A public sector service organization is considering whether to use a balanced scorecard or a value for money approach based on the three Es to assess…

The Value for Money (VFM) framework, based on the three Es (Economy, Efficiency, Effectiveness), is a cornerstone of public sector performance measurement. The Balanced Scorecard (BSC) is also widely adapted for this context.

Public satisfaction is a crucial measure of 'Effectiveness' in the VFM framework, as it indicates whether the service is achieving its intended outcomes. Similarly, in a public sector BSC, public satisfaction is a primary metric within the 'Customer' (or 'Citizen/Stakeholder') perspective.

The three Es approach was indeed designed for and is central to public sector auditing and management. The BSC, while originating in the private sector, has proven to be a flexible tool that public sector organizations use to translate their unique strategic objectives into a comprehensive set of performance measures.

A. The Balanced Scorecard's 'Internal Business Process' perspective explicitly measures operational efficiency through metrics like cycle times, resource utilization, and cost per transaction.

B. Both frameworks consider financial and non-financial aspects. The three Es include 'Economy' (cost of inputs) and non-financial measures for 'Efficiency' and 'Effectiveness'.

D. The three Es approach is not solely about cost reduction. 'Effectiveness' is fundamentally concerned with the extent to which the organization's objectives and desired outcomes are achieved.

1. CIMA Official Study Text P2 Advanced Management Accounting (2019). Chapter 3

Section 4

"Not-for-profit organisations

" discusses the application of both the Balanced Scorecard and the Value for Money (three Es) framework in the public sector. It clarifies that effectiveness is about "doing the right thing" (achieving objectives) and that the BSC's customer perspective in the public sector focuses on service users (the public).

2. Kaplan

R. S. (2001). Strategic Performance Measurement and Management in Nonprofit Organizations. Nonprofit Management and Leadership

11(3)

pp. 353-370. This article by the co-creator of the Balanced Scorecard details its adaptation and use in non-profit and government organizations

confirming its applicability beyond the private sector. It highlights how the mission and customer perspectives are modified for this context. DOI: https://doi.org/10.1002/nml.11307

3. National Audit Office (UK). (2018). Framework for Value for Money audit. This official document from a major public sector auditing body defines Value for Money based on Economy

Efficiency

and Effectiveness. Section 1.4 states

"Effectiveness: The extent to which the objectives of a policy

programme or project are achieved." This confirms the framework's focus on achieving objectives

not just cost.

4. LSE Public Policy Group. (2011). Maximising the value of public spending: a review of the VFM approach. This university-affiliated report discusses the VFM framework's origins and application in the UK public sector

establishing it as a purpose-built model for this environment. It also notes the rise of complementary frameworks like the Balanced Scorecard. (See Section 2: "The VFM approach in the UK").