اثرات عملکرد با استفاده از کارت امتیازی متوازن : یادداشتی بر تجربه هلند

This article aims to contribute to understanding how to use the Balanced Scorecard (BSC) effectively. The BSC lends itself to various interpretations. This article explores how the way in which the BSC is used affects performance. Empirical evidence from Dutch firms suggests BSC use will not automatically improve company performance, but that the manner of its use matters: BSC use that complements corporate strategy positively influences company performance, while BSC use that is not related to the strategy may decrease it. We discuss the findings and offer managers guidance for optimal use of the BSC.

The Balanced Scorecard (BSC) is a strategic management system that aims to clarify strategy and to translate it into action.1 It is widely used by organizations as a tool to assess and manage their companies’ organizational performance. In their publications regarding the BSC, Kaplan and Norton have emphasized the need for companies to align their BSC with their strategy in order to reach maximum benefits. They illustrate and support their ideas with ‘case-type’ examples. However, surprisingly little research has been done to examine Kaplan and Norton’s performance claim and its generalizability using larger samples.2 The danger is that managers’ expectations may be raised too much, leading to potential disappointment.3 As an ‘ideational’ innovation, i.e. novel ideas that lack a material component,4 the BSC lends itself to various interpretations. Under the same label, the BSC can be and is used in different ways involving many different functional areas and indicators. Different ways of implementing and using the BSC may have different effects on company performance.5 As the Exhibit shows, usage of the BSC will not automatically improve company performance. The case of the financial institution illustrates that BSC interpretation and implementation are not straightforward. The company made three attempts to implement and use the BSC, and each time it was interpreted and used differently. The first two implementations were disappointing, but the third and final attempt was successful. As one respondent commented, ‘The BSC is a good concept but at the same time the instrument’s actual guidelines are vague, maybe too vague. You need some experience to get it right. Finally, after three implementations we figured out the process and what was most critical about the instrument for us.’ This case suggests that ‘use matters’, i.e. the way the BSC is interpreted and used is key for successful BSC application. This raises the question of how a company should implement and use the BSC to increase organizational performance (see Exhibit). Exhibit. Organizational impact of BSC implementation and use in a financial institution A large financial institution in the Netherlands decided to implement the BSC to increase organizational control. During the period 1996–2001 they made three attempts, all accompanied by management consultancies. The first two failed but the third implementation appears to have been successful. The following description illustrates that the way the BSC is interpreted and used matters. The way the BSC is used to complement corporate strategy and the way the BSC is operationalized to support comprehensive performance measurement appear key factors for successful implementation. In 1996, the board of directors of the financial institution took the initiative for introducing and developing a scorecard on corporate level. The aim was to develop a coherent set of performance indicators linked to the firm’s strategy. With a moderator present, members of the board and the department heads participated in multiple sessions discussing several aspects of the new instrument. However, a very generally formulated mission statement made it difficult to come up with concrete strategic and operational indicators. Moreover it left room for conflicting interpretations based on different norms and values that arose. The board forced decisions and went ahead with top-down implementation. However, the ambiguity in strategic objectives and subsequent interpretations, combined with disagreement about performance indicators and targets, prevented scorecard success. People felt threatened further hindering the instrument’s success. Finally the project was abandoned. A merger and subsequent changes in the board of directors paved the way for a new attempt. In 1998 the second BSC implementation was initialized by the accounting department business controller, who wanted to integrate the diverse accounting systems used by different departments. The same management consultancy as in the first attempt supported the implementation process. Top management support was present but no one from the board was really involved in the project. The effort thus was bottom up rather than top down. Probably as a consequence, the emphasis was on measurement system integration and improved reporting formats without taking the firm’s strategy as a starting point. To force a uniform scorecard structure, the controller decided to buy a stand-alone software package, a decision taken by mutual agreement within his own department. However this approach, which could be characterized as overly technically-oriented, did not involve the departments enough. As a result a ‘software based’ BSC was implemented, but most of the measurements proved of limited use. When the software turned out not to be user-friendly and incapable of being linked to the main information system, departmental resistance to the BSC-system grew. Finally, the project was abandoned and considered as sunk cost. In 2000, after a second merger, the new board of directors decided to restructure the organization. Assisted by another management consultancy, the business processes were redesigned in order to create a more ‘lean and mean’ organization. With full support of the board, the BSC was introduced as the “change scorecard”, i.e. the central organizing framework and communication mechanism to help guide the ongoing organizational change processes. The philosophy adopted was to create a ‘cause and effect’ mindset among employees to enhance continuous strategic learning. Workshops and frequent discussion meetings between the board of directors, the managers of the departments and team leaders were organized to facilitate implementation. The objectives of the meetings were multiple, including: • discussion and clarification of the firm’s strategy; • making employees see the need for change; • introduction of the new performance measurement and management system; • involving staff at all levels of the organization, from strategic business unit to operational level. To create a necessary change of culture and mindset, every employee had to apply for the newly designed positions, and this unsettled situation, which threatened job security and career prospects, clearly ‘stimulated’ change of behavior. Communication and training sessions helped everyone to develop the necessary competencies but also contributed to employee commitment, and showing early results was aimed at stimulating motivation. To involve the employees, they were included into empowered teams at different organizational levels, with each responsible for ‘their’ performance. They had to develop their own strategic objectives, that had to be linked explicitly to departmental and corporate strategy. Subsequently team performance measurement was based on criteria that were consistently derived from these strategic objectives. As a consequence, performance measurement and accountability became central issues. Teams and business units had to report two kinds of measures. First a set of joint measures applying to all teams and units, like budget variances and absence through illness. Second, a set of 4-8 specific performance measures (with a maximum of 15) related to the specific strategy objectives of the team or business unit. At local level the specific measures mostly appeared to be operational measures (e.g. the number of complaints, dropouts and process completion times), while at departmental level and top level these measures were more external oriented, e.g. financial performance measures compared to benchmarks, including sales, and percentage of market growth. Recording for information was done mostly with simple Excel data applications that were linked with the main system: ‘Easy to Handle’ was the slogan. The teams evaluated the relevance of the indicators regularly and if necessarily redefined them or introduced new indicators. The Planning and Control department supported these processes, making sure that the measures were coherent and consistent with clear links with the firm’s strategic plans. In close consultation with the key team members, they discussed to what extend the indicators measured what they should measure and whether they reflected the teams’ responsibilities. After 12 months an overall evaluation showed that the implementation was successful. 87% of the participants agreed that processes had become more focused and aligned and that management information had greatly improved. The more careful approach with strong top management and employee involvement had paid off. Increasingly the BSC was perceived as the ‘changing change-scorecard’. Although the merger and reorganization context probably helped to make the necessary changes, the particular attention for strategy alignment of the scorecard and its effect on performance measurement appear to have been key factors for success. This article’s aim is to contribute to understanding the effective use of the BSC by assessing how BSC use affects company performance. Such understanding is important, as knowing how to deal with the BSC effectively may help organizations to improve their competitive position and reach organizational objectives. Because there is little information present about how to optimize the tool’s benefits, it can provide managers with guidance as how to optimize the benefits of the BSC.6 The remainder of the article is organized as follows. First, empirical research on performance effects of BSC use is reviewed. Next, a research model and hypotheses are developed, followed by a description of the research method and a presentation and discussion of the results. Finally, we summarize our conclusions and discuss implications for managers.

Table 3 shows the results of the regression analysis for the hypothesized model shown in Figure 1. From the baseline model only strategy was significant (p<0.05) in all regressions. The full model explained 38% of variation of Overall Company Performance (adj. R2=0.38; F=4.3, df=7, p<0.01). A comparison with the outcome of the baseline model showed a substantial and significant positive increase in R2 of 19% (ΔR2=0.19, ΔF=2.8, p<0.05), suggesting that BSC use contributes significantly to a company’s overall performance. The models using the other performance indicators were also significant and explained a fair amount of variance. The results explaining financial company performance were similar to those of overall company performance, although those regarding perceived company performance lagged behind. Moreover, the increase in R2 from the BSC usage variables in this regression was not significant. An explanation may be response bias, i.e. less variation in the subjective performance evaluation than in the overall and objective performance measuresOn closer inspection of Table 3, zooming in on the model and using overall company performance as the dependent variable, we find that the effect of measurement-focused-BSC use was significant but negative. As this is opposite to our expectation, H1 is rejected. The effect of strategy-focused-BSC use on overall company performance was significant and positive, providing support for H2. A similar pattern of effects was found regarding the other performance variables providing further support for our conclusions, although not all effects reached significance (p<0.05). On the one hand, the results suggest that BSC use that is aligned to company strategy positively influences overall company performance, as was hypothesized. A comprehensive set of carefully chosen financial and non-financial measures may provide managers with insights to optimize their companies’ strategy and to improve its competitive position and performance.12 On the other hand, the performance effect of measurement-focused-BSC use is negative. Several explanations exist as to why this manner of BSC use decreases overall company performance. First, measurement applications may be too instrumental: specifically, when management sees implementation and usage of the BSC as an ‘end’ rather than a ‘means’ to a goal, performance may be harmed rather than helped. One respondent from the exhibit case commented: ‘Initially, the focus was too much on making a dashboard. But, by looking only at the dashboard you cannot decide where you want to go’. When designed and used mechanistically, BSC use may result in overbureaucratization and focus on details rather than on the overall picture and strategic direction. A financial director who responded to the survey made the following comment: ‘Because we experienced problems measuring ‘soft information’ elements, we shifted our attention towards searching for valid measures and reliable data but we lost sight of their strategic links.’ A problem may be that in the beginning this ineffectiveness may not show because increases in efficiency measurements suggest improvement. However, efficiency and effectiveness results should be assessed and monitored together carefully. A methodological explanation as to why there is no support for H1 may be the way BSC usage was operationalized. The negative effect of our two-way interaction could be an artifact of the assumption that an equal division of attention across the four BSC perspectives is optimal. Depending on the company’s market and strategy archetype an ‘unbalanced’ but tuned-to-strategy BSC profile may be better than a standard ‘balanced’ BSC.13 We checked different variation for comprehensiveness and balance using different formula but could not detect major changes in the two-way interaction’s influence on performance. Finally, other managerial accounting tools may moderate or reinforce the relationships examined: for instance, the BSC may be incorporated into wider systems, e.g. Enterprise Resource Planning (ERP) systems.14 The question is whether and when these tools become more effective and complement each other or work against each other. Future research may control for or study these effects.