Paper on-balance-scorecard1

ISSN:2348 9510
International Journal Of Core Engineering & Management(IJCEM)
Volume 1, Issue 1, April 2014
19
Enhancing Organizational Performance through Balance Scorecard with
Strategic Management Activities
Ram Janm Singh a
Nagendra Sohani b
Abstract: Balanced Scorecard (BSC) is one of the management
organizational performance enhancing technique. BSC is a
strategic management system that is used broadly in industries.
It is used globally to support business activities to the vision of
the organization for enhancing organizational performance and
improving internal and external communications within the
organization. A major concern in organizational performance
improvement entails the conception and use of performance
measures or indicators. The success of the balanced scorecard
will depend on the clear classification of non-financial and
financial variables. Before the organization is ready to
implement a balanced scorecard a consensus of the
organizations vision and strategy has to be reached. The
components of the balanced scorecard claim that it aligns with
strategy leading to better motivation and communication which
causes better performance. The objectives of this paper are to
facilitating strategic planning for organizations, and to examine
the process of identifying performance measures linking
department’s BSC to the overall BSC for the organization.
Keywords: BSC, Balanced Scorecard strategy, Performance
measurement, Strategic management, Organizational
performance.
I. INTRODUCTION:
The conventional performance measurement systems
based on financial metrics alone have been considered
inadequate and more attention is being paid to non-
financial metrics. Various wider performance measurement
systems have been designed, of which BSC, Kaplan and
Norton, (1996) has been most extensively accepted and
least criticized. A high rate of failure and various realistic
difficulties however, are related with the implementation of
BSC.
The aim of the BSC is to express, manage and
change in support of the long-term strategy in order to
manage performance. It acts as a vehicle for bringing in the
change component within the organization.
The highest-level scorecard is ideally at the
corporate level, but the BSC may be implemented at the
division or department level. The BSC framework is used
to apply approach from four perspectives, Kaplan and
Norton, (1996b): financial performance, learning and
growth, customers and internal business processes.
It allows, for the first time, an organization to look
ahead using principal indicators instead of only looking
back using lagging indicators. The balanced scorecard puts
strategy the main driver of results today at the center of the
management process.
The BSC is a management system designed to
link and align the organization with its strategy at all
levels. After the BSC is formulated at the corporate level
of the organization, it is cascaded downward to strategic
business units and support departments.
II. LITRATURE REVIEW
The BSC matches financial measures of past
performance with measures of the drivers of future
performance, Kaplan and Norton, (1996). BSC, as a
strategic management system integrates financial and non-
financial perspectives. In each perspective, strategies are
translated into specific goals and measures. The goals and
objectives along with the designed performance measures
are communicated throughout the organization. The aims
are planned and set to support with strategic proposals and
strategic feedback and knowledge is enhanced.
Ho and Mckay (2002) examine the
implementation of BSC within two organizations and find
that one of them was extremely satisfied with BSC, while
the other found BSC an ineffective management tool and
discarded it. They imply that delay in feedback and an
unmanageable number of parameters selected by the
second organisation might have contributed to discarding
BSC. Bourne (2002) points out that BSC is designed to
implement the selected strategy, but fails to ask the
question whether the selected strategy is the right strategy

ISSN:2348 9510
20
for the business. The same study finds that effective
management control using the BSC appears to indirectly
cause positive outcomes through strategic alignment.
According to the Hackett Group’s survey (2004),
less than 20 per cent of companies who invested in BSC
have mature balanced scorecard implementations that are
generating value. The survey argues that most companies
rely on too many metrics and heavily weighted internal
finance data, making the scorecards unbalanced. Pforsich
(2005) repeated this, claiming that there is a maximum
chances of failure when it comes to BSC implementations,
and points out along with Chow (1998) that when it
approaches to implementation of BSC, translating common
concepts into tangible action and operationalisation of
measures is challenging.
Hoque & James (2000) examine the relationship
between market position, organization size, product life-
cycle stages, Balanced Scorecard practices and
organizational performance. It also suggests that greater
BSC practices is associated with enhanced performance,
but this relationship is largely independent of organization
size, product life cycle or market position. Neely et al.
(1997) carried out an empirical investigation to explore the
performance impact of BSC by employing a quasi-
experimental design methodology. They found that while
analyzing the data from a business that implemented BSC;
it appeared that implementation might have had a positive
impact on sales, gross profit and net profit.
Neely (2003) state that first generation
performance measurement systems are static. There is
significant literature on designing Performance
Measurement Systems (PMS) with many providing a good
set of directions (Neely et al., 1997). The performance
measurement systems however, keep evolving. To date,
very few people have explored how this evolution can be
managed, a fact confirmed by Neely (1999). The
traditional planning in strategic management is driven by a
conception of balance as a strategic balance between
existing internal resources and external opportunities
(Bordum, A., 2010).
A performance measure is information delivered
to the management function, evaluating the efficiency and
the effectiveness of a process, resource or an outcome.
Performance measures could be identified into different
levels according to the decision-making process. Its
measures are strategic, tactical and operational
(Papakiriakopoulos, D. and Pramatari, K., 2010).
Balance scorecard is one of the mostly used
methods on performance management system. Several
methods have been developed to measure intangible asset
such as market capitalization approach, direct intellectual
capital measurement approach, scorecard approach and
economic-value added approach (Calisir, F., et al., 2010).
Gunasekaran et al. (2001) develop a framework
for respectively measuring the performances from
strategic, tactical and operational levels in supply chains;
this framework mainly deals with supplier, delivery,
customer service and inventory and logistics costs.
Salaheldin Ismail (2009) shows the importance of
the BSC for strategic and sustainable continuous
improvement capability at the operational level. He
suggests that BSCs have proved to be a powerful tool for
the strategic management not only of the overall company,
but for the production division or at the operational level in
particular.
Barnali Chaklader & Deya Roy (2010) identified
that traditional BSC includes four viewpoints: financial,
customer, learning and innovation and internal process but
excludes two significant long term viewpoints:
environmental and social.
Ghani et al. (2010) identify the results specify that
performance measurement does influence service quality.
They show significant differences between organizations
that have high level of BSC adoption on their level of
service quality and those organizations that have low level
of BSC adoption. Singh Ram Janm & Sohani Nagendra
(2011) identified that performance measurement activities
have an important role to play in setting objective,
evaluating firm performance and enhance customer
service. Singh Ram Janm et al. (2013) identified that in
many of the survey studies, supply chain integration
enhance the organizational performance of enterprises.
III. METHODOLOGY:
Our objectives in this paper are to discuss
different phases of BSC implementation as a methodology
for facilitating strategic planning for organizations and to
examine the process of identifying performance measures
linking department’s BSC to the overall BSC for the
organization. We will examine the cause-effect
relationship between performance measures and linkages
between the overall objectives for the department and the
goals of the organization.
A firm can develop a seemingly brilliant strategy
designed to achieve competitive advantage and grow the
firm, but implementing strategy is the management
challenge. The BSC strategic management system requires
organizations to translate strategic goals into relevant
measures of performance. Financial and nonfinancial
measures are indicators of the extent that strategies are
successfully being implemented throughout the

ISSN:2348 9510
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organization, and whether strategic goals are being
achieved.
BSC Perspective Strategic
Management Activities
Fig. 1: Relation between BSC perspective and strategic
management activities
Fig. 2: Causes & effects of BSC perspective
BSC Implementation Phases: Several different
procedures describing the building process of a Balanced
Scorecard have been presented. The procedure described
below is just one of them and is not necessarily better than
other procedure. Before the organization is ready to
implement Balanced Scorecard consent of the
organizations vision and strategy has to be reached. Many
of the phases can be performed parallel. This will shorten
the total implementation schedule significantly.
Fig. 3: BSC Implementation Phases
Table1: Different BSC Implementation Phases &
Implementation Activities
Different BSC
Implementation
phases
Implementation Activities
Phase 1 Model Synthesis Strategy Synthesis: The objective
of the strategy synthesis phase is to
form and commit the management
to a consensus view about the
organizations vision and strategies.
It is not unheard of that there exist
several different view s of vision
and the strategic principles within
an organization.
Measure synthesis: During the
measure synthesis phase the
strategy of the organization is
enumerated into measures or Key
Performance Indicators (KPI’s).
Phase 2 Technical
Implementation
# Installation of the software,
# Basic training for the persons
building scorecards
# Building of the scorecards
# Setting target and alarm levels
Business
Processes
Learning &
Growth
Knowledge
Management
Business Process
improvement
Financial Results
CRM
Budget & Cost
Management
Customer
Satisfaction Model synthesis
Technical implementation
Organizational integration
Technical integration
Operation
Financial
Results
Customer
Satisfaction
Business
Processes
Learning &
Growth
Satisfied & loyal
customers lead to
increase revenues
Improved processes lead
to improved product &
services for customers
Learning & growth of
employees is the
foundation for innovation
and creativity
Skilled & creative
employee status quo &
work to improve
business processes

ISSN:2348 9510
22
# Setting calculation formulas to
consolidate the data
# Defining graphical properties for
graphs
Phase 3 Organizational
Integration
# Definition of the persons who are
responsible for measure data and
their empowerment.
# Explanation of the objectives of
BSC implementation to the
employees.
# Re-engineering the strategy
procedure and management.
# Re-engineering the treatment
process.
Phase 4 Technical
Integration
# Identification of the imported
measures and the source systems
# Analysis of the database structure
and exporting capabilities of the
operative systems
# Defining the procedure to get
measure data from data sources
including data identification,
modification and scheduling.
# Implementation of the link
between BSC Scorecard and the
operative systems.
Technical integration can be
executed parallel with
organizational integration and often
somewhat overlaps the operation
phase. Effort and calendar time
needed for this phase are highly
dependent on the number and the
complexity of the source systems.
Phase 5 Operation of the
BSC System
During the organizational
integration phase the Balanced
Scorecard is incorporated to the
normal management and reporting
processes of the organization.
Within these processes following
tasks are performed regularly.
# Update measure values
# Analyze the Balanced Scorecard
results
# Report the Balanced Scorecard
Results
# Refine the Balanced Scorecard
model
IV. CONCLUSION
The BSC is therefore a very significant strategic
management tool which helps an organization not only to
enhance performance, but also decide the strategies needed
to be customized so that the long-term objectives are
achieved. The application of BSC ensures the consistency
of vision and action which is the first step towards the
development of a successful organization. Also,
appropriate implementation can ensure the development of
capabilities within an organization which will help it in
developing a competitive advantage, without which it
cannot be expected to better its competitors.
V. REFRENCES
[1] Kaplan R. S. & Norton D. P., “The Balanced
Scorecard: Translating Strategy into Action”, Harvard
Business School Press, Boston (1996).
[2] Kaplan, R. S. & Norton, D. P., “Transforming the
balanced scorecard from performance measurement to
strategic management: part I”, Accounting Horizons,
15, March (2001b), 87-104.
[3] Ho, K. & Mckay, R., ‘‘Balanced scorecard: two
perspectives’’, The CPA Journal, Vol. 72 No. 3,
(2002), pp. 20-5.
[4] Bourne, M., ‘‘The Emperor’s new Scorecard’’,
Financial World, August (2002), pp. 48-50.
[5] Hackett Group, ‘‘most executives are unable to take
balanced scorecards from concept to reality’’, Hackett
Group press release, 22 October (2004), available at:
https://portal.thehackettgroup.com
[6] Pforsich, H., ‘‘Does your scorecard need a
workshop?’’, Strategic Finance, Vol. 86, No. 8,
(2005), pp. 30-5.
[7] Chow, C., ‘‘the balanced scorecard: a potent tool for
energizing and focusing healthcare organization
management’’, Journal of Healthcare Management,
Vol. 43, No. 3, (1998), pp. 263-80.
[8] Neely, A., ‘‘Gazing into the crystal ball: the future of
performance measurement’’, Perspectives on
Performance, Vol. 2 No. 2, (2003), pp. 12-13.
[9] Hoque, Z. & James, W., ‘‘Linking balanced scorecard
measures to size and market factors: impact on
organizational performance’’, Journal of Management
Accounting Research, Vol. 12, (2000), pp. 1-17.
[10] Neely, A.D., Richards, A.H., Mills, J.F., Platts,
K.W. and Bourne, M.C.S., “Designing performance
measures: a structured approach’’, International
Journal of Operations & Production Management,
Vol. 17 No. 11, (1997), pp. 1131-53.
[11] Bourne, M., Mills, J., Wilcox, M., Neely A. and
Platts, K., ‘‘Designing, implementing and updating
performance measurement systems’’, International
Vol. 20 No. 7, (2000), pp. 754-771.
[12] Neely, A., ‘‘The performance measurement
revolution: why now and what next?’’, International
Vol. 19 No. 2, (1999), pp. 205-23.

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[13] Bordum, A., “The strategic balance in a change
management perspective”, Society and Business
Review, Vol. 5 No. 3, (2010), pp. 245-258.
[14] Papakiriakopoulos, D. & Pramatari, K.,
“Collaborative performance measurement in Supply
chain”, Industrial Management & Data Systems, Vol.
110 No. 9, (2010), pp. 1297-1318.
[15] Calisir, F., Gumussoy, C. A., Bayraktaroglu A. E.
and Deniz E., “Intellectual capital in the quoted
Turkish ITC sector”, Journal of Intellectual Capital,
Vol. 11, No. 4, (2010), pp. 538-554.
[16] Gunasekaran, A., Patel, C., and Tirtiroglu, E.,
“Performance measurement and metrics in a supply
chain environment”. International Journal of
Operations and Production Management, Vol. 21,
(2001), 71-87.
[17] Salaheldin Ismail, “The design and
implementation of the balanced scorecards in a
manufacturing firm: a case study”, International
Journal of Learning and Intellectual Capital Vol. 6,
No.1/2, (2009), pp. 117 - 135.
[18] Barnali Chaklader & Deya Roy, “Sustainable
development using the sustainability balanced score
card: the case of Tata Motors, India”, International
Journal of Sustainable Strategic Management, Vol. 2,
No.2, (2010), pp. 155 - 167.
[19] Erlane K. Ghani, Jamaliah Said & Fawzi Laswad,
“Does level of balanced scorecard adoption affect
service quality? A study on Malaysian local
authorities”, International Journal of Managerial and
Financial Accounting, Vol. 2, No.3, (2010), pp. 256 -
274.
[20] Singh Ram Janm & Sohani Nagendra,
Proceedings of the National Conference on “Recent
Advances in Manufacturing Engineering &
Technology”, (2011), pp.190-195.
[21] Singh Ram Janm, Sohani Nagendra & Marmat
Hemant, “Supply Chain Integration and Performance:
A Literature Review”. Journal of Supply Chain
Management Systems, Vol. 2, No. 1, (2013), pp. 14-
25.
Ram Janm Singh
a
Mechanical Engineering Department, Sangavi Institute of
Management & Science, Indore, India
E-mail address: ramjanm.singh@gmail.com
Nagendra Sohani
b
Mechanical Engineering Department, Institute of
Engineering & Technology, DAVV, Indore, India
E-mail address: nagendrasohani@yahoo.com

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