The Effect of Balanced Scorecard on the Organizational Performance of Holeta City Administration

Abstract

The BSC approach, implemented since 2010 in Oromia, is believed to improve efficiency and effectiveness in financial utilization, customer service, internal business process and learning and growth. Assessments of the effects of BSC on the organizational performance of Holeta City Administration and the progresses achieved from the implementation of BSC interventions during the last decade would absolutely be essential in promoting reflective practices strengthening leadership, in allowing problems to be identified at early stages of implementation so that corrective actions could be taken promptly. This study was conducted to examine the effect of implementation of balanced scorecard on organizational performance of Holeta City Administration. Statistical population of the study consisted a total of 1444 (767 male and 677 female), employees of Holeta City Administration. Stratified sampling technique was used to classify the employees into male and female staff members. A representative sample of 230 respondents (sampled from 19 of the total 29 offices) was taken from each category proportionately by a simple probabilistic random sampling technique. Primary data was gathered from the selected respondents by using self-administered questionnaire. Univariate and multivariate analysis of the data were made using Microsoft Excel, MINITAB 14 and STATA as appropriate. Out of a total number of 230 questionnaires dispatched, 176 (67.05% male) and (32.95% female). In terms of academic qualification, 7.95% respondents were diploma holders, 65.34% were Bachelor’s degree holders, 26.14% were Master’s degree holders and the remaining one person was a PhD holder. In terms of work experience, the largest group, 27.27% served for 11-15 years, followed by 6-10 years (23.86%), 16-20 years (16.48%), 1-5 years (14.20%), 20-25 years (10.23%) and more than 25 years (7.95%) in that order. The largest group, 40.91% of the respondents were within the age range of 25-35 years followed by 35-45 years (32.39%), 45-55 years (19.32%), 20-25 years (5.11%) and more than 55 years (2.27%). Hierarchical classification responses from 57 selected respondents (three from each sector office) presented in a dendrogram identified three main clusters. The pattern of distribution of respondents from different sector offices over different clusters was apparently random, showing that there was no clear association between respondents from different sector offices and their responses. The effect of the implementation of BSc on organizational performance in Holeta City Administration was found to be partially successful as compared to the expectation. The results of the study revealed that the majority of the respondents (50%-62%) favorably assessed as they agree or completely agree on the existence of change in financial processes/cost effectiveness, internal business processes, customer satisfaction, and the ultimate organizational performances, indicating the positive perception of the employees on BSC for possible better implementation in the future. Limitation including lack of proper rewards and incentives, lack of capacity building, poor knowhow of leadership, low support of leadership to the employees, resistance from leadership, resistance from staff members and poor knowhow of employees were observed as challenges. Multivariate relationships between the perspectives, supported by structural equation modeling (SEM) methodology, depicted that customer satisfaction, internal processes and learning and growth showed significant impact on organizational performance. Even if positive results were achieved in many aspects, overhauling the whole process of the future implementation of BSC in Holeta City Administration is needed. The strengths in terms of the fact that desirable relationship between customer satisfaction, internal processes and learning and growth showed significant impact on organizational performance need to be capitalized on working out better to enhance the status of rewards and incentives and learning and growth perspectives. The findings reported here need to be disseminated to the sector offices and applied in order to locate and overhaul the weak loops in BSC implementation. It is also pertinent that clear and structured guideline of BSC implementation by employees and the leadership setting the responsibilities and accountabilities of each party are needed. It would also be equally worthwhile if the City Administration considers improving the level of salary and per diem.