BALANCED SCORECARD

BSC is an introduction from the works of Kaplan and Norton (1992). It comprises of four

Perspectives. The financial perspective views growth, comparability and risk from the shareholders’

viewpoint (Martello, Watson & Fischer, 2016). Under this perspective, firms seek to

build the shareholder’s worth through increased revenues and enhanced productivity.

Thus, the basic measures include sales growth, return on capital employed, industry leadership,
profitability, cost savings and market share among others (Tjader et al.,

2014). Financial metrics have however been faulted for being short-term and internally

looking.

The customer perspective looks at value from the customer’s viewpoint. This perspective

thus assesses who are the firm’s customers, their expectations and the value proposition

in meeting those expectations (Niven, 2011). It focuses on the customers’ concerns

including quality, delivery time, product availability, cost and price stability. The firm’s

concern under this perspective thus is how the customer perceives it in terms of products,

services, value-added and relationships (Asosheh, Nalchigar & Jamporazmey, 2010).

The internal business perspective on the other hand relates to business processes which

lead to customer and shareholder satisfaction. Measures encompass crucial skills and

competencies, technologies and processes that support present and future firm success. A

firm that effectively identifies the internal actions and retooling required achieves

breakthrough performance (Booyse, 2018).

Finally, learning and growth perspective describes approaches that facilitate an

environment conducive to innovation and growth. The perspective comprises of

establishment of employee skills, technology and a corporate environment that supports a

strategy. Martello et al. (2016) argued that these must be in tandem with strategies in the

rest of the perspectives for coherence among the four perspectives. The perspective seeks

to encourage change and investing for future growth and opportunities.

Therefore, BSC measures performance broadly which allows guidance and assessment of

a firm’s strategy through a variety of financial and non-financial tools. It seeks to balance
the inherent accuracy and reliability of financial metrics with the wide foundation of

future financial performance that caters for more stakeholders (Hubbard, 2009; Sundin,

Granlund & Brown, 2010; Niven, 2011; Hoque, 2014). Here, performance measurement

is based on the extent to which indirect costs are minimised thus creating competitive

advantage as recommended by Mailat, Stoica, Surgun, Trastaru and Vranceanu (2019).

Owing to its popular adoption, the BSC has over time developed into an instrument for

the management to explain, propagate and execute strategy (Kaplan, 2009). In this way,

BSC is employed to offer theoretical explanations. As a theory, BSC has been employed

to guide research questions and methodology in various studies (Krylov, 2019; Sainaghi,

Phillips & d’Angella, 2019). BSC has also been used as a theoretical basis to interpret

research findings (Marquez, Guillem, Vicens-Salort & Vivas, 2018) while Tuan (2020)

used it as a theoretical basis for broad assessment of how Vietnamese commercial banks

performed.

The model supports the outcome variable through recommendation that firm performance

should be assessed through a mix of indicators and recognising that a firm’s objectives

are more than generating profits for the shareholders. It also anchors the relationship

between the explanatory and outcome variables arguing that as firms manage costs, this

must relate to the broad performance objectives. The model also recognizes the value of

competitive advantage in that it is those firms that better position themselves to address

the four perspectives of BSC that attain the highest performance. Conversely, the centrality of the firm’s
environment is emphasized by the model in calling for need for

continuous organizational learning.

The balanced scorecard (BSC) was first created by Kaplan and Norton in 1992 for the

private sector as an answer to the deficiencies of traditional accounting models and

addressing what was considered too narrow a focus on financial measures in management
tools (Speckbacher, 2003; Wongrassamee et al., 2003; Kaplan and Norton, 1996). The

concept has been developed since that time, resulting in numerous iterations with, it is

argued, no agreed taxonomy for these iterations, making comparison of research findings

difficult (Wongrassamee et al., 2003). The purpose of the BSC is to help communicate and

implement an organisation’s strategy and it is a framework with a set of financial and nonfinancial
measures defined in the company’s vision (Wongrassamee et al., 2003; Kaplan,

2001; Kaplan and Norton, 1996). The BSC has been credited by the Harvard Business

Review as one of the most important management tools of the last 75 years and is

considered the most widely cited performance management framework (Manville and

Broad, 2013; Bourne et al., 2005). However, evidence as to its usefulness varies with the

failure rate of BSC implementation (from a for-profit and public sector perspective) being

reportedly high, running at 70% due, it is argued, to poor design, poor implementation and a lack of
communication (Manville and Broad, 2013).

The BSC has been modified for use by third sector organisations (Kaplan, 2001; Taylor

and Taylor, 2014), however, it is argued that it is not suitable for the diverse range of third

sector organisations (Kong, 2008; Kong, 2010; Taylor and Taylor, 2014). The concerns are

threefold; third sector organisations have service users, rather than customers; they have

multiple stakeholders to satisfy; and its implementation with a lack of consideration of the

third sector context could be more damaging than beneficial (Kong, 2008; Manville and

Broad, 2013). There has been very little empirical research examining the implementation

of the BSC in a TSO, with a small number of exceptions, for example, from Greiling

(2010) and LeRoux and Wright (2010). It has been found that implementing the BSC is not

so useful for a third sector organisation, as there is still too much focus on financial

indicators, rather than the non-financial, and more emphasis on measurement over strategy

(Greiling, 2010; Taylor and Taylor, 2014). The BSC approach has also been considered

too detailed to implement by smaller organisations (Moxham and Boaden, 2007; Dawson,

2010) although others argue that the approach can be useful for the third sector, with time

and care needed to adapt the BSC appropriately to be effective (Cairns et al., 2005a;

Dawson, 2010). However, arguments in support of its use in the third sector tend to be
theoretical, lacking empirical evidence to support claims (Speckbacher, 2003).

BSC is a success measure for strategic management used to define and optimize different

functions and their resulting external results. The balance scorecard is

method of management that helps companies to translate their vision into plans and actions plans

that once developed lead to better results. It was developed by Kaplan and Norton in the early

1990s and four key aspects, customer, financial, business processes and learning and growth

(Faruk & Lynn, 2016).

These four perspectives give feedback on progress of the strategic plans and its direction towards

achieving the set objectives and fulfilling the strategic goals so as to reach the organizational

vision (Odita & Bello, 2015). In the banking sector, BSC guides the management in strategic

plan development and its managers during the implementation stage so as to improve

performance and head towards achieving then goal of the bank vision and mission.

In the context of this study, the balanced score card model supporting organization’s

performance as the research variable. The balanced score card model was useful in the study

since it enabled the bank’s management an edge over its competition without presenting an

information's overload.

organizations can excel in their operational processes (internal processes perspective) by

preparing an appropriate space for staffs and try to improve creativity, learning, and growth in

the organization (Poureisa, Ahmadgourabi, & Efteghar, 2013). Since performance is a

composite of financial and non-financial indicators, use of BSC broadened the view of

performance for better evaluation of the SMEs ICT firms in Kenya

Faruk K. & Lynn, G. (2016). The impact of strategic innovation management practices on firm

innovation performance. Research Journal of Business and Management, 2(3), 412-429.

Odita, A. & Bello, A. (2015). Strategic intent and organizational performance: A study of Banks

in Asaba Delta State in Nigeria, Information and Knowledge Management, 5(4): 60-

Poureisa, A., Ahmadgourabi, M. B., & Efteghar, A. (2013). Balanced Scorecard: A New Tool
for Performance Evaluation. Interdisciplinary Journal of Contemporary Research in

Business, 5 (1), 974-978.