part of sustainable performance, the BSC is a valuable tool for improving the sustainable performance of organizations [ 94 ]. The BSC facilitates organizations’ growth and sustainable development [ 95 , 96 ]. Recent studies have shown a high integration between the balanced scorecard and sustainable development [ 96 ]. Non-financial indicators are motivating factors to enhance sustainable development regarding social and environmental issues [ 97 ]. Learning and growth are crucial elements for organizational growth and development [ 98 ]. The adoption of the BSC is essential for ensuring the organization’s sustainable development because it uses financial indicators that characterize the economic driver and operational indicators that characterize the social and environmental drivers. For better BSC use, synchronizing sustainable development and strategic management systems is fundamental [ 96 ].

Butler et al. [ 99 ] and Kalender and Vayvay [ 100 ] suggested the development of a framework for a sustainable BSC. The new model offers an additional perspective that encompasses economic, social, and environmental aspects. In such a model, social and environmental drivers fit into all BSC perspectives. However, in the corporate world, environmental and social goals often conflict with financial goals [ 101 ]. These contradictions reflect in the development of a sustainable BSC model. However, social and environmental goals ultimately lead to financial goals.

To focus on sustainable development, managers in the healthcare sector must benefit from appropriate mechanisms [ 102 ]. In addition, many researchers have indicated the benefits of BSC for the organization’s sustainable development, obtaining a competitive advantage over other organizations [ 103 , 104 ]. On this basis, the fourth hypothesis is the following:

BSC dimensions have a significant positive effect on sustainable development.

According to Kilig and Uludag [ 105 ], the primary strategic objective of organizations is to improve performance by increasing efficiency (the ability to achieve set objectives with minimum resources) and effectiveness (achievement of the established objectives). Organizations’ performance levels are consistent with current technologies, information, human resource strategies, and performance evaluation methods. Figure 1 shows the research model, the relationships between the research variables, and the research hypotheses.

Theoretical model. Source: own construction based on [ 7 , 9 , 31 , 42 , 106 , 107 ].

3. Research Design and Methodology

Investigating the direct impact of DT, the improvement of the AIS and SHRM on BSC dimensions, and the indirect impact on sustainable development in the perception of employees with management experience in the healthcare sector involved five phases ( Figure 2 ).

Research process phases. Source: own construction.

The study used a survey-based approach with a questionnaire to assess the ‘employees’ perception of management experience in the healthcare sector. The study used the stratified random sampling method. The establishment of the layers depended on two demographic criteria (gender and age). The study population consisted of Romanian employees with experience in management positions in the healthcare sector. The survey took place in the South-West Oltenia region. The respondents were among the employees with experience in top management and middle management positions (managers of medical departments, auxiliary departments, financial offices, and accounting offices). The sample has a level of confidence of 95%, with the margin of error being 4.565%. The questionnaire was sent to 500 people to ensure a suitable sample with a high confidence level and a small margin of error. Out of the 500 questionnaires sent, 398 respondents returned the filled questionnaires. Therefore, 387 questionnaires are valid (duly filled). The response rate was 75.60%. The questionnaire was distributed by email between June 2022 and September 2022. Among the total respondents, 54.3% are male, and 45.7% are female. The structure according to age is as follows: 25.1% of respondents are in the 18–30 years category, 43.1% are in the 31–45 years category, and 31.8% of respondents are between 46 and 65 years.

The questionnaire consists of nineteen questions ( Table A1 ). The questionnaire items were developed based on previous research on balanced scorecard dimensions, digital transformation, accounting information systems, human resources strategic management, and sustainable development [ 7 , 9 , 31 , 42 , 106 , 107 ]. Two questions in the first part of the questionnaire contained demographic information. The following sections include the antecedent variables of digital transformation, accounting information system improvement, strategic human resource management, BSC dimensions, and sustainable development ( Table 1 ).

Questionnaire design.

Source: own construction based on [ 7 , 9 , 31 , 42 , 106 , 107 ].

The questions for the antecedent variables of DT, the improvement of AIS and SHRM, and the BSC dimensions are as follows: “On a scale from 1 to 5 (1—non-important, 5—most important) what do you think is the importance of [DT/AIS/SHRM/FD/CD/IPD/LGD] in increasing organizational [efficiency/effectiveness]”. The questions for the antecedent variables of sustainable development are as follows: “On a scale of 1 to 5 (1—non-important, 5—most important), what do you think is the importance of [economic driver/social driver/environmental driver] in ensuring sustainable development”. The questionnaire includes general questions regarding the employees’ perceptions and does not include data that require an institutional review board and informed consent. The measurement scales were developed based on previous research [ 7 , 9 , 31 , 42 , 106 , 107 ]. DT, AIS, SHRM, FD, CD, IPD, LGD, and sustainable development are the model’s endogenous (latent) variables. Table 2 shows the descriptive statistics of the observable variables (questionnaire items).

Descriptive statistics.

Source: own construction using SPSS v.20 (SPSS Inc., Chicago, IL, USA).

The paper used structural equation modeling to test research hypotheses. Structural equation modeling allows the assessment of the relationships among the model’s latent variables [ 108 ].

The SmartPLS v3.0 software (SmartPLS GmbH, Oststeinbek, Germany) is the best solution for testing the four hypotheses because it allows structural equation modeling. The model applied is reflective and uses a PLS algorithm. For path coefficient a bootstrapping procedure is applied to the model. [ 108 ]. Figure 3 illustrates the empirical model.

Empirical model. Source: own construction using SmartPLS v3.0 (SmartPLS GmbH, Oststeinbek, Germany).

The variables’ reliability and validity are excellent ( Table 3 ), with Cronbach’s Alpha over 0.8, Composite Reliability over 0.8, and average variance extracted over 0.6 [ 108 ]. Moreover, values below 0.08 (0.074) for SRMR (standardized root mean squared residual) and values over 0.9 (0.904) for NFI (normed fit index) prove a good fit for the model.

Validity and reliability.

Source: own construction using SmartPLS v3.0 (SmartPLS GmbH, Oststeinbek, Germany).

The paper used a bootstrapping procedure (with 500 subsamples and a significance level of 0.05) to test research hypotheses. Values above 2.6 for T statistics and below 0.005 for p values show an increased relevance of the path coefficients [ 108 ]. The path coefficients indicate direct positive influences among model variables ( Table 4 ).

Path coefficients.

Table 4 highlights that all four hypotheses are validated. The DT, the improvement of the AIS, and the SHRM have a significant positive effect on the BSC dimensions (Hypotheses H1, H2, and H3). On the other hand, BSC dimensions have a significant positive effect on sustainable development (Hypothesis H4). However, the model also shows some weak influences between the researched variables. Digital transformation and strategic human resource management do not significantly influence the financial dimension of performance. The accounting information system is essential in healthcare managers’ perception of the financial dimension. Human results and technologies are tools that support the accounting information system but do not significantly influence the financial dimension. In turn, the financial dimension of performance does not significantly influence sustainable development since, in the perception of healthcare managers, the essential drivers of sustainability are social and environmental. Regarding the influences exerted by the accounting information system on the BSC performance dimensions, only the influence on the internal process dimension is irrelevant because healthcare managers believe that the accounting information system uses financial information that does not match the operational indicators of the internal process dimension.

5. Discussions

The rapid pace of economic changes in recent decades has imposed the need to understand the influences of changes on an organization’s activities and how they can increase performance [ 109 ]. In this dynamic and ever-changing environment, knowledge-based assets create most of the organization’s added value, being largely intangible. The intangibility of assets has affected the traditional methods of evaluating organizational performance. As a result, organizations have, since the 1990s, to implement multidimensional valuation models that also consider intangible assets. These models enable the alignment of cost and performance evaluation systems with the organization’s strategy. BSC is a widely used performance evaluation system [ 9 ] in various forms.

The proposed theoretical model emphasizes the need to consider the significance of information resources and human resources on the BSC dimensions (FD, CD, IPD, and LGD) and in ensuring organizational sustainability. As per [ 16 ], the paper considers that organizations in the healthcare sector that want to achieve sustainability goals must implement innovative solutions within information systems and motivate their employees to use the new opportunities offered by digitalization [ 110 ].

Implementing new digital technologies, improving accounting information systems, and optimizing strategic human resources management influence the BSC performance dimensions (Hypotheses H1, H2, H3). The study results show that digital transformation mainly influences internal processes and learning and growth dimensions. Furthermore, improving accounting information systems exerts significant influences, especially on the financial and customer dimensions. On the other hand, optimizing strategic human resources management significantly affects the internal process and customer dimensions.

Similar to the findings of Kilig and Uludag [ 105 ], Gazi et al. [ 9 ], and Alnamrouti et al. [ 31 ], the paper’s results show that organizations aimed to improve performance must adapt to informational and DT by motivating employees to develop their knowledge and skills (Hypotheses H1, H2, H3). Like Fabac [ 27 ], the paper demonstrates that implementing new digital technologies and innovations in an organization represents a significant competitive advantage. In line with the findings of Gazi et al. [ 9 ] and Dudic [ 75 ], improving the accounting information systems of organizations in the healthcare sector through digital transformation and the strategic change in human resources has a significant impact on aligning the organizational strategy with the objectives of increasing performance and sustainable development. The investigation of hypothesis H4 led to the conclusion that the BSC dimensions have a significant positive effect on sustainable development, with the internal process dimension exerting the most decisive influence on the organization’s sustainable development. Similar to Fabac [ 23 ], the research results show that digitalization and sustainability are the dominant global social phenomena in the contemporary period, and strategic management cannot ignore the effects of digitalization on performance evaluation through the BSC and, finally, on sustainable development. Therefore, the organizational transformation achieved by considering the effects of implementing new digital technologies, improving accounting information systems, and strategic human resources management must also include sustainable development objectives.

5.1. Practical and Managerial Implications

Organizations in the healthcare sector are at various stages of BSC implementation as an organizational performance evaluation system. This study aimed to determine the influences of DT, the improvement of the AIS, the SHRM on BSC, and the indirect impact on sustainable development in the perception of employees with management experience in the healthcare sector. The study results enable managers in the healthcare sector to understand the role of information and digital systems and SHRM in implementing BSC to achieve sustainable development. Furthermore, based on the study’s results, managers in the healthcare sector can implement or restructure the existing performance evaluation system to align with the organization’s strategic objectives following the imperatives of the technological revolution 4.0 and sustainable development.

Therefore, healthcare organizations aiming for sustainable development must implement BSC, relying on digital transformation, improvement of the accounting information system, and a strategic approach to human resources to obtain their commitment to the implementation of the organizational strategy. The central policies and actions that healthcare managers must promote are:

• encouraging the integration of digital technologies in all medical or auxiliary activities of the organization;
• the restructuring of the accounting information systems in the BSC-sized functions and the relevant management policies;
• promotion of a more dynamic, inclusive, and performance-oriented environment among employees;
• promoting a leadership based on innovation and creativity;
• encouraging engagement in achieving sustainability objectives by obtaining employee loyalty;
• supporting employee confidence and self-development, encouraging autonomy, and allowing participation in decisions.

5.2. Theoretical Implications

Over the past three years, healthcare systems have developed resilience to deal with the COVID-19 pandemic [ 19 ], manage resources optimally, and align their goals with the mission of providing efficient and effective healthcare [ 111 ]. In addition, as a result of multiple public sector reforms [ 112 ], healthcare systems have developed performance measurement systems to improve the efficiency and effectiveness of healthcare [ 19 , 113 , 114 , 115 , 116 , 117 ].

The sustainable development of organizations depends on how managers understand how to ensure increased efficiency and effectiveness by aligning performance objectives with organizational strategies. In increasing the efficiency and effectiveness of contemporary organizations, an important role plays DT, the optimization of AIS, and the SHRM. This study investigated the relationship between digital transformation, the accounting information system, strategic human resources management, the BSC dimensions, and the sustainable development of organizations, offering a perspective on integrating these variables into the organization’s strategy. The positive influences found between the research variables indicate the need to implement new digital technologies to improve accounting information systems and the motivation of employees to use these new technologies to increase performance. The proposed model provides the tools to integrate the BSC with the HTA, analyzing the relationships between digital transformation, accounting information systems, strategic human resources management, and BSC dimensions. Through the proposed model, the paper offers an instrumental framework for BSC implementation in line with digital transformation and the drivers of sustainable development.

5.3. Limitations and Further Research

Like other investigations, this research has limitations. The first limitation refers to the synthetic approach without describing the indicators of each BSC dimension. Including analytical indicators would provide information on their relevance within each dimension in the perception of employees with management experience in the healthcare sector. Future research should explore the influence of BSC dimensions on each vector of sustainability (economic, social, and environmental) to provide management with clues as to which performance dimensions to focus on in achieving sustainable development. In addition, other factors can influence the optimal implementation of BSC. A second limitation is the construction of the sample (employees with management experience in the healthcare sector in Romania), which does not provide increased representativeness. Extending research to other countries will allow researchers to consider organizational culture as an influencing factor of BSC dimensions, providing a clearer picture of employees’ perceptions.

6. Conclusions

The challenges generated by globalization, competitiveness, and the permanent requirement for performance improvement led modern organizations to find new ways to increase performance sustainably. The digital transformation of accounting information systems and the development of human resources skills to use new digital tools is an optimal way to achieve the sustainable development of organizations in the healthcare sector, focused on a knowledge economy.

The research suggests that organizations should consider the effects of digital transformation and employee acceptance on organizational performance to meet sustainable development challenges. The study emphasized the influence factors on the performance dimensions within the BSC and the effects of financial and non-financial performance on sustainable development. The study concludes that implementing the BSC is particularly useful for ensuring sustainable development, regardless of its challenges. If the support provided by organizational managers for digital transformation is not convincing, the overall effort will fail, causing low performance in conditions of unsustainable development.

Questionnaire items.

Funding Statement

This research received no external funding.

Institutional Review Board Statement

Informed consent statement, data availability statement, conflicts of interest.

The authors declare no conflict of interest.

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Balanced Scorecards: An Experimental Study of the Effects of Linking the Evaluators' and Subordinates' Balanced Scorecards on Performance Evaluation.

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In the early 1990s, Robert Kaplan and David Norton introduced and developed a new performance measurement and management system called the balanced scorecard (BSC). Most studies have found that evaluators tend to ignore or are not willing to use nonfinancial measures. This study attempts to examine whether the explicit linkage between the evaluator's BSC and the subordinate's BSC makes the evaluators use nonfinancial measures in performance evaluation. This study used an experimental design where subjects were asked to evaluate two managers' performance under explicit linkage versus nonexplicit linkage conditions. The difference between performance evaluation scores of the two managers under … continued below

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Kang, Gerui December 2008.

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• Kang, Gerui
• Mayper, Alan G., 1952- Major Professor
• Koch, Bruce S. Co-Major Professor

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• Beyerlein, Michael Minor Professor
• Wilner, Neil A.
• Merino, Barbara
• Prybutok, Victor
• University of North Texas Place of Publication: Denton, Texas

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• Name: Doctor of Philosophy
• Level: Doctoral
• Discipline: Accounting
• Department: Department of Accounting
• Grantor: University of North Texas

In the early 1990s, Robert Kaplan and David Norton introduced and developed a new performance measurement and management system called the balanced scorecard (BSC). Most studies have found that evaluators tend to ignore or are not willing to use nonfinancial measures. This study attempts to examine whether the explicit linkage between the evaluator's BSC and the subordinate's BSC makes the evaluators use nonfinancial measures in performance evaluation. This study used an experimental design where subjects were asked to evaluate two managers' performance under explicit linkage versus nonexplicit linkage conditions. The difference between performance evaluation scores of the two managers under the two linkage conditions captures the influence of explicit linkage between BSCs on performance evaluation. I used regression analyses to test my hypothesis. The results of the regression analyses support my hypothesis. This study attempts to explore one possible reason for evaluators' not using nonfinancial measures much in performance evaluation. It is the first one that studies the influence of the linkage between the BSCs on performance evaluation.

• Balanced scorecards
• financial and nonfinancial measures
• linkage between balanced scorecards
• performance evaluation

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• Executives -- Rating of.
• Performance -- Measurement.
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Kang, Gerui. Balanced Scorecards: An Experimental Study of the Effects of Linking the Evaluators' and Subordinates' Balanced Scorecards on Performance Evaluation. , dissertation , December 2008; Denton, Texas . ( https://digital.library.unt.edu/ark:/67531/metadc9767/ : accessed June 4, 2024 ), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu ; .

Balanced scorecards: proposed framework for application at the local system level insights from international experiences

Review of Economics and Political Science

ISSN : 2631-3561

Article publication date: 25 April 2022

The study aims to provide a clear framework of steps on how to implement the balanced scorecard model at the level of measuring and managing local performance, with a mix between what theoretical approaches show in this matter and examples of applied experiences in different contexts.

Design/methodology/approach

The study relies on the case study approach, which was used to present pioneer experiences in the field of application of the model on local government's level, namely, in the USA, England and South Africa. This paper was done by reviewing the original balanced scorecard literature and writings regarding the public and local government sector. This literature formed the basis for analyzing the various sections of study.

Balanced scorecard is one of the important models for developing and measuring local performance. International experiences under study confirmed that application of the model requires the following: The availability of bureaucratic will at the local level to apply the model, necessity of capacity building of local government units to apply it, introduction of institutional and strategic changes to the local units to be able to build their own performance cards, as well as strengthening local information systems, and not standardizing the performance cards at the different local administrative units.

Originality/value

This study will be useful for scholars, policymakers and local executive leaders on ways to apply the balanced scorecards at the local government units.

• Balanced scorecards (BSCs)
• Performance
• Local government
• Local councils
• Strategy map

Hamied, M.S.A. and Elbagoury, A. (2022), "Balanced scorecards: proposed framework for application at the local system level insights from international experiences", Review of Economics and Political Science , Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/REPS-08-2020-0109

Emerald Publishing Limited

Copyright © 2022, Mohamed Sayed Abdel Hamied and Ayman Elbagoury

Published in Review of Economics and Political Science . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode .

1. Introduction

The local units in many countries have suffered from central control, and inability of building their capabilities in line with the application of modern approaches concerned with the process of reform. Hence, with the transformation of many international experiences to decentralization thought and local governance, it became the responsibility of the central governments to develop local performance systems, in proportion to these reforming approaches.

The beginnings of performance reform on local units return to 1906, where the reform at the municipal government level was the driver behind the movement to report performance to the citizenry, and there has been a great interest in performance measurement reports of municipalities since 1920. A publication entitled Measuring Municipal Government appeared in 1927 through the International City and county Management Association (ICMA) in USA ( Hildebrand, 2007 , pp. 13–14); however, the first scientific writing on measuring local performance can be traced back to 1938, when ICMA published a volume entitled Measuring Municipal Activities: A Survey of suggested Criteria and Reporting Forms for Appraising A dministration ( Kopczynski and Lombardo, 1999 , pp. 124–125).

The 1950s, 1960s and 1970s witnessed the domination of inputs and measurement models that are based on financial analysis tools, such as cost-benefit analysis and budgeting systems. Then, during the end of the 1980s, new approaches began to appear and came to be used at public organizations ( Lusthaus and Adrien, 1998 , p. 3). The traditional methods that were dependent on financial variables began to face many criticisms, and new approaches began to emerge, a combination of financial and nonfinancial indicators, which provided a balanced view to measure performance. On the top of these approaches that appeared in the early 1990s was the balanced scorecard (BSC) model developed by Robert Kaplan and David Norton ( Kaplan and Norton, 1992 , pp. 71–79).

The BSC model has four perspectives: the financial, the customer, the internal processes and the learning and growth perspective. The approach is based on dependent performance indicators and leading performance indicators; it links the sub-strategic goals with each other, and the key performance indicators with each other, in what is known as the cause and effect relationships included in the strategy map ( Kaplan and Norton, 1992 , pp. 71–79).

The main question is what are the phases through which this model can be applied to work at the level of local government units? By focusing on analyzing three study cases in the USA, England and South Africa, this paper discusses applying the model at the local level.

2. Concepts definition

The BSCs is a multi-dimensional framework, which presents a probable sequence of phases for its implementation. Indeed, the structure of the BSC may also help to explain its successful functioning ( Mbala, 2016 , p. 26).

The model could be defined into three dimensions, as Kaplan and Norton (1992 , 1996) described, and as Mashoko (2011) argued, which is discussed in the following sections.

2.1 As a performance measurement tool

BSC as a performance measurement tool was introduced in the early 1990s by Robert S. Kaplan and David P. Norton of the Harvard Business School, as a new approach to performance measurement. It allows mangers to look at their performance through four important perspectives, including financial, customer, internal business processes and innovation and learning. Through these four perspectives, BSC minimizes information overload by limiting the number of measures used, and by mixing financial and nonfinancial measures in the four pervious perspectives. BSC helps mangers understand, at least implicitly, many interrelationships, and thereby helping them to overcome traditional notions about functional barriers and ultimately leading to improved decision-making and problem-solving. Therefore, BSC can keep organizations looking and moving forward ( Kaplan and Norton, 1992 , pp. 71–73, 79; Abdul Majid and Som, 2008 , pp. 82–85).

2.2 As a strategic performance management system

Kaplan and Norton described the BSCs as a strategic management model which is capable of translating vision and strategy to all parts of the organization, where the mangers using the model do not have to rely on short-term financial measures as the sole indicators of the organization's performance, the BSC allows them to introduce four new management processes that, separately and in combination, contribute to linking long-term strategic objectives with short-term actions ( Kaplan and Norton, 1996 , p. 75).

Importance and benefits of BSC as a strategic management system comes from its ability to overcome the common barriers of strategy execution, including: the participatory translation of vision, mission and strategy into clear objectives, measures and initiatives via the strategy map that involves the cause and effect relationships among four types of measures presented in customer, financial, learning and growth and finally, internal processes measures. Additionally, cascading the scorecard into different levels for managers and employees to achieve what is known as the alignment to the organization strategy and using the BSC enable the organization to overcome problem of resources allocation, because this model links financial budgets with its strategic goals ( Mashoko, 2011 , pp. 7–8; Kaplan and Norton, 1996 , p. 78).

2.3 As a communication tool

The BSC model is first built on a participatory methodology in developing an organizational scorecard and strategy map; then, it cascades to different organizational levels and manages its implementation. All of these processes depend on high degree of participation and sharing knowledge and experiences between top management and different levels of organization, such as managers and employees ( Mashoko, 2011 , p. 8).

3. Context and the BSCs developments

BSCs were presented as a management system that enables organizations to translate and achieve their vision and strategy, and provide a comprehensive and integrated system of performance measurement, in order to continuously improve the organizational performance and the results to be achieved ( Akbarzadeh, 2012 , p. 86).

Because of the limited ability of traditional approaches – which rely on financial indicators – to provide managers in organizations with comprehensive information that enables them to make long-term strategic decisions, Kaplan stressed at the beginning of 1983 the need to find new performance measures to keep pace with developments in the business; he explained that there are missing dimensions in the process of measuring organizations performance, namely nonfinancial measures and indicators ( Ittner and Larcker, 1998 , pp. 214–217; Išoraitė, 2008 , p. 18).

In 1987, a book titled “ The Relevance Lost: The Rise and Fall of Management Accounting ” was published, criticizing accounting systems that are based on providing historical information that does not enable senior management to make future decisions or build expectations necessary for the continued competitiveness of the organization's performance ( Johnson and Kaplan, 1987 , pp. 5–13).

Then, the experimental start of using BSCs began through a research project that included 12 large companies. This project was supervised by Kaplan and Norton in 1990, and the main goal was to present a new method or model for performance management that combines financial and nonfinancial measures, with an emphasis on the importance of accounting and financial measures in decision-making in the short term, and their importance for investing in assets that are easily valued; but what about investing in the intangible assets of the organization, such as innovations in products and operations, developing employee skills and customer satisfaction? ( Kootanaee et al. , 2013 , p. 49).

How do customers see us? Customer perspective.

What must we excel at? Internal processes perspective.

Can we continue to improve and create value? Innovation and learning perspective.

How do we look to stakeholders? Financial perspective ( Kaplan and Norton, 1992 , pp. 71–72).

Kaplan and Norton did not stop at merely introducing the concept, but the BSCs went through four main developments, beginning in 1992, which formed the first generation, in which the concept was explained, and its four main perspectives were presented as a performance driver; but the scorecard when first introduced was generic, and it did not focus strongly on causal relationships among the four perspectives ( Kaplan and Norton, 1992 , pp. 71–79; Lawire and Cobbold, 2002 , pp. 3–6).

Kaplan and Norton quickly realized the difficulties that faced this model. BSC was sparse and focused on the high-level structure; therefore, they developed the model, put forward the concept of strategic objectives, how to find cause-effect relationships between strategic objectives in the four perspectives and defined sub-measures for each one. This phase began in 1993 with the publication of an article titled Putting the Balanced Scorecard to Work ( Kaplan and Norton, 1993 , pp. 2–16; Rabe, 2019 , p. 14; Narayanamma et al. , 2016 , pp. 79–80).

Some problems emerged, especially at the level of choosing measures and setting objectives, in addition to the issue of the cascading the BSCs to the lower levels of the organization. So there was a third generation, that witnessed the confirmation of the strategic role of the model and how to translate the organization's strategy through BSCs; the simplified version of the strategy map was then presented. The most important feature of development was what was known as a statement of the organization's future destination according to specific agreed upon dates ( Kaplan and Norton, 1996 , pp. 75–85; Kaplan and Norton, 2000 , pp. 167–176; Kaplan and Norton, 2001b , pp. 147–160).

The fourth development emphasize on the necessity of the ability of the model to achieve rapid response to uncertainty and risk variables, and the ability to learn when implementing the strategy, rather than control and management only, in addition to an importance of the environmental and social impact on the organization performance ( Kádárová et al. , 2014 , p. 175).

Hence, the first generation mainly targets control of the organization by defining a set of measures for the four perspectives. It is useful for operational performance, but it lacks the strategic role, while the second generation focuses on performance drivers and KPIs, which make the difference in performance. The third generation is more focused on the strategic dimension of the organization's performance, and importance of a strategy map that links the performance threads, according to the destination statement of the organization, while the fourth generation, focuses on learning while implementing the strategy more than just controlling and managing, and responding to changing circumstances and risk factors.

Figure 1 shows the BSC model as developed by Kaplan and Norton (2007 , p. 4).

4. Adapting the model for local government units

Kaplan emphasized that the difference in the context in which the model arose is not an obstacle to the direction of public organizations to use it, as the application of the model to public organizations may achieve benefits that may outweigh its application in the private sector ( Kaplan, 1999 , pp. 3–5).

However, the governmental organizations quickly faced difficulties in the implementation process, which prompted many of them to avoid relying on the model at the beginning, as there were problems in understanding the components of the model itself, which was reflected in the difficulty of these organizations in defining their strategy precisely. As there were problems in the way of dealing with the four perspectives, especially the financial and the customers perspectives, the success of public organizations financially is completely different from the success of private sector, in addition to other problems that have been linked to trust, absence about the quality and accuracy of information required, the lack of clarity of real incentives about the returns from the use of these models for employees and the time and effort that this model requires for implementation, in addition to the absence of systems and databases used as the basis for providing the cards with the necessary information ( Kaplan, 1999 , p. 3; Niven, 2002 , pp. 293, 297–299; Perera et al. , 2007 , pp. 58–59; Holzer et al. , 2009 , pp. 31–40).

In this context, the City of “Charlotte”, North Carolina, set an example of the first use of the BSCs at the level of public organizations, and Paul Niven considered it the best example of the success of the BSC for the public and non-profit organizations, where the city used this model in 1996, and its approach to this model was driven by the importance of the concept of measuring performance and creating a distinct value for the citizen. It achieved great benefits as a system, not only to measure performance but also as a strategic management system and an effective communication tool ( Niven, 2003 , p. 271).

The development introduced by the city on the BSC, the strategy it used which is driven by customer orientation and the creation of an interconnected set of strategic priorities that achieved a distinct value for citizens are used as a reference for many cases at the level of public organizations as a whole (see Figure 2 ) ( Kaplan, 1999 , p. 4; Iqbal, 2007 , pp. 42, 45).

Cost incurred : This objective emphasizes the importance of operational efficiency, by measuring the cost incurred to provide public services. This cost must include two types of costs: the direct costs borne by the governmental organization and the social cost that imposes on the citizen and other organizations through its operations. Here, the local council concerned with providing public services should minimize both types of costs.

Value Created : What are the benefits that the organization achieves for the local community, it must prove to the local citizens that there are tangible outputs that are achieved and would benefit them. The BSC provides the public organization with mechanisms that enable it to measure the benefits achieved with regard to the outputs, such as the outputs associated with the quality of the education process, improving the environment and public health. Also, there must be a balance between the benefit achieved and the corresponding cost.

Legitimizing Support : It is important for public organizations to maintain all the supportive bodies, whether the legislative body that plays an important role in approving the funding programs for these organizations to continue their activities, or citizens, who represent an important source both at the level of giving legitimacy to the work of these organizations, through the ballot boxes, or at the level of being a source of funding, as a recipient of the service, or a taxpayer.

Hence, the governmental organization, according to this model, has to determine how to achieve the expected value, at minimal cost, while maintaining support from its funding authority. The study in the next section will analyze some of the pioneer international experiences in the application of this model at the level of local government organizations, in an attempt to provide a guiding framework by analyzing what these experiences have gone through.

5. Experience of using the BSCs at the local government organizations

This section discusses how to implement the BSCs by analyzing the stages that some of the pioneer international experiences have gone through in the USA, England and South Africa. The criterion in selecting cases was the significant success of those organizations in adopting the model and the presence of a clear framework for the stages of implementation.

5.1 Study cases analysis

This section aims to highlight experiences of local government organizations in the use of BSCs, where the focus was on three study cases, including the City of Charlotte, USA, Hertfordshire County, England, and Ehlanzeni District Municipality, South Africa. The three cases represented pioneering experiences in the use of BSCs at the level of local councils in their countries.

The City of Charlotte is the best and first model for applying the BSCs in the public sector at the level of local government in the world, where it used this model in 1996. The situation in the USA at that time was witnessing many changes at the local government level to reform performance management systems for government institutions, especially with the emergence of the new public management and the approach of reinventing the government. Thus, the city tended to adopt the model in recognition of its leadership, at the time, of its importance, and that of performance measurement as a vital issue. They maximized the benefit of the model, not only as a system for measuring performance but also as a strategic management system, as well as an organization-wide communication tool ( Niven, 2003 , p. 271; Kaplan, 1999 , p. 3; A balanced scorecard hall of fame, 2005 , p. 1; Hoque and Adams, 2008 , pp. 2, 3, 4, 22; Osborne, 1993 , pp. 349–356).

The Hertfordshire County Council’s use of BSCs began in 2003, when the model was first introduced to the county council using the “Excel platform” ( Woods and Grubnic, 2008 , p. 353). Although the beginning of the implementation of the model at the county council level as a whole was in 2003, the county had previous experience of this model through applying it to Hertfordshire Fire and Rescue Service in 1998, which is part of Hertfordshire County Council (Business intelligence, 2004, p. 21).

There have been attempts to reform the English local government system since 1983. These include: the establishment of the Audit Commission, as an independent body, which undertook the collection and publication of performance indicators on which the comprehensive performance assessment system was built in England; then the continued attempts to reform the local performance system through the issuance of the Local Government Law in 1999; then the presentation of the white paper on local government in 2001 during the Blair's government, to provide a framework of what was called “A Comprehensive Performance Assessment system” for local government, which was adopted in 2002, to measure the performance according to performance indicators, based on the “best value” system. This context of reforms is what constituted a major factor, not only of the Hertfordshire County but also of all local government authorities in England, to adopt modern and advanced performance measurement systems that meet the requirements of the new central system for comprehensive performance assessment ( Haubrich and Nclean, 2006 , p. 274; Boyne, 2002 , p. 22; Game, 2006 , pp. 4–6; Holdt-Olesen, 2007 , pp. 11–13).

In South Africa, the Ehlanzeni District Municipality Council started using the model in 2007. There was an emphasis on similarity between the methodology of the model's work and the legislative reforms that took place at the state level. This aimed at reforming the local government performance system, starting with the state constitution in 1996, which gave to municipalities the right to structure and manage their administration, budgeting and planning processes in such a way that priority is given to the basic needs of the community, within strengthening the capabilities of local councils ( Magagula et al. , 2019 , pp. 1–2; Ndevu and Muller, 2018 , p. 1).

The main objective of the reforms was to improve the efficiency and quality of public service delivery. In 1998, a policy document known as the white paper for local government was issued, and articulated the framework to enhance the capabilities of the local governments in South Africa. The document then acquired the mandatory form with the promulgation of the Municipal Structures Act in the same year. Then the Act was amended in 2000 to determine the nature of the performance management system at the local government level, according to key performance indicators linked to the so-called integrated development plans. This was then followed by the issuance of a set of regulations that included in details the requirements of the processes management system at the municipal level in 2001, as well as the issuance of a set of other acts, such as Municipal Finance Management Act in 2003, the Intergovernmental Relations Framework Act in 2005. The choice of many municipalities for this model was driven by the ability of BSCs to limit the subjectivity of the participants in the development and formulation of the organization's strategy, to enhance the ability of officials within the organization to assess the strategic impact of all implemented programs without bias and in accordance with clear indicators and measures ( Magagula et al. , 2019 , pp. 3–4; Mbala, 2016 , p. 54; Ronchetti, 2006 , p. 28).

5.2 Implementation stages of the BSCs

This section explains the stages which the case studies went through to apply the BSC. The experiences of the study cases, which were analyzed, showed that there are three basic stages of applying the model.

5.2.1 The project planning phase

City of Charlotte : The champion of the BSC at that time was “Pam Syfert”. She was Deputy City Manager in 1994, before becoming City Manager, and she then took over the process of convincing the council members of the model and the great benefits expected from its application through many meetings. There were also the Mayor of the city and the elected council members who encouraged the search for best practices for the process of measuring and managing performance, and they were convinced of the importance of BSCs in helping them focus on strategic aspects, and decisions making based on accurate information ( Niven, 2003 , p. 284).

Hertfordshire County : The BSC champion for using the model was the chief executive of the county council. The BSC became widely discussing in central government level, and the chief executive presented strong incentives of the importance of the model due to his international fame, and the elected members found the model a good opportunity to comply with the comprehensive performance assessment system that was adopted at that time ( Woods and Grubnic, 2008 , p. 353).

Ehlanzeni Municipality : The support process for the model was available at the highest level, whether from the Municipality Mayor or the elected members. The process of support and conviction with this model was driven by the strong logic and justification represented in carrying out a strong research process on the methodology and benefits of the model, why it was chosen instead of other models for implementation at the municipal level and the success achieved by the model at the international level; so, there was a semi agreement to implement and use the model ( Mashoko, 2011 , pp. 35–36).

City of Charlotte : They prepared brochures to introduce and raise awareness of the new system, and discussing the model in their newsletter. Also, they developed a glossary of all the terms they use in describing performance measurement, distributed it to employees and contracted with a specialized external consulting firm, to provide training sessions over a period of weeks, in addition to preparing a BSC Handbook. The city adopted a train-the-trainer model, so they selected a group of employees, who received Intensive training in order to become trainers and consultants, for the city later, in everything related to the model ( Niven, 2003 , pp. 275, 284).

Hertfordshire County : The county made a promotional campaign for the model at the community level as a whole, as well as at the employee level. The focus of the campaign was to confirm that the model represents one of the requirements for compatibility with the comprehensive performance assessment system approved at the county level, as well as the benefits of the model at the level of institutional and individual performance of employees, which are clearly listed in those campaigns, as well as improving the mechanism for citizens by monitoring the performance of all executive departments, by announcing the targeted results and linking them with clear indicators and measures ( Sanderson, 2002 , pp. 297–313).

Ehlanzeni Municipality : A large mobilization and awareness-raising process was implemented at the level of employees and citizens. Several workshops were implemented to explain the objectives of the performance management plan as a whole, and to introduce the concept of the BSC. These were conducted under the sponsorship of the council's leadership, and the research process carried out by the council contributed to the literature review, as previously discussed, on the model and its relevance at the international level in facilitating the process of persuasion and promoting it significantly to employees and the local community. Workshops have been implemented to train on the concepts of the model and the processes it includes ( Mashoko, 2011 , pp. 33–34).

City of Charlotte : The city built an action plan based on five core elements: mobilizing and supporting the process of change through executive leadership, translating the city's strategy into operational terms that can be implemented throughout the model, creating alignment within the city's strategy by cascading the BSC to different organizational levels, creating a strong incentive plan to make the strategy a daily work for every employee and tightening control to make the strategy an ongoing process. Initially, there were two staff members responsible for facilitating the BSC implementation, and then the model was administered by the Budget and Evaluation Office ( A balanced scorecard hall of fame, 2005 , pp. 2–8).

Hertfordshire County : Strategic management board (SMB) was formed by the county's chief executive, through which an action plan had been set, the responsibilities and lines of authority were assigned, and any overlap between the roles of elected councilors and the executives were resolved. Hence, the SMB became in charge of the action plan and the model implementation, while receiving regular performance status reports according to the core objectives stated by the council ( Woods and Grubnic, 2008 , p. 355).

Ehlanzeni Municipality : The so-called performance management system policy framework was developed in 2007 as part of the planning process to provide the necessary funding for the model application. The plan also included applying any necessary changes at the management level or the implementing programs, and coordinating with all departments in every stage of the model implementation. Further, a team work was formed, known as “performance management system task team”, who was responsible for developing the plan, discussing it with the municipal council for future improvements whenever needed ( Mashoko, 2011 , pp. 33, 54).

City of Charlotte : When “Pam Syfert” became in charge of the city management, a long discussion was held over the importance of identifying the main objective of the city as an organization in the local community, while strongly emphasizing on how impractical it is for the city council to provide all the services to all people inside the local community. Hence, an agreement was reached stating that main services have to be selected, reflecting the real merit for having this council in the local community, known as “focus areas”, namely: community safety, communities within a city, transportation, economic development and restructuring government. Accordingly, the city’s vision was briefly formulated as “Community of Choice for living, working, and Leisure”, and the five focus areas became the main determinants for the city success and the basis for building the BSC ( Kaplan, 1999 , p. 3).

Hertfordshire County : The county applied the same methodology of “Charlotte”, in which the county's vision stated that “To make Hertfordshire an even better place to live and work”, followed by identifying the mission that took the form of the county's strategic challenges, including: helping people's safety, tackling the causes and impact of congestion, maximizing the opportunities for all children and youth and maximizing efficiency savings. These challenges represented the framework for formulating the organizational objectives at the departmental level in the county and including it in its BSCs ( Woods and Grubnic, 2008 , pp. 354–355).

Ehlanzeni Municipality : This step was not included in the planning phase, yet was put as the first step in the implementation plan; as the municipal's plan at this preparatory phase was more concerned with mobilization and getting people's support, setting an action plan, conducting meetings with stakeholders and creating a team responsible for the model and scorecards development ( Mashoko, 2011 , p. 54).

City of Charlotte : The city made an adjustment to the order and name of the scorecard perspectives developed by Kaplan and Norton, under which customer perspective was given a priority over the financial perspective to avoid sending a wrong mission by putting the financial at the top of the card ( Kaplan, 1999 , p. 3). This is so because the main mission of every local government authority cannot be making profits despite the importance of the financial results, but should be satisfying the needs of its citizens ( Kelly, 2005 , pp. 76–84). This was followed by changing the name of the fourth card's perspectives, where the customer's perspective became “serve the customer”, to emphasize on the concept of citizen service; the internal processes became “run the business”; the financial perspective became “manage resources” and finally, learning and growth perspective became “develop employees” ( Rivenbark and Peterson, 2008 , p. 33).

Hertfordshire County : Following the City of Charlotte’s example, the county renamed the customers’ perspective into services delivery, and the financial perspective into resources, while keeping the two other perspectives unchanged. The county then relocated the services delivery to be at the top of the card in line with the council's vision and aspiration to provide the best services ever so that the county becomes a better place to live and work ( Audit Committee, 2006 , p. 4).

Ehlanzeni Municipality : Ehlanzeni applied the same BSC of Kaplan model for the public organizations, benefiting from the successful story of the City of Charlotte, while applying some modifications. Figure 3 presents the modifications introduced by this municipality to its BSC ( Mashoko, 2011 , p. 31).

City of Charlotte : The city provided the needed financial resources to train its employees on how to use this model, and even how to build these scorecards from the very beginning during these training sessions. Initially, the city used Microsoft Word and Excel programs, where the city officials presented the alternative training programs so that the city can choose from them. However, the majority of these programs use the quantitative method in presenting the data that does not match the nature of work in governmental agencies that depend on operations instead of statistics.

Hertfordshire County : The county formed a team from the county's council to be responsible for gathering the required information and ensuring an effective coordination across all departments, which is the SMB. The first model was implemented using Excel platform.

Ehlanzeni Municipality : There was a strong emphasis on financial and human resources' allocation, ensuring a suitable time frame for developing the model, and the department managers' commitment to put this into effect, while identifying the required data for compilation to save time gathering unnecessary data. The justification for using modest software in the three cases when presenting and analyzing the data was that the novelty of the model and the unique features of each case required developing customized software, which was unavailable at that time and costly as well. Later, customized software was purchased, like what Hertfordshire County did when using the Strategic Enterprise Management Software, known as “SEM” ( Woods and Grubnic, 2008 , p. 353; Read and Daum, 1999 , p. 23).

The final review of the action plan : Ehlanzeni municipality council has achieved an important step which is considered also as a unique one. Before starting the actual implementation, it included an item in the execution plan to invite the different stakeholders of the local community of the county to a meeting with the municipality council to present the model to them and take their comments on it, prior to the step of developing the cards. This was done in the context of the final review of the action plan. This procedure was not identified in the case studies of Charlotte and Hertfordshire, where it was not appearing that they invited the external stakeholders to take their opinions on the model and the overall performance system ( Mashoko, 2011 , p. 54).

5.2.2 Launching the project

The pilot application of the model : Charlotte City has applied a mix between the experimental approach for applying the model on some organizational units and the development of corporate scorecard. In the beginning, it developed corporate scorecard, after it had identified 21 objectives and included it in the card. After that, Focus Area Cabinets who are responsible for the five major focus areas previously mentioned developed scorecards for these areas; parallel to this, four key organizational units inside the city, out of 14, were chosen to build its own scorecards, on the contrary to Hertfordshire and Ehlanzeni. After the preliminary cards were built, an extended meeting was held to discuss the results and develop the scorecards; in a year and a half the BSCs was implemented across all the key organizational units in the city. Whereas, in Hertfordshire and Ehlanzeni, the corporate scorecards were developed and the attained results were discussed, and then the corporate scorecard was cascaded to different departmental levels ( Niven, 2003 , pp. 52, 275; A balanced scorecard hall of fame, 2005 , p. 11).

Developing and confirm ing the vision, mission and strategy : In this step there are two scenarios, either confirming the vision, mission and the strategy previously articulated, or developing any of them, or all of them based on the pilot application; or implementing the corporate scorecard in its preliminary design, where this approach could reveal a number of issues that are worth reconsidering. This is the benefit attained by the methodology adopted by the City of Charlotte, on the contrary to the other two case studies that depended mainly on learning by doing and applying improvements during the implementation process. Nevertheless, each of the two approaches has its pros and cons; however, the three cases studies have revealed that no changes were applied on any of the variables across the above-mentioned levels during the period between the experimental application or the preliminary execution and the reviewing of the results achieved for this level of implementation, which implies that sufficient time was provided and necessary discussions were held to reach the sound articulation for each of these variables in a way that fully reflects what each of the three local councils want to present to their local communities ( Mashoko, 2011 , pp. 38–39; Kaplan, 1999 , pp. 3–5; Woods and Grubnic, 2008 , pp. 54–57).

Designing the strategy map and identifying the objectives, performance indicators and measures : The three case studies have agreed on the importance of this step, and it usually comes next to the process of confirming the mission and the strategy. There was also a consensus on the methodology adopted to build the strategic map, where it followed the Kaplan methodology of designing maps from the top to the down. This included identifying cause-effect relationship between the major perspectives set on the scorecard and the desired results; then, it started to move downward to the bottom of the hierarchy reaching the level of the departments and the business units. The Hertfordshire County has used the concept of golden thread which reflects the path that connects the organization's strategy with the outputs related to the operational performance, right down to the level of individual work plans. Figure 4 illustrates a model for the strategy map as designed by the City of Charlotte. As for developing the performance indicators and measures, Charlotte City was able to achieve important development regarding used measures, where the city had 900 measures distributed among the different fields; this number was later decreased to 375 measures by filtering them and creating intra-linkages among them across the four perspectives of the card. The measures used were classified into activity measures, input measures, output measures and outcome measures. Whereas in Hertfordshire County, the measures were set through the coordination and consultation between the employees and the elected councilors, and clear definitions were identified for the different strategic challenges. This was further reflected in the measures. Concerning Ehlanzeni Municipality, the organizational BSC was generic, and logical links among the measures in each perspective was not clarified. Additionally, the lead and lag indicators had no clear linkages and were dominated by indices from stakeholder's opinions, and limited quantitative measures were considered as a point of weakness in developing the measures ( Kaplan, 1999 , pp. 3–4; Niven, 2003 , pp. 274, 282; Woods and Grubnic, 2008 , pp. 355–357).

Cascading the BSCs : After the process of developing the strategy map, the three case studies started to build the scorecards on the departments level, and linked that to the organizational scorecard, so that the services scorecards of the different departments, as per the terminology used by Hertfordshire, is a reflection of the organizational BSC. This is considered a crucial step to realize what is called organizational alignment around the organization's strategy ( Ayoup et al ., 2016 , pp. 86–88). For the purpose of developing cards, Ehlanzeni Municipality has confirmed the necessity of following the participatory approach among the interrelated departments. But it has witnessed difficulties in cascading cards on the lower level departments due to some shortcomings in the understanding of the employees on the strategy, or due to their inability to comprehend their role in a clear and accurate way ( Mashoko, 2011 , p. 42). This is the same issue that the Hertfordshire County faced, where the BSCs were not able to go down to the level of certain services in the county, and the organizational culture for some employees was considered to be the main reason for that. Here, each department or unit providing a certain service was responsible for developing its own scorecard, whereas Charlotte City succeeded in developing BSCs for all its organizational units over the period of a year and half since the beginning of implementing the model ( A balanced scorecard hall of fame, 2005 , p. 3; Woods and Grubnic, 2008 , p. 355).

5.2.3 Review and results reports phase

The review of BSCs results: This includes carrying out the necessary updates on the components of the corporate BSC, or on the level of each department's BSC, which in turn includes presenting the performance reports, and what might result from that of development to the objectives or the indicators or the measures of the used cards. According to the emergence of new urgent needs, this may include the level of minor or slight changes ( Niven, 2003 , pp. 279–280; Mashoko, 2011 , p. 56).

Presenting the results reports and reviewing the strategy: This illustrates that the departments responsible for the supervision on implementing the model has presented the annual reviewing reports covering the results achieved. These reports were submitted from the chief executive of council to an internal audit committee, as applied in Hertfordshire County. Additionally, the performance of the council is subject to monthly follow up. While allowing the employees to send their proposals to develop the measures and indicators of the scorecards, the local council may develop schemes to identify the opportunity for making any developments on the level of the mission or the strategy, as revealed in the case of Ehlanzeni District Municipality.

This framework is characterized by an openness that gives an opportunity to each case to implement the model according to its own special considerations.

6. Conclusion

The main argument of this paper is to provide a proposed model of the steps that should be taken into account by the local councils through the process of the BSC implementation. The paper indicated that there are three basic issues that constitute the context of adopting this model, and there are three important issues that must be taken into consideration when applying it. The first three dimensions include: real awareness of the need for a system that provides a balanced view not only to measure performance but also to manage it, that combines the ability to provide an explanation of tangible financial aspects and intangible nonfinancial aspects; adoption of the model was preceded by the existence of will at the central level to make real reforms at the local performance level and emergence of a central performance management system that requires local government organizations to comply with this system, in addition to the political will represented in supporting elected councilors and the bureaucratic will represented in supporting the leadership and executive staff to achieve a real performance reform. The other three include: first, the necessity of depending on the scientific method to obtain high-level support from different stakeholders, whether internal or external, by conducting the champion responsible for introducing the model for extensive research on the model's components and benefits in order to possess strong arguments and evidence to defend the use of the model, and one may seek the assistance of a team that conducts such a search process; second, contracting with a consulting firm that plays the role of facilitator for the model implementation, and giving the needed training sessions, in addition to providing the solutions that may appear through different processes, especially some stages that require technical expertise, such as building indicators, identifying appropriate measures and developing the strategy map; finally, capacity building of the local councils involve the employees in BSCs articulation of their departments, and merging individual development plans within the organization's development plans and creating a clear incentives system to make employees realize the returns accrued to them from the success of this model and performance development. All of these are crucial factors to build a steady BSC system. The future agenda of this study include further research about the available opportunities for the Egyptian local administration system to use this model, and analysis of the current local performance system to overcome the shortages and enhance the performance of local administration units.

The BSCs model: four perspectives

The BSC for public-sector organizations

Ehlanzeni district scorecard

The City of Charlotte's strategy map

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What Is a Balanced Scorecard?

• 26 Oct 2023

Think of your business’s most valuable assets. Talented employees, customer relationships, brand loyalty, research capabilities, and a strong company culture may come to mind. Yet, the things that often create the most value are intangible and difficult to measure and track.

When crafting business strategy , you must account for intangibles and give them as much weight as financial goals. In the online course Strategy Execution , Harvard Business School Professor Robert Simons introduces the concept of the balanced scorecard to help you do just that.

Here’s a primer on the balanced scorecard and three steps to apply it to your organizational strategy.

Access your free e-book today.

The balanced scorecard is a tool designed to help track and measure non-financial variables. Developed in 1992 by HBS Professor Robert Kaplan and David Norton, it captures value creation’s four perspectives.

“The balanced scorecard combines the traditional financial perspective with additional perspectives that focus on customers, internal business processes, and learning and development,” Simons says in Strategy Execution . “These additional perspectives help businesses measure all the activities essential to creating value.”

The four perspectives include:

• Financial perspective: Do your plans and processes lead to desired levels of economic value creation? Metrics include sales revenue, operating expenses, net income, and investment in assets.
• Customer perspective: Does your target audience perceive your product, services, and brand in the desired way? Metrics include quality, delivery speed, and customer service experience.
• Internal business process perspective: Do your organizational processes create value for customers? Metrics to track are related to operations and customer management, innovation, regulatory, and social processes.
• Learning and growth perspective: Does your organization support and utilize human capital and infrastructure resources to meet goals? Areas to consider are human capital (people, talent, and knowledge), information capital (databases, networks, and technology), and organizational capital (leadership capabilities and cultural alignment to company goals), each with its own set of metrics.

You should use the balanced scorecard in tandem with a strategy map , a visual way to illustrate the cause-and-effect relationships underpinning your business strategy.

“Without a strategy map, what you’re calling a balanced scorecard is really just a list of measures,” Simons says in Strategy Execution. “And those measures may or may not tie back to your intended strategy. Without a strategy map to tell the story, people in your organization will have no clue where those measures came from.”

The purpose of a balanced scorecard is to add actions to your strategy map and clarify which goals make others possible.

To get started, here are three steps to crafting your organization’s strategy map and balanced scorecard.

Related: How One Television Producer Is Putting Her Strategy Execution Skills into Action

How to Create a Balanced Scorecard: 3 Steps

1. craft a strategy map.

Before creating your balanced scorecard, you must craft a strategy map to base it on. Start by listing the scorecard’s four perspectives in this order:

• Financial perspective
• Customer perspective
• Process perspective
• Learning and growth perspective

“Learning and growth” will be the foundation, so position it at the bottom of your strategy map.

Next, list your goals in each category using action verbs. What do you intend on doing? For example, in the “learning and growth” category, you could write “train staff on a new content management system.” Next to “customer perspective,” you could write “increase customer satisfaction.”

These goals are what Simons calls “critical performance variables.” For your strategy to succeed, you must achieve them.

“This exercise is asking you to imagine what variables are so serious that—if you failed to deliver on them—you could imagine your entire strategy collapsing,” Simons says in Strategy Execution . “These are the critical performance variables that you must monitor if you want your business to succeed.”

Finally, draw arrows pointing upward between each perspective category, so “learning and growth” points to “process,” which points to “customer,” which points to “financial.”

“The arrows are the most important part of a strategy map,” Simons says in the course. “They reveal cause-and-effect relationships so that everyone in a business can understand the theory of value creation. The outputs from one stage are the inputs to the next.”

2. Select Measures

Once you’ve created your strategy map, start your balanced scorecard by selecting how you’ll measure progress for each objective.

Assess measures using three questions:

• Does the measure link to my strategy map?
• Is it objective, complete, and responsive?
• Does it link to economic value?

For example, if your objective is to “increase customer satisfaction,” measures could include:

• Number of referrals
• Number and speed of resolved support tickets
• Number of testimonials
• Net promoter score (NPS)

Link these measures to the goal in the strategy map to objectively measure, change, and tie them to your organization’s economic value.

Selecting the right measures is critical because, as the balanced scorecard’s creators note in the Harvard Business Review , “What you measure is what you get.”

“You can have the best strategy in the world,” Simons says in Strategy Execution . “You can communicate that strategy to employees in different ways—town hall meetings, videos, company newsletters. But at the end of the day, what everyone pays attention to is what they're measured on. So, you need to be sure that measures throughout the business reflect your strategy, so that every employee will devote their efforts to implementing that strategy.”

However you decide to measure objectives is where your team will focus its efforts, so choose wisely.

Related: 5 Strategy Execution Skills Every Business Leader Needs

3. Set Targets

The final step to creating your balanced scorecard is setting targets. What metrics must you hit to achieve your goals using your selected measurements? Consider the metric you want to reach and within what timeframe.

In the case of increasing customer satisfaction, targets for each sample measurement could be:

• Number of referrals: Garner 500 referrals next year
• Number and speed of resolved support tickets: Resolve 75 percent of support tickets within 48 hours
• Number of testimonials: Gather 100 testimonials next year
• Net promoter score (NPS): Target an average score of eight or above by 2026

Setting targets helps quantify what successful strategy execution means for each measure.

In Strategy Execution , Simons notes that, when looking at your balanced scorecard, the further you move to the right, the more you can objectively measure and reward performance. The further you move left, the more performance is subjective.

Set challenging but achievable targets. Remember that not accomplishing your “learning and growth” goals can impact the rest of your strategy map.

Building and Leveraging Your Strategy Toolkit

After creating your strategy map and balanced scorecard, the last, ongoing step is tracking and reporting progress toward each objective.

Use both to align on strategy, flag areas needing more attention, and highlight how goals connect. Everyone’s efforts funnel into a specific part of the strategy critical to the team’s overall success.

The balanced scorecard is just one tool to help execute your organization’s strategy. By opening up to new ways of thinking about strategy, you can reach business goals and advance your career as a strategic leader.

Are you interested in designing systems and structures to meet your organization’s strategic goals? Explore our eight-week Strategy Execution course, and other online strategy courses , to hone your strategic planning and execution skills. To find the right HBS Online strategy course for you, download our free flowchart .

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