The project aims at developing a novel methodology for monitoring the performance of organizational units within a large and complex local government. The objective is to give the top management the levers for providing incentives to the directors of the sub-units within a complex municipality, by calculating the full cost of activities and “products” and by assigning corresponding performance indicators along these dimensions of analysis. The model is applied to analyze the financial statement of the Municipality of Milan by organizational unit (Directions).
In complex public organizations, like a big municipality, it is often very difficult for the top manager to have a clear picture of performance obtained by the sub-units – which usually benefit of substantial autonomy in their operations. The general director, in this view, has not time to undertake specific activities of internal auditing directly, and instead should have a “scoreboard” to get synthetic and comprehensive picture about how sub-units are performing with respect to their assigned targets.
This research project aims at developing a novel methodology for monitoring the performance of organizational units within a large and complex local government. The objective is to provide the top management with the levers for providing incentives to the directors of the sub-units within a complex municipality, by (i) calculating the full cost of activities and “products” and by (ii) assigning corresponding performance indicators along these dimensions of analysis.
The project applies in a specific case, and applied the methodology with a particular objective of analyzing the financial statement of the Municipality of Milan by organizational unit (Directorates). The commitment of the project stems directly from the General Director, and the final goal is to create an instrument for analyzing the dynamics of revenues and costs of the Municipality internally – i.e. by Directorate – for favoring a clearer decision-making process for allocating the resources.
On a practical ground, the application to the case of the Municipality of Milan followed three steps:
- Identification of a common scheme of Income Statement, to be applied to all the Directorates within the Municipality;
- Definition of categories of costs to be included (direct and indirect) and suggestions for performance indicators;
- Application of the model to five pilot directorates.
