A Critical Analysis of the Article : ;For Which Purposes Do Managers Use Balanced Scorecards?: an Empirical Study;

Summary Resulting from the constantly changing environment, the accounting information systems transform and renovate continuously, for instance, the development from traditional costing system to activity-based costing or the Balanced Scorecard (BSC) which is an up-to-date system that connects non-financial and financial performance measures to a company’s overall strategy (Kaplan and Norton 1996). The article aims at demonstrating the specific purposes for which managers use the Balanced Scorecard, instead of simply measuring the adoption rates or the degree of BSC usage.

Therefore, BSC usage at the individual management level is emphasized by the author. First, the author explores the purpose for which managers use the BSC. According to the author, the purpose for communicating the firm’s strategy to the employees and helping implement that strategy are mainly at the organizational or business unit level. Thus, the author employs exploratory factor analysis to identify the purposes of BSC usage. Besides, data was collected from a survey administered in 19 Dutch firms which constitute 224 respondents from managers who in charge of the BSC in their departments.

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From the author’s analysis, three different purposes of BSC usage are indicated, i. e. for decision-making and decision-rationalizing, for coordination of activities within the organizational unit, and for self-monitoring purposes. Second, the author identifies the drivers of BSC usage for different purposes. Three types of drivers are analyzed: (1) dimensions of evaluation style—-in addition to Hopwood’s instrument, namely, the dimensions of extent and manner, the three potential dimensions in control styles are identified: i. e. ppropriateness of non-financial versus financial measures use, the appropriateness of qualitative versus quantitative measure use and the rigid versus flexible use of evaluations; (2) alternative controls used in the organizational unit—-whether alternative controls mechanisms are complements to or substitutes for the use of a BSC, such as action controls and personal or cultural controls; (3) the receptiveness of managers to new types of information—-the author analyses this driver from the age of respondents and their frequency of courses taken.

As can be shown from the data, the author found that BSC usage for decision-making and decision- rationalizing purpose is motivated by the degree of action controls used and manager’s receptiveness to new information types. Moreover, the emphasis placed on managerial evaluation of subordinates and the manager’s receptiveness to new information promotes the BSC usage for coordination purpose. Finally, BSC usage for self-monitoring purposes is driven by the emphasis placed on managerial evaluation of the managers. 2.

Critical Analysis A host of articles about establishing the adoption rates and degree of BSC usage can be found. What is noteworthy, therefore, is that the article aimed at studying BSC usage in a distinctive perspective, namely, demonstrating the specific purposes for BSC usage at the individual management level and the drivers of each purpose. In addition, the author collected data from a survey consisted of 224 respondents from 19 firms and analyzed the data by means of the quantitative methods, such as Cronbach’? Wilcoxon signed-rank tests and the chi-square difference test, which verify the reliability of the data in a way. Nevertheless, the study and the analysis of the data were carried out based on the author’s experience. Naturally, the results can be influenced by the subjective and one-sided thinking unavoidably. As the author mentioned in the article, “the empirical analysis cannot make any claims on the direction of causality between the drivers of usage and BSC usage”, and some independent variables with a low Cronbach’? may result in problematic statistical power.

As Bryman and Bell (2007:370) state that, “the chi-square value that is arrived at is affected by the size of the table, and this is taken into account when deciding whether the chi-square value is statistically significant or not”. When it comes to measuring BSC usage, the author tended to adopt management information system (MIS) literature to analyze. Although BSC is a MIS, the instrument is not totally adapted to BSC environment. MIS is a system with an extensive concept, which covers the application of people, documents, technologies and accounting procedures etc..

Some specific problems cannot be solved when operated in such a wide-ranging system. Therefore, sequential Manufacturing Resource Planning (MRPII) and Enterprise Resource Planning (ERP), aiming at bettering manufacturing management and augmenting the integration of organizational resource respectively, have been raised to apply in specific fields, though MIS, MRPII and ERP share the common goals, i. e. rationalizing decision-making and coordinating with superiors and subordinates. Similarly, anagers indeed use BSC for three purposes in line with the purposes of MIS usage, but BSC usage is less stressing the purpose for management control and emphasizing the communication of strategy capabilities, thereby achieving a goal of intensive management and equipping their own high-efficient and elite team. In terms of Kaplan and Norton (1996:25), “the Balanced Scorecard should be used as a communication, informing, and learning system, not a controlling system”. Obviously, the purpose for motivating employee’s performance is a significant purpose of individual BSC usage.

In the contemporary day, an increasingly number of managers begins to link incentive compensation to the Balanced Scorecard. As Kaplan and Norton (1996) indicate that the incentive and reward system is an effective instrument to stimulate strategy formulation and motivate the morale of the employees, and a great many of managers are already benefiting from linking incentive compensation systems to their Balanced Scorecard. Ultimately, several positive suggestions for future research were posed by the author, i. e. ther drivers of BSC usage, way to assess the performance consequences of BSC usage and the results of assessing managerial implications should be studied in future research.

Bibliography Bryman, A. ; Bell, E. (2007) Business Research Methods Oxford: Oxford University Press Kaplan S. R. ; Norton P. D. (1996) The Balanced Scorecard : translating strategy into action Boston: Harvard Business School Press Wiersma, E. (2009) ‘For which purposes do managers use balanced scorecards? : An empirical study’ Management Accounting Research 20 (4):239-251

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