The overarching research question addressed in this thesis is whether or not performance management can facilitate organisational intelligence in governmental organisations. Like most themes under the umbrella of so-called New Public Management (NPM), performance management and its applicability to governmental organisations is subject to much debate.
The analysis is based on clinical research into a Norwegian local government experience in which the performance management-system “the Balanced Scorecard” (BSC) was implemented over a period of five years, 1996-2001. The thesis narrates and compares the parallel change experiences of four functional units within the context of Larvik Municipality in Norway: the Technical department, the Culture and Sports department, the Work and Employment department and Byskogen primary school. Together, these departments cover a wide range of the public services provided by Norwegian municipalities. Informed by March and Olsen’s (1976) distinction between two fundamental processes of organisational intelligence, the analysis started from the following assumption: in order to fruitfully discuss the performance management doctrine, its ability to facilitate both fundamental processes of organisational intelligence had to be taken into account: management control is one, organisational learning the other.
The first question addressed is whether management control was facilitated by the BSC-reform. The narration of the departments’ experiences shows that this was indeed the case. However management control can take many shapes. In the relation between upper management and the Technical departments, a “close” management practice emerged. This was a system with many, detailed and unambiguous controls; a system for close measuring and monitoring of most aspects of performance: outputs as well as outcome. In the case of Byskogen school, on the other hand, no such system emerged. Here, measures of performance were few and ambiguous. Byskogen’s PI-system facilitated “prospects-oriented” management control; a system that could be used by the CEO less as a tool for close measuring and monitoring than as a tool for evaluation, planning and estimation of future prospects.
As for the other process of organisational intelligence, learning from experience, the departments’ experiences varied less. The narration showed how the BSC-reform over time brought all four departments studied into a substantially more active intrusiveness mode. This means that they actively and regularly scanned a range of sources in their respective environments for feedback about their performances, and subsequently made considerable efforts to make sense of it. Hence, the departments were given the opportunity to learn form their experiences.
In fact, innovative interpretation activities were spurred in all four departments, not least in Byskogen, by arguably “ambiguous” data from e.g. surveys of staff and user satisfaction. The term used in this thesis for such indicators of performance is “tin openers”. By itself, a tin-opener provides only an incomplete and inaccurate picture. Such indicators do not give answers but prompt further interrogation and inquiry, or at least discussion. Discussions about the significance and implications of such data took place on multiple levels in Larvik: Between department managers and department staff; Between department managers and upper management in the municipality and, last but not least, between managers of different departments.One of the lessons that can be drawn from the Larvik experience is thus that in managing complex, decentralised governmental organisations, the BSC is a tool as much, if not more, attuned to facilitate the process of organisational learning as the process of management control.
This conclusion has several implications for an important aspect of performance management; the question of what makes for good performance indicators. According to Neil Carter (1991), it is an established truth in the management accounting literature that the only good performance indicator (PI) is an unaboiguous PI. In Larvik, tin opener PIs proved just as valuable as dials in facilitating organisational intelligence, in that they often provided the basis for the process of learning. The Larvik experience thus forcefully challenges the “established truth” that only dials are good PIs. By it’s “parents”, Kaplan and Norton, the Balanced Scorecard is presented as a tool for enhancing strategic management above all. The Larvik experience illustrated that the BSC is in fact able to facilitate such “strategy-focusedness”, as a hierarchy of objectives did emerge. However, the experience also indicated that there are limits to the scope for strategic management in a decentralised, diversified organisation like a municipality. The thesis argues that the ability of the Balanced Scorecard to “translate strategy into action” in is dependant upon at least two things. The first is the strategies themselves, the second the design of the management process.
This latter point leads us to the next and last lesson I draw from the Larvik experience: implementation and management style matters. Not forgetting the arguably multiple and substantial successes of the 1996-2001-reform in Larvik, make no mistake: the BSC is no magic formula. The management concept cannot be distinguished from its implementationThe fact that both processes of organisational intelligence were facilitated in Larvik, as well as a notable degree of strategic management, is hence evidently due to a mixture of the BSC concept itself, a series of innovative managerial interventions and an inclusive management style.