Corporate governance and the performance of South African national government departments : a balanced scorecard perspective

Abstract

When poor organisational performance is exposed, factors responsible for such results also get revealed, and progressive organisations strive to turn those factors into drivers of performance. Linked to public performance is also the need to demonstrate transparency and accountability in public governance, particularly because of the public sector’s well-acknowledged role in determining the success in the performance of the national economy. Despite the South African government’s pivotal role in the country’s economy, its performance is depressed, which is caused by a plethora of performance challenges, among them ineffective corporate governance mechanisms and practices. The aim of this study is to investigate the implementation of corporate governance, determine possible barriers to corporate governance and determine their influence on the performance of South African national government departments. Ultimately, the study aims to develop a model for the implementation of corporate governance for the improvement of organisational performance within national government departments in South Africa. The study was conducted using a quantitative survey method, in which 260 managers were purposively drawn from national government departments based in Gauteng province. Performance was measured using a combination of Balanced Scorecard (BSC) indicators and another unidimensional measure of overall organisational performance. The agency theory provided the theoretical foundation of the study. The collected data were analysed using a combination of descriptive statistics, Exploratory Factor Analysis and Structural Equation Modelling (SEM), based on the Partial Least Squares technique. Application of Exploratory Factor Analysis yielded six barriers to corporate governance, namely, governance systems and processes, policies, managerial skills and competence, internal environment, external environment, and client service delivery. SEM results showed that only two barriers (managerial skills and competence, and internal environment) were inversely related to the implementation of corporate governance. However, the external environment factor emerged as a driver of corporate governance and organisational performance. Only the internal environment was inversely related to organisational performance. Further, SEM results indicate that corporate governance is positively related to all four BSC indicators (customer satisfaction, learning and growth, internal processes, and financial control). In turn, three BSC indicators (customer satisfaction, learning and growth, internal processes) exert a positive impact on organisational performance. The study contributes to theory on the application of the BSC as a performance management tool in the public sector. It also contributes to the literature on how corporate governance can be harnessed to improve performance in the public sector. It further identifies the barriers and drivers to corporate governance and performance in the public sector. Practically, the study proposes a model for the application of corporate governance for the improvement of performance in national government departments.