Designing a Balanced Scorecard for the Evaluation of a Local Authority Organization

Abstract

1. Introduction In 1985, the member States of the Council of Europe, agreed to the constitutional and legal foundation of Local Self-Government, convinced that Local Authorities, the main foundation of any democratic regime, can provide an administration that can be both effective and close to the citizen, once they are given a wide degree of autonomy to their operation and resources management. The European Chapter of Local Self-Government (1985), as this agreement was named, defined the concept, the scope and the whole framework in which Local Authorities are entitled and committed to operate. This Chapter was incorporated to the Greek Legislation in 1989 (Greek Law No 1850, 1989) and in coherence with the Greek Constitution and Law No 2539/1997, changed the administrative map of Greece and created a new form of local administration units, named as Local Authority Organizations (LAOs). The newly established municipalities, along with the pre-existing ones, constituted the First (A') Degree LAOs, while the Prefectures constituted the Second (B') Degree LAOs (Ministerial Arbitration No 25565, 1998). L.A.Os are entitled, according to national economic policy, to draw financial resources of their own, part of which derive from local taxes and charges, whereas the other part is Government participation. LAOs may allocate these resources freely, within their operational framework and under the State's supervision in terms of Law maintenance (European Chapter of Local Self-Government, 1985). As the first core of administration, LAOs' have such an authority and financial autonomy which enable them to intervene, in a determinant way, in many aspects of their population's life. Therefore, the assessment and evaluation of their performance provides useful information and evidence of their effectiveness in serving community needs. Although traditional financially-based performance measurement systems provide information about the financial activity of an organization, they seem to fail when it comes to the measurement of all the critical success factors, even in the contemporary business environment. These systems seem to fail even worse in the case of LAOs that are non-profit organizations. To the direction of the evaluation of the Greek public administration, the Greek Law No 3230 (2004) established a Management-By-Objectives (MBO) framework and an efficiency measurement system in Greek public administration. Directions and guidelines for the implementation of this Law, were given by the Ministry's of Interior Circular Letter No 5270/2007, whose main concept was based on a new approach to performance measurement systems, developed in the early 1990's by Robert Kaplan and David Norton, named > (BSC). According to them, this new evaluation method supports managers to translate a company's strategic goals into a coherent set of performance measures, not only in the financial level but also in critical areas like product, process, customer and market development (Kaplan and Norton, 1992; 1993). Trying to integrate the 2007 Circular Letter into the Greek Law No 3230, this paper attempts to propose and design such a scorecard that could be appropriately applied to the performance evaluation of a LAO. The remaining of the paper is organized as follows: The second chapter gives a brief description of the basic concept of the BSC, as well as its implementation as a strategic management tool. In the third chapter, the transformation of the classic BSC in the case of a LAO and its architecture modification are proposed. The fourth chapter describes the methodology followed and the designing process of such a BSC for a Greek typical LAO and presents the final formulation of the scorecard whereas the last chapter summarizes the final conclusions of the paper. 2. The Balanced Scorecard 2.1. The Concept Many performance measurement systems have been developed throughout the years, in the business or private companies' sector. …