Posted by Lancing Farrell 700 words
There have been a number of posts on public value (use the theme ‘public value’ to find them). The idea that is is important and how it relates to private value has been discussed. This post looks at how public value can be measured using the Public Value Scorecard.
According to Mark H. Moore, public managers can improve the performance of public organisations by committing to the discipline of a public value ‘bottom line’. In the private sector, the ‘bottom line’ is a compelling and effective business concept. This post discusses the practical application of Moore’s public value scorecard in local government.
Moore describes public value as the ‘collective view of the public or community about what they regard as valuable, especially with regard to the use of public money and authority’. The arbiter of whether or not public value has been created is the collective citizenry. It is similar to the concept of shareholder value in the private sector. He says that public managers need to try and understand what constitutes public value so that they can set out to deliver it through their operations and be held accountable for their performance.
Moore has developed the public value scorecard (based on the balanced scorecard concept) as a tool for public managers to use to provide a public sector ‘bottom line’. It aligns with his strategic triangle and comprises a public value account and scorecards for legitimacy and support, and operating capacity. The following diagram illustrates how the public value scorecard integrates with the strategic triangle.
The public value account (PVA)
The starting point is the PVA. It is essentially an income statement, with revenue flows accounted for in the right hand column and costs in the left to provide the public value equivalent of the ‘bottom line’ using dimensions of value relevant to the public sector that are simple and non controversial. Its purpose is to distribute managerial attention to results produced in the past and to the conditions necessary to improve performance and results in the future.
Standard form Public Value Account and worked example for waste management (click to enlarge)
The categories of value in the Public Value Account are really ‘valued effects’, which need real quantitative and empirical data to capture some sense of the value produced. Many of these dimensions of value do not have a financial measurement. Instead, the public that authorises and pays for the activities needs to determine their value.
This makes calculating the ‘bottom line’ difficult. A set of financial costs is being compared to a complex set of material, ‘valued’ effects that are hard to measure and difficult to compare with the costs of production (or with each other). This includes any negative or positive unintended consequences in pursuing the organisation’s mission. Ways to measure the positive material effects of organisational activities are essential to create a conceptually sound and practically useful ‘bottom line’.
The financial costs can be readily measured using the organisational accounting systems. In comparison, the ‘revenues’ for public value are mainly ‘valued’ effects or material accomplishments related to the organisation’s mission, which can be measured using techniques such as surveys and objective or independent technical assessment.
Moore describes this approach as ‘value-oriented’ (or value-led) management. It puts the production of value at the centre of operations while acknowledging the complexities of defining and measuring public value. Public managers need a way to move forward without becoming confused by philosophical complexities or ignoring them to over simplify and focus on a single numeric value as a ‘bottom line’.
Moore also describes an important feature of valuing performance in the public sector. Both individuals who interact with public organisations and the broader community place value not only on the financial costs of production and the ultimate effects of activities, but also on features of the actions of the organisation in producing those effects. For example, has the organisation been fair in its dealings with service recipients?
To help breakdown the task for public managers, Moore has developed scorecards for the legitimacy and support, and operational capability perspectives. These are discussed in Part 2.
Moore, Mark H, 2013. Recognising Public Value.
Other posts on public value