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Origination and History of Balanced Measures Approach

Location: Charlotte, NC
Contact Name: Lisa Schumacher
Position/Office:Budget and Evaluation Dept.
Researcher: Charlie Bennett
Position: Director, United Way of America

Outcome Measurement Implementation

The City of Charlotte began developing and implementing their balanced scorecard measurement system approximately three years ago. Charlotte’s interest in the balanced scorecard approach resulted from their interest in using a more strategic, forward-looking framework to organize and implement performance measures. Prior to using the balanced scorecard, they had been measuring performance for decades in a more traditional management-by-objectives context.

In 1990, Charlotte City Council chose five areas (community safety, transportation, economic development, neighborhoods, and restructuring government) on which to focus its strategic plan. These priorities formed the basic categories in their "corporate" level scorecard. In the mid-1990s, several Councilmembers advocated for more outcome- or results-oriented measures. At about the same time, the City Manager became interested in the balanced scorecard approach, having read Robert Kaplan and David Norton’s early articles published in the Harvard Business Review. This essentially marked the beginning of the city’s balanced scorecard efforts.

During the first year of implementation in 1996, the City Council established the city’s "corporate" scorecard, and city staff from four pilot business units began developing their balanced scorecards. By the end of 1997, all 13 of the city’s business units had at some level developed their measures and balanced scorecards based on the corporate scorecard. Although Charlotte was the first U.S. city to adopt the balanced scorecard approach, the interviewee considered their work to be still evolving and maturing.

Charlotte is pursuing a balanced scorecard approach to performance measurement in the more formal sense. That is, they categorize measures according to the four "perspectives" typically associated with a balanced scorecard: financial, customer, internal business processes, and learning and growth. All 13 of the city’s business units participate in the measurement system, tracking a total of 266 measures. The customer perspective is the most emphasized of the four perspectives, accounting for 38% of the total measures. The other three perspectives account for the following: internal processes, 27%; growth and learning, 21%; and financial, 13%.

The next steps that Charlotte plans to take to improve its balanced scorecard system include the following: condense the current list of performance measures to the "critical few," continue refining their business unit plans and scorecards, move to a quarterly reporting system (from the current semi-annual schedule), and eventually link performance results and resource allocations.

Charlotte uses their balanced measures for several purposes: to communicate performance information to elected officials and the public, as input in their strategic planning process, in annual business unit and employee performance plans, and to identify areas for further evaluation and improvement.

The City of Charlotte’s performance measurement effort has provided value to the city in the following ways:

• Measuring performance has clarified vague concepts like strategic goals.
• The balanced scorecard helped to integrate common goals across departments.
• It has allowed them to set their performance measures into a more comprehensive, strategic context.
• It has encouraged them to narrow their list of performance measures to those that are more meaningful and useful.
• Building the scorecards has developed consensus and teamwork throughout the organization.

One of the key lessons learned has been that implementing a balanced scorecard system looks a lot easier than it is in reality. It requires city staff to learn new ways of thinking about the work they do, and then to identify measures that gauge their success. This presents many challenges to management and staff related to changing existing practices. To successfully meet these challenges and the expected resistance, management must remain committed to the effort over the long haul. It is also very helpful to have high level champion(s) who can provide committed leadership.

Another lesson learned was that challenging, but achievable "stretch" targets must be set in a nonpunitive context. If staff perceive that their budgets and other forms of support are at risk if actual performance results do not meet targets, buy-in and commitment will be negatively affected. Although Charlotte has begun to explore ways in which their balanced scorecard can be integrated into their resource allocation process, they are moving with care on this issue in light of this concern.

See above for a discussion of barriers regarding expected resistance, difficulty of this type of work, and the premature linking of scorecard results and resource allocations, and how Charlotte has dealt with these issues.