Examining the process of performance measurement system design and implementation in two Italian public service organizations

• Published date: 01 November 2017
• Author: Enrico Bracci,Laura Maran,Robert Inglis
• DOI: http://doi.org/10.1111/faam.12131
• Date: 01 November 2017

Received: 23 February2013 Revised: 19 June 2015 Accepted:19 October 2015

DOI: 10.1111/faam.12131

ORIGINAL ARTICLE

Examining the process of performance

measurement system design and implementation

in two Italian public service organizations

Enrico Bracci1Laura Maran2Robert Inglis2

1Universitàdegli Studi di Ferrara, Italy

2RoyalMelbourne Institute of Technology

(RMIT),Australia

Correspondence

LauraMaran, c/o School of Accounting – RMIT

University,445 Swanston Street, Bldg. 80, Level

11,VIC 3000, Australia.

Email:laura.maran@rmit.edu.au

Theauthors gratefully acknowledge the discus-

sants’comments from the IRSPM XV Conference

2011,held in Dublin (Ireland), and the EIASM

Conference2012, held in Milan (Italy). Despite

theauthors’ common effort, their individual con-

tributioncan be identified as follows: E. Bracci,

thirdand fifth sections, L. Maran, second, fourth

andseventh sections and R. Inglis, first and sixth

sections.

Abstract

In the last two decades, the adoption of new public management

(NPM) practices in the public sector has increased as public sector

organizations seek to improve efficiency, effectiveness and public

accountability. We present case study findings of a NPM initiative

to implement balanced scorecard (BSC) performance measurement

systems in two Italian public sector organizations. This study con-

siders the question of whether the BSC development process can

be effectively translated into the public sector context. Our find-

ings highlight the importance of aligning the development of per-

formance management systems with a greater understanding of the

internal and external environment of public sector organizations.

Our results further emphasize the significant role of emergent stake-

holders and management culture for the success of NPM perfor-

mance management initiatives.

KEYWORDS

balanced scorecard, performance management, public sector, social

services, stakeholders

1INTRODUCTION

Using Otley's (1999) performance management model, this article examines the processof design and implementation

of balanced scorecard (BSC) performance management systems at two Italian public sector organizations and high-

lights factors that impact the successful adoption of the BSC.

BSC initiatives reflect shifts by public sector organizations towards using contemporary business-oriented perfor-

mance management systems that focus on performance and accountability as part of a broader movementof new pub-

lic management (NPM) (Arnaboldi, Lapsley,& Steccolini, 2015). Performance management systems are at the heart of

public sector reforms in Italy, which reflect a shift towards a more effective and efficient public sector management

(Arnaboldi & Azzone, 2010; Liguori, Sicilia, & Steccolini, 2012; Minelli, Rebora, & Turri, 2009; Ongaro, 2009). NPM is

characterized by a distinction between policy and operations and an emphasis on private sector practices and values

(Charih & Rouillard, 1997; Gow & Dufour, 2000; Hood, 1991, 1995). Gow and Dufour (2000) see the public–political

Financial Acc & Man. 2017;33:406–421. wileyonlinelibrary.com/journal/faam c

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BRACCI ETAL.407

dimension as one that distinguishes NPM from private sector management, and where a shift (or a blend) in the values

and culture of public sector organizations (to emphasize, for example,service effectiveness and cost efficiency) is a key

success factor (Dwivedi & Gow,1999; Lane, 1999).

Evidence to date, however, suggests that implementation of performance management systems under NPM

reforms is far from linear and straightforward (Arnaboldi et al., 2015), and may have unintended and adverseconse-

quences(Diefenbach, 2009). Previousresearch identifies difficulties such as deviant behavior, negative feedback loops,

poor professionalism of public sector staff and inconsistency between organization type and the performance manage-

ment system used (Adcroft & Willis, 2005;Bevan & Hood, 2006; Fryer, Antony,& Ogden, 2009; Pollanen, 2005; Vakkuri

& Meklin, 2003) that maylead to different outcomes or even to abandonment of the performance management system

(Lawton, McKevitt, & Millar,2000; Popper & Wilson, 2003). Despite mixed findings about the success of performance

management systems in the public sector (Lapsley,2008), they are considered necessary to support improved produc-

tivity (Olden & Smith, 2008) and accountability (Walker& Dunn, 2006).

Arnaboldi et al. (2015, p. 8) identify the BSC as one of five ‘performance management technologies’ regularly used

in the public sector. They note that it can be difficult to choose the right technology for performance management in

the complex deliveryof public services.

Hoque (2014, p. 37) also documents the research into BSC performance management systems in the public sec-

tor. Studies across a range of countriesexamine implementation of the BSC in healthcare management (Grigoroudis,

Orfanoudaki, & Zopounidis, 2012; Radnor & Lovell, 2003), higher education institutions (Barndt, Mcgee, & Cataldo,

2011; Chan, 2007; Wu, Lin, & Chang, 2011), local government (Askim, 2004; Kloot & Martin, 2000;Nilsson, 2010) and

federal government departments (Chenhall& Euske, 2007; Hoque & Adams, 2011). In his extensive 20-year review of

the BSC research literature, Hoque (2014) concludes that further research is needed to examinethe use of the BSC in

the public sector.

This study considers the question of whether the BSC development process can be effectively translated into

the public sector context. While other studies examine the outputs and outcomes of BSC implementation, rel-

atively little is known about the process of developing BSCs in the public sector (Dreveton, 2013). We posit

that this development process can impact the ability of the BSC to enhance organizational performance and

accountability.

Wecompare and contrast the BSC development in two public sector organizations over a three-year period, and we

document and analyse the process of establishing strategic objectivesand performance measures. In so doing, we doc-

ument and examinethe development of ‘strategy maps’,an aspect of the BSC noted as being under-researched (Hoque,

2014). Weuse Otley's (1999) performance management model, which incorporates a five-step process of performance

managementsystem design, to examinethe development of the BSC in each organization. A key aspect of the Otley and

BSC models (Kaplan & Norton, 1992, 1996, 2001c) is the link (or‘fit’) between strategy and performance measurement

design (Kaplan and Norton, 2000, 2001a, 2001b, 2008). Reflecting contingency theory, performance measures are

viewed as a function of the organization's strategy (Cavalluzzo & Ittner,2004; Gupta, Dirsmith, & Fogarty, 1994) and

organizational performance as a product of the fit between strategy and performance measurement practices (Luft,

1997). Rather than focusing on organizational performance, however,this study adopts a holistic approach (Arnaboldi

et al., 2015) in looking at how public sector organizations interpret public sector contingencies in the process of devel-

oping their strategy and performance measures.

This study identifies the success factors for BSC implementation in two Italian public sector organizations. Our

findings highlight the influence of political and cultural factors, and the significance of the multiple and often con-

flicting goals of stakeholders in the process of formulating strategic objectives and performance measures. We also

identify the potential of Otley's (1999) framework as a means to assess and evaluate the BSC in the public sector.

The article is structured as follows: the next section examines the relevant public sector and social services reforms

in Italy, for the two case organizations. We outline the motivation for NPM reforms and then present the theoreti-

cal framework, along with the case study research strategy.This is followed by an analysis and interpretation of two

case studies of Italian public sector social services. Discussion and concluding comments are provided in the final

sections.