Does the Balanced Scorecard add value to the Organization and BSC’s effect on performance?
This report is about to find the effectiveness of Balanced Scorecard (BSC) on the company’s performance and how much the BSC is going to add value to the organization.
BSC is a strategic planning and management system, used by organizations to communicate, prioritise and measure their goals and strategies. It is mostly used in industry, business, government and non-profit organisations around the globe. Fifty percent of the large firms in the US and other countries have adopted BSC and is one of the most influential, innovative ideas in the business field over the past 75 years. Due to the rise in popularity of BSC, and benefits attributed to its usage, Atkinson and others (1997) stated that in management accounting, BSC is a key advancement which requires attention in research.
This report is prepared to find out whether BSC is positively correlated with value creation for companies that are using it. This research can be structured around three main issues:
(1) The characteristics of the predominant diffusion
(2) The analysis of the contribution of BSC to firm’s performance and
(3) The way BSC affects this contribution.
But according to the research from few of the articles; like in one of the article BSC has been used to investigate the effects of its adoption and its impact on workplace attitudes and behaviours. BSC has been considered as a good practice in the United Arab Emirates(UAE) and the Kingdom of Saudi Arabia(KSA). From, this article it was concluded that the adoption of BSC has positively increased the abilities of the companies and also has enhanced their performance in different perspectives;
Learning and Growth Perspective: the adoption of BSC has allowed the companies to effectively understand customers’ needs and helped in improving their corporate reputation and brand image.
Internal Process Perspective: the adoption of BSC has efficiently improved the alignment of service department and strengthened the overall working environment.
Customer Perspective: the adoption of BSC also increased customer satisfaction and loyalty.
Financial Perspective: the adoption of BSC also improved the profitability and productivity of the company.
From another article, BSC has been tested as a five-level taxonomy to classify firm’s performance measurement systems(PMS). The five-level taxonomy was used to categorize the PMS of 149 organizations and it was found that 111 organizations (74.5%) PMS met the criteria to be classified as a basic Level 1 BSC, while 61 organizations (40.9%) have systematically achieved Level 3 BSCs and 36 organizations (24.2%) have fully developed Level 5 BSCs. This article clearly defines the differences between Level 1 and Level 5 BSC organizations. To conclude, both the planned and emergent approaches to implement BSC are acceptable, it also appears that organizations move up the BSC levels, many make a deliberate decision to implement BSC, while almost others do not (56% of the Level 5 BSC organizations said that their performance measurement system was a BSC). If at all organizations wish to progress to higher levels of BSC implementation, greater involvement of senior management is required. It also assists the managers to guide and measure their organization’s BSC implementation process when compared to BSC taxonomy.
So, from the overall research from various articles it was found that, BSC approach positively adds value to the business by improving its PMS and by increasing the firm’s ability, capability, profitability and enhancing a good working environment.
Davis,S. and Albright,T.(2004),”An investigation of the effect of Balanced Scorecard implementation on financial performance”, CIMA Management Accounting Research, 15(2), pp. 135-153.
Geuser,F.D. Mooraj,S. ; Oyon.D(2009), “Does the Balanced Scorecard Add Value? Empirical Evidence on its Effect on Performance”, European Accounting Review, pp.93-122.Jabeen.F, Behery.M(2017) “Exploring the status and effects of Balanced Scorecard adoption in the non-western context: Evidence from the Middle East”, Journal of Management Development, Vol.36 Issue: 8, pp.1063-1075.
Soderberg.M, Kalagnanam.S, Sheehan.N.T, Vaidyanathan.G, (2011) “When is a Balanced Scorecard a Balanced Scorecard?”, International Journal of Productivity and Performance Management, Vol.60 Issue: 7, pp. 688-708.