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Weighing it up a literature

review for the balanced


scorecard
Paul Hepworth

Weighing it up

559

Army School of Catering, Aldershot, UK


Introduction
The balanced scorecard (BSC) has received much literary acclaim from its
originating protagonists, Professor Robert Kaplan and David Norton. This
literature review seeks to offer an insight into the concept, to raise a number of
questions which current literature alludes to, but fails to address and to provide
direction for those who seek to research the concept further.
The evolution of a concept
The evolution of this new concept from a radical performance measurement
device to a comprehensive strategic management tool is documented in four
Harvard Business Review articles (Kaplan, 1994; Kaplan and Norton, 1992; 1993;
1996a) and the concept receives a more detailed explanation in Kaplan and
Nortons book The Balanced Scorecard: Translating Strategy into Action (Kaplan
and Norton, 1996b). For the uninitiated, a short explanation of the concept is
offered:
To begin, Argyris of The Harvard Business School suggests that:
Kaplan and Norton present an innovative management perspective that can be used to translate
strategy for growth into operational terms. It represents the beginning of a comprehensive and
actionable theory of governance.

In reality, this description hardly scratches the surface of the concept. Kaplan and
Norton themselves state that:
The Balanced Scorecard translates an organisations mission and strategy into a comprehensive
set of performance measures and provides the framework for strategic measurement and
management (Kaplan and Norton, 1996b).

This simple overview is accurate, but does not quantify fully the radical approach
that the BSC provides. The BSC defines and assesses the critical success factors
(CSFs) considered necessary to fulfil the corporate goal(s) to ensure future
success. This is achieved by close scrutiny and subsequent understanding of
cause and effect relationships. Now the concept becomes both complex and
innovative. The BSC divides the business environment into four key business
areas, see Figure 1. Additional areas can be included if considered applicable and
necessary. For the purpose of illustration, The Performance Measurement Action
Team, a US governmental body formed to consider government-wide
procurement practices, successfully identified and included employee
empowerment as an additional BSC focus (Kaplan and Norton, 1996b).

Journal of Management
Development, Vol. 17 No. 8, 1998,
pp. 559-563, MCB University
Press, 0262-1711

Journal of
Management
Development
17,8
560

A radical new approach to measurement and management


The concept was developed as an innovative business performance
measurement system, in the belief that existing performance measurement
approaches, primarily relying on financial accounting measures, were
becoming obsolete (Kaplan and Norton, 1996b). This innovative approach was
able to consider the intangible or soft factors that had previously been
considered as immeasurable, and as such, of little value. The term balanced
scorecard reflected the balance between short- and long-term objectives,
financial and non-financial measures, lagging and leading indicators and
external and internal performance perspectives.
The successful application of the BSC in a number of transformation projects
identified that it could also be a medium to communicate and align a new
strategic approach. It has been successful because it is able to identify linkages
between the four key areas that generate and perpetuate success.
The impact of BSC measures considered in isolation would probably be
minimal, success is derived from comprehensive visibility of all key influences.
The added value of the BSC is in the drawing together of all the key business
areas and identifying and exploiting the linkages that deliver success. These are
explained in some detail by Hoffecker and Goldenberg. They emphasise that the
impact of a decision in one area on the other areas can be recognised before the
decision is implemented, offering more strategic management visibility than
would normally be expected. This holistic approach has resulted in better
performance, resulting from more informed management decision making
(Hoffecker and Goldenberg, 1994).
The balanced scorecard had now evolved from an innovative measurement
system into a proven management system (Kaplan, 1994). This success was
supported strongly by the following case studies: Diversified holdings
companys chemical division (Vitale et al., 1994), Mobil: Americas marketing
and refining division (McWilliams, 1996), and The Pepsi Dashboard (Jensen
and Gerr, 1994/95).
Jensen alludes to the BSC business methodology within his dashboard
framework, but it can be argued that only the measurement facility is fully
exploited, the value of linkages appears to have been ignored. The quality and
depth of external academic analysis, utilising case study methodology suggests
that the concept has significant integrity.
Balanced scorecard a universal solution to business management?
To date, all the BSC case studies have been both favourable and from a US
business perspective. All this success was reported from within the US

Figure 1.
The balanced scorecard
key perspectives

Financial

Internal business process

Customer

Learning and growth

management culture, the concept has not yet been reported on or documented
as being an unqualified success within the UK. Speculation might identify a
number of possible reasons why it has not yet been adopted in the UK, but such
conjecture could serve little purpose. The utility of the BSC within the British
hospitality industry has been considered, the hotel sector being the specific
focus (Brander Brown and McDonnell, 1995). They identified that the BSC
emphasised vision, and the need to keep the organisation moving and looking
forward, rather than focusing purely on control measures. They concurred that
this approach could assist management in understanding the many interrelationships within their organisation and it could offer a balance between the
external and internal measures by identifying the effects of trade-offs between
them. Their comments appear consistent with Kaplan and Nortons claims and
reported examples. By utilising a pilot study they developed a BSC for a real
operation, however, this highlighted a number of weaknesses that were hotel
industry specific. It was suggested that further research would be necessary in
the areas of:
common goals, CSFs and performance measurements for the UK hotel
industry;
the use of BSCs at hotel company level and the employment of differing
BSCs at all management levels within a hotel;
the identification of effective performance measures for CSFs such as
marketing, guest satisfaction and employee morale.
It is in these soft areas that the concept tends to come a little unstuck. The
application of values to such issues as service quality and guest satisfaction is
both subjective and perceived as complicated. This said, their consideration of
the concept appeared favourable, but remained inconclusive without the
support of further research. To date, the only evidence of the BSC being
employed in the UK has been within The British Army, specifically the Food
Services branch of The Royal Logistic Corps. The authors BSc (Hons)
dissertation recommended the concept as a management tool that was suited
well to the evolving food services environment (Hepworth, 1997). The concept is
now in the initial implementation stage but offers significant research potential.
Lopes did consider the BSC as one of three real estate management devices
within his PhD research at the University of Reading, however, no evidence to
support its physical application was offered (Lopes, 1996). Corrigan also offered
the BSC a favourable review from an accountancy perspective in Australia, but
again, no evidence to support its employment has been evident (Corrigan 1995).
A question of theory and application
The BSC has been applied successfully across many diverse industries and
within the public sector in the USA. The public sector applicability of the
concept has been discussed (Tonge, 1996) and numerous examples of successful
public sector applications have been documented. These were all reported in a
positive manner, no failures of the concept were identified, but many pitfalls and

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problems involving application of the concept were highlighted (Kaplan and


Norton, 1996b). It was emphasised that the application of the BSC is far from
simple and requires a comprehensive understanding of the principles involved
and significant commitment towards accepting the new philosophy and
implementing the necessary change. The question, however, still remains; why is
so much theory widely available yet the concept remains untouched in the UK?
The body of evidence supports the theory that the BSC offers a medium to
deliver strategic vision while providing an evaluation system. The many case
studies provide physical proof to support this theory. In addition, the concept
has been approached from many different management discipline perspectives.
The accountancy aspect of the BSCs utility has been considered widely (Booth,
1996; Corrigan, 1995; Hussain, 1996; McWilliams, 1996; Newing, 1994). The
BSCs performance measurement capability has received much interest and
attention (Birchard, 1995; Brown, 1994; Lingle and Schiemann, 1996). One
consideration of this measurement utility was enhanced by linking it into the
concept of quality management (Cortada, 1994).
The BSCs performance measurement capability has been considered from a
number of unique but valid perspectives (Davis, 1996; Feurer, 1995; Smith, 1993;
Vantrappen and Metz, 1994). Bainbridge provides a comprehensive overview,
considering all key aspects of the concept, albeit very briefly. His contribution
offers the best executive summary from which a sound overview of the BSC
can be obtained (Bainbridge, 1996).
The BSC is able to provide utility at all management levels, if managers have
an understanding of the mechanics of the concept. Awareness of how the four
perspectives are interlinked, interdependent and should not be considered in
isolation is necessary to ensure the maximum benefit is obtained. It is also
critical that managers should be empowered to utilise the information to
support decisions at their level.
Summary
There is no doubt that the concept has delivered a totally new and radical
approach to business management. It has a proven track record in the USA and
is now being delivered to an international audience, on a multi discipline front.
It is being taken seriously by accountancy and management specialists alike,
therefore, it must offer significant potential for such agreement to be evident.
Perhaps it is currently more acceptable within the US management culture than
the more conservative British equivalent? The question of it being employed to
secure a competitive advantage in the UK remains to be answered. The
literature concerning the application of the concept is favourable, constructive
and, in most cases, revealing. Perhaps such success in the UK is viewed with
natural suspicion and pessimistic procrastination? Furthermore, the potentially
complicated approach to soft issues might frighten those who seek to manage
issues by seeking simple answers or by employing traditional solutions. The
theory is now widely available, perhaps if its deployment in the military is
successful, it might be applied more widely in the UK?

References
Bainbridge, C. (1996), Balancing act, Management Consultancy, July/August, pp. 30-3.
Birchard, B. (1995), Making it count, CFO the Magazine for Senior Financial Executives,
October, pp. 42-51.
Booth, R. (1996), Accountants do it by proxy, Management Accounting, May, p. 48.
Brander Brown, J. and McDonnell, B. (1995), The balanced score-card: short-term guest or long
term resident?, International Journal of Contemporary Hospitality Management, Vol. 7
No. 2/3, pp. 7-11.
Brown, M.G. (1994), Is your measurement system well balanced?, Journal for Quality and
Participation, October/November, pp. 6-11.
Corrigan, J. (1995), The balanced scorecard: the new approach to performance measurement,
Australian Accountant, August, pp. 47-8.
Cortada, J.W. (1994), Balancing performance measurements and quality, Quality Digest,
December, pp. 48-54.
Davis, T.R.V. (1996), Developing and employee balanced scorecard: linking frontline
performance to corporate objectives, Management Decision, Vol. 34 No. 4, pp. 14-18.
Feurer, R.C. (1995), Performance management in strategic change, Benchmarking for Quality
Management and Technology, Vol. 2 No. 2, pp. 64-83.
Hepworth, P. (1997), The balanced scorecard: can it deliver British army food services policy and
provide a sound mechanism for performance evaluation?, A project submitted in part
fulfilment of requirements for the award of the degree of BSc (Hons) in Hotel and Catering
Management, University of Surrey.
Hoffecker, J. and Goldenberg, C. (1994), Using the balanced scorecard to develop company-wide
performance measures, Cost Management, Fall, pp. 5-17.
Hussain, A. (1996), How do you measure performance?, Certified Accountant, March, pp. 48-50.
Jensen, B. and Gerr, G. (1994/95), Seismic shifts in HR management: a case study in mapping
radical change at Pepsi, Employment Relations Today, Winter, pp. 407-17.
Kaplan, R.S. (1994), Devising a balanced scorecard matched to business strategy, Planning
Review, September-October, pp. 15-19, 48.
Kaplan, RS. and Norton, D.P. (1992), The balanced scorecard measures that drive
performance, Harvard Business Review, January-February, pp. 71-9.
Kaplan, R.S. and Norton, D.P. (1993), Putting the balanced scorecard to work, Harvard Business
Review, September-October, pp. 134-47.
Kaplan, R.S. and Norton, D.P. (1996a), Using the balanced scorecard as a strategic management
system, Harvard Business Review, January-February, pp. 75-85.
Kaplan, R.S. and Norton, D.P. (1996b), The Balanced Scorecard: Translating Strategy into Action,
Harvard Business School Press, Cambridge, MA.
Lingle, J.H. and Schiemann, W.A. (1996), From balanced scorecard to strategic gauges, is
measurement worth it?, American Management Association, March, pp. 56-61.
Lopes, J.R.L. (1996), Corporate real estate management features, Facilities, Vol. 14 No. 7/8,
July/August, pp. 6-11.
McWilliams, B. (1996), The measure of success, Across The Board, February, pp. 16 -20.
Newing, R. (1994), Benefits of a balanced scorecard, Accountancy, November, pp. 52-3.
Smith, P. (1993), Outcome related performance indicators and organizational control in the public
sector, British Journal of Management, Vol. 4, pp. 135-51.
Tonge, R. (1996), Lessons for the public sector, Certified Accountant, March, pp. 50-1.
Vantrappen, H.J. and Metz, P.D. (1994), Measuring the performance of the innovation process,
Prism, Fourth Quarter, pp. 21-33.
Vitale, M., Mavrinae, S.C. and Hauser, M. (1994), DHC: the chemical divisions balanced
scorecard, Planning Review, July-August, pp. 17, 44-5.

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