You are on page 1of 41

The Link between Perception of BSC Implementation and Corporate Strategy and Its Impact on Performance: A Contingency Approach

Majidul Islam, Ph.D., CGA* Associate Professor Department of Accountancy John Molson School of Business Concordia University Montreal, Canada H3G 1M8 514-848-2424/Ext: 2235 Email: mislam@jmsb.concordia.ca

I acknowledge gratefully the funding from the SAP-CAAA Research Grant program I appreciate very much the comments by Emilio Boulianne of Concordia University and Zahirul Hoque of La Trobe University on an earlier draft of the paper. This is a preliminary version of the paper. Please do not quote or reproduce without permission of the author.

The Link between Perception of BSC Implementation and Corporate Strategy and Its Impact on Performance: A Contingency Approach
ABSTRACT: Behavioral aspects and positive attitudes toward the balanced scorecard (BSC) could be a determinant factor in the success of BSC implementation. In the study we use the contingency theory framework to examine whether adopting a planned strategy improves employees buying into the BSC and helps to maximize the benefits of BSC implementation by enhancing corporate performance. We hypothesize that employees attitudes and perceptions towards the implementation of the BSC is contingent upon the type of strategy the firm is employing and the suitability of deploying the BSC with this strategy in place. We use a path model that draws an association between the firms strategy and employee attitudes towards BSC implementation and employs OLS regression to test the association between the variables. We also examine whether employees positive attitudes help to improve a firms performance as proxied by the customer, internal processes, learning and innovation, and financial perspectives of the BSC. We sent a mail survey to Canadian and US firms to collect the necessary data in order to conduct this study. Conforming to our expectations, we found that firms that carefully planned their strategic objectives were more likely to have a positive impact on their employees perception of the BSC. A deliberate strategyor planned strategyas defined by is associated with higher levels of BSC awareness, perceptions of BSC ease of use, perceptions of BSC usefulness, and intentions to use the BSC. We also found that higher perceptions of BSC ease of use were positively associated with aspects of a firms performance, such as from the customer, internal processes, and learning and innovation perspectives. Hence, we conclude that firms implementing the BSC need to take into consideration that the successful implementation of the BSC requires careful planning to ensure

that the firms strategic objectives are well formulated, in agreement with BSC measures, and effectively communicated to BSC users.

1. INTRODUCTION Since Kaplan and Norton (1992) developed the balanced scorecard (BSC) for performance and strategic management, the tool has gained prominence in industry and academic research. The BSC relies on the interaction and the complementarities between four aspects of the firm financial, customer, internal business, and innovation and learning perspectivesin order to drive the firms future financial success in a sustainable manner. There is some empirical evidence that firms who have implemented the BSC have achieved some form of success and enhanced financial performance . Nevertheless, the difficulty in implementing the BSC has impeded companies, on numerous occasions, from achieving the desired results . Also, it has been claimed that the widespread adoption of nonfinancial measures is generally based on the idea that financial measures are characterized by being narrow in focus and historical is nature and may be aggregated and too unidimensional to be useful (e.g., Ittner et al., 2003; Lau and Sholihin, 2005; DeBusk et al., Budde, 2007). Van der Stede et al. (2006) emphasized that performance measures play a very important role in translating an organizations strategy into desired organizational behaviours and consequent results, as well as in helping to communicate expectations, monitor progress, provide feedback, and on the other hand, motivate employees who would be under the BSC control system through performance-based rewards. The normative approach advocates that a blend of measures drawn from the four scorecard perspectives would contribute towards organizational performance (Kaplan and Norton, 1992, 1996). The technology acceptance model (TAM) (Davis, 1989; Davis et al., 1989) examines employees behavioural issues and shows that positive perceptions of the technologys ease of use and usefulness increases employees liking of the technology and the likelihood that employees would use that technology. However, there is a lack of evidence that shows that overcoming these behavioural issues would have a positive impact

on performance (Chenhall, 2003). This study aims at filling that gap in the literature by examining the link between employee acceptance of the BSC and firm performance. emphasized the linkage between the different measurements of the BSC and the firms strategy to promote the non-financial measures from a strategic operational point of view. In other words, the mapping between the BSC and the firms strategy is fundamental for a successful implementation. This means that a planned strategy that incorporates BSC measurescustomer, internal business, and learning and innovation perspectivesis fundamental, since it ensures that BSC objectives are well communicated to employees and guarantees their buy into the system. Therefore, we believe that the success of deploying the BSC relies on the firms ability to positively affect employees attitudes towards the BSC, which is contingent upon the type of strategy the firm is employing and the suitability of deploying the BSC while this type of strategy is in place. However, the mapping between the BSC and strategy does not guarantee enhanced performance, since other variables might also affect the usage of the BSC, such as competition or cost structure . Therefore, in order to ensure a successful implementation, the firm also needs to manage a fit between BSC usage and other internal and external variables. A critical issue is whether score-based measures linked to the four perspectives can contribute to performance when there is a corporate strategy that acclimatizes organizational performance. To the best of our knowledge, this has not been examined in the management accounting literature. This study would like to contribute to the literature by examining the link between BSC implementation and corporate strategy and its impact on performance. In this study, we first examine the effect of mapping between the firms strategy and the balanced scorecard on employees acceptance of the BSC as a management control system. We

hypothesize that firms that employ a planned strategy are more suitable to deploy the BSC, since a planned strategy insures that BSC objectives are well communicated to employees, which positively affects their attitudes towards the BSC. We also examine whether employee acceptance of the BSC would lead to improved performance; a model is presented in Figure 1. We study a sample of firms who implemented the BSC and assess the impact of having a deliberate strategy on employee attitudes and behaviours towards the implementation of the BSC. We hypothesize that a deliberate strategy that ensures proper implementation of the BSC will positively influence employees attitudes towards BSC implementation, which will consequently have a positive impact on firm performance. The findings of this study would help explain and predict the likelihood that BSC implementation would lead to improved performance. We also believe that this study provides a validation to the TAM, as it shows that the behavioural aspect is an important factor in BSC implementation, since it has an impact on performance. Further, it could also provide guidance to firms on how they could make the most of BSC usage and maximize its expected benefits. Section 2 provides a review of the literature and hypothesis development. Section 3 includes the sample description and the methodology used for our analysis. Section 4 is a discussion of the research findings. Finally, the conclusion and research limitation are presented in section 5. 2. THEORY AND HYPOHESES The use of the BSC as a management control system is not a blueprint for success, since different firms operate under different levels of uncertainty. The ability of the BSC to respond to the firms level of uncertainty determines the success of the BSC as a management control system. In order to respond to uncertainty, the contingency theory framework predicts that control systems

would lead to improved performance if they acted in concurrence with other factors of the firms internal and external environment (Hayes, 1977; Hirst, 1983; Govindarajan, 1984; Govindarajan, 1988). For one thing, Govindarajan (1988) found that firms that employed a differentiation strategy achieved more success when they put less emphasis on meeting budgetary conditions in comparison with firms that employed a low-cost strategy. In brief, mapping between the firms strategyas well as other internal and external factorsand the control system used by the firm is essential for a successful deployment of the control system. Further, human resources factors have been cited as a major factor in the failure to deploy management control systems (Chen and Jones, 2009; Johanson et al., 2006). The disengagement between the firms strategy and the BSC might lead to lower levels of acceptance of the control system, which harms rather than benefits performance. In this paper, we study this relationship between the firms strategy, employee attitudes towards BSC implementation, and performance, using a sample of firms who implemented the BSC as a tool for management control. Employees attitudes towards balanced scorecard implementation and the firms performance There have been many cases where firms have failed to put the BSC into operation, and academic research has attempted to explore the factors behind failures . In a survey of 96 MBA students, highlighted the importance of employee buy-into the BSC in order for the firm to derive the expected benefits from implementation. They have found that the disengagement between employees goals and those of the BSCin other words, goals set by their managersis the reason for employee dissatisfaction. Further, they also found that BSC measures and benefits are not well communicated to employees. criticize companies for employing a top-down approach in BSC implementation that does not allow employee participation in the process. Therefore,

employee involvement and attitude towards the BSC are major success factors of BSC implementation. Islam and Kellermanns (2006) examined an individual-level model similar to the TAM developed by Davies (1989) that embraced behavioural issues that could enhance or impede BSC usage inside the firm. They examined the association between four different factors and found that employee awareness of the BSC capabilities led to a better perception of the BSCs ease of use and usefulness. Further, perception about the BSCs ease of use was also associated with positive perception of the BSCs usefulness. Finally, perception of the BSCs usefulness among employees led to greater intention to use the BSC as a management control tool. Whether the findings of have an impact on firm performance remains unknown. Based on contingency theory framework, Chenhall (2003) predicted that positive perceptions about the ease of use and usefulness of a management control system would lead to better usage of the system, which would accordingly improve performance. Hence, we hypothesize that the four behavioural issues examined by would influence firm performance following the implementation of the BSC. H1: Awareness of BSC capabilities is positively associated with firm performance. H1a: Perception of BSC ease of use is positively associated with firm performance. H1b: Perception of BSC usefulness is positively associated with firm performance. H1c: Intention to use the BSC is positively associated with firm performance.

Strategy and employees attitudes towards balanced scorecard implementation The association of management control systems with the companys strategy is well documented in literature . In this reciprocal relationship, the firms strategy helps to define the type

of control system required by the firm . In return, the control system provides the companys management team with the necessary support for strategy realization. Strategy is quite an abstruse term that many scholars have attempted to define. According to , strategy goes through two phases: formulation and realization. He suggested that not every formulated strategy ends up being implemented. On the other hand, a firm might realize a strategy that results from regular daily operating decisions that end up building the firms strategy, which he called emergent strategy. defined three types of firm strategies: a firm could use a defender, prospector, or analyzer strategy. A defender strategy is based on maintaining stability through continuous improvement of current products or services. Meanwhile, a prospector strategy is built around a dynamic environment that favours innovation. The analyzer strategy falls halfway on the defender-prospector spectrum. Similarly, leadership, differentiation, and focus. Despite the differences, there is common ground between these definitions. According to , a defender strategy and a cost leadership strategy require a high level of planning with structured and detailed control systems in order to achieve results. This draws a parallel with Mintzbergs (1978) definition of deliberate strategy, a strategy that goes from a careful phase of formulation into the implementation phase. Alternatively, claimed that prospector and differentiation adopter firms prefer more flexibility and less formal control systems, as mandated by the dynamic environment in which they operate. These types of firms may adopt an emergent strategy as defined by , where the realized strategy is a result of the decisions made in response the changes in the environment rather than a pre-planned process. We suggest that firms adopting a deliberate strategy are more inclined to adopt a structured management control system, including one such as the BSC. These firms would carefully plan the has also defined three types of strategies: cost

implementation of the balanced scorecard and ensure that the four elementscustomer, financial, internal business, learning and innovationwere well embedded into the firms strategy. Further, they would ensure that objectives were carefully communicated to employees. Hence, we hypothesize that a deliberate strategy is positively associated with the four factors of BSC implementation.

H2: A deliberate strategy is positively associated with awareness of BSC capabilities. H2a: A deliberate strategy is positively associated with perception of BSC ease of use. H2b: A deliberate strategy is positively associated with perception of BSC usefulness. H2c: A deliberate strategy is positively associated with the intention to use the BSC.

Alternatively, firms following emergent strategies might have their objectives changing constantly. If these firms adopted the BSC, they would find that they had difficulty in embedding the four perspectives of the BSC into their strategy, since the strategy is continuously evolving. Therefore, firms would not be able to rely on pre-defined measures of financial, customer, learning and innovation, and internal processes, since their emergent strategies would require these measures to evolve continually. Consequently, confusion could be created among the users of the BSC and negatively affect their perception about the tool. Therefore, we hypothesize that an emergent strategy is negatively associated with the four factors of BSC implementation.

H3: An emergent strategy is negatively associated with awareness of BSC capabilities. H3a: An emergent strategy is negatively associated with perception of BSC ease of use. H3b: An emergent strategy is negatively associated with perception of BSC usefulness.

10

H3c: An emergent strategy is negatively associated with the intention to use the BSC.

Control variables Govindarajan and Gupta (1985) suggested that a good mapping between the elements of the firms external environment, the firms strategy, and its choice of control system would result in better corporate performance. It is well documented that external variables are determinants of the firms strategy; furthermore, there is also evidence that external variables would affect the choice of the management control system. found that operating in a market characterized by strong competition increased the need for formal control systems. Therefore, we believe that external variables would affect the firms strategy as well as the choice and implementation of the management control system. Some internal characteristics of firms play a significant role in BSC implementation. For example, found that differences existed between BSC adopters and non-adopters in terms of information capital. They claimed that BSC adopters had more developed information systems that enabled firms to process information in real time; thus, the adoption process was facilitated. Further, information capital is part of the learning and growth perspective as defined by Kaplan and Norton (1992), and an association between BSC objectives and strategy means that the firms information system could be also a determinant of the firms strategy. Therefore, it is necessary to control for some of the firms internal characteristics, since they might play a role in determining the firms strategic choices and BSC implementation factors. 3. METHOD Sample selection

11

We collected data for this study by surveying individuals in management teams in American and Canadian companies. The list of companies was obtained using the Dunn and Bradstreet database. We sent the survey questionnaires to 800 companies by mail in November 2008. We followed up with phone calls two weeks after the mailing date. The survey consisted of questions about the firms internal processes, external environment, strategy, balanced scorecard perceptions, and corporate performance. In most of the questions, the respondent showed his level of agreement with the subject by using a seven-point Likert-scale. See Table 1 for details. The survey ensured that all respondents were kept anonymous. We received 91 responses, representing an 11.4% response rate. Of the responses, 63 indicated that they had used the balanced scorecard. The main reason for the low response rate was that the firms management was busy managing the economic depression at the end of 2008. Other reasons for not answering the survey included company policy on not responding to surveys and the unavailability of the contact person. Definition of variables Table 1 shows the measures that we used to proxy for the different variables employed in this study. Corporate performance: We used a large number of indicators to proxy for firm performance. Since these indicators could be linked together, we employed factor analysis to reduce the number of indicators for performance. The study examined the four dimensions of performance as described by : financial, customer, internal business, and innovation and learning. Measures of firm performance are presented in Table 1. BSC implementation factors: As was previously mentioned, we adopted the four measures developed by to proxy for the different behavioural factors affecting the implementation of the

12

BSC. These factors were awareness of BSC capabilities, perceptions of BSC ease of use, perceptions of BSC usefulness, and intentions to use the BSC. Measures of BSC implementation factors are presented in Table 1. Firm strategy: We examined one characteristic of firm strategy as defined by Mintzberg (1978): whether the firms realized strategy was a result of a pre-formulated strategy (i.e., deliberate strategy) or whether it was an outcome of a management decision-making process in response to a changing environment (emergent strategy). The survey asked the respondents to describe whether the firms strategy was planned in advance or whether it was formulated over time. Measures of the firms strategy are presented in Table 1. Internal factors: We examined the firms capabilities and characteristics such as the extent of use of information systems, productivity, employee retention, product development, and market performance. External factors: In terms of external factors, we examined the level of competition in the firms market, legal environment, changes in consumer demands, and product life cycle. Tests We performed OLS regression to test the relation between the variables, as indicated in Figure 1.

4. RESULTS Table 2 summarizes the results of the factor analysis that was performed to define the different constructs of BSC awareness, perception of BSC ease of use, perception of BSC usefulness, intention to use BSC, strategy, financial perspective, customer perspective, internal business perspective, and innovation and learning perspective. Table 1 shows the definition we

13

employed for the internal and external characteristics of the firm. For the internal characteristics we asked the respondents to report on the emphasis placed by their firm on the introduction of new products, gain of market share, productivity, and employee retention. We also assessed the firms information system capabilities and controlled for firm size. As for the external environment in which the firm was operating, we asked the respondents to assess changes in product, manufacturing, and information technologies and product life cycle. We also asked them to assess the threats made by changes in customer preferences and the legal, political, and social environment. Table 3 presents the Pearson Correlation between the different variables. It should be mentioned that the customer perspective reported in Table 2 had two components. The first component was associated with the introduction of new products; hence, it is called New Products. The second factor, called Customer Satisfaction, was related to customer satisfaction measures and product quality. The strategy construct also had two components. The first component reported in Table 2 loads positively on measures of Deliberate Strategy and loads negatively on measures of Emergent Strategy. The second component loaded on one measure of Emergent Strategy. We retained the first component, since it provides an explanation for 43% of the variation in strategy measures and since the interpretation of that component is in agreement with our expectations. The second component is not reported on in this study. The higher the values of the strategy construct, the more the firm was inclined towards the adoption of a Deliberate Strategy, and the lower value of that construct meant that the firm tended to adopt an emergent strategy. Discussion of the correlation matrix Regarding the correlation between the different variables, Table 3 shows that there is a positive correlation between a firms strategy and the four factors affecting BSC implementation.

14

This suggests that a deliberate strategy is associated with higher levels of BSC awareness, perception of BSC ease of use, perception of BSC usefulness, and intention to use the BSC. The high levels of correlation between the four BSC implementation factors may raise questions about the co-linearity between the measurements. It might be possible that the users overall experience with the BSC biases their assessment of the level of awareness of BSC capabilities, perceptions about the BSC, and intention to use it. In other words, users who have a positive BSC experience might be willing to provide a high evaluation regarding their level of BSC awareness, perception of BSC ease of use, perception of BSC usefulness, and intention to use the BSC and vice versa. A positive correlation between BSC ease of use and internal processes and innovation and learning shows that BSC ease of use is essential to engage employees in using the BSC and improving some aspects of a firms performance. However, it is the higher awareness of the BSC capabilities that results in higher financial performance, as shown by the positive correlation between the two variables. Regression Analysis Results show that the firms internal characteristics do tie in with our definition of firm strategy; refer to Table 8. On the other hand, an examination of the firms outside environment shows that firms that face increased market competition, higher changes in manufacturing technology, and higher legal and political threats are more likely to adopt a deliberate strategy, meaning that these firms plan their strategic actions more carefully and ensure that their plans are implemented accordingly. As predicted in H2 and H3, there is a positive association between the type of strategy used and the BSC implementation factorsawareness, perception of ease of use, perception of usefulness, and intention to use (refer to Table 5). This means that firms that adopt a deliberate

15

strategy will likely positively influence the BSC implementation, and firms that adopt an emergent strategy will be less likely to do so. A possible explanation for this finding is that the implementation of the BSC requires a lot of preparation on behalf of the firm; therefore, anticipation and early resolve on objectives facilitate the communication of the BSC capabilities to the employees and ensure their buy-in. Table 7 shows the association between the BSC implementation factors and the external variables of the firms environment. The models for BSC Awareness, Perception of BSC Usefulness, and BSC Intention to Use are all significant, meaning that, overall, these variables help explain the variation in BSC implementation factors. The results show that firms that experience large changes in their social environment are more likely to be associated with higher awareness of BSC capabilities. Further, firms that experience continuous changes in consumer demands will be more likely to see the BSC as a useful management control tool. Finally, changes in the legal and political environment will likely promote employees intentions to use the BSC. Table 6 shows the association between the internal characteristics of the firm and the BSC implementation factors. Intuitively, firms that focus on the development of their information systems are associated with higher levels of BSC Awareness. A probable explanation is that the development of information systems helps communicate the BSC capabilities effectively to employees. However, a developed information system does not ensure that the employees would perceive the BSC as being easy to use or useful. Neither will it ensure that employees will use the balanced scorecard. Firms with a focus on revenue-side activities, such as increase in market share, would find the BSC more useful and would be much more willing to use it. A focus on market share is also associated with higher BSC awareness but is not associated with BSC perception of ease of use. Interestingly, firms associated with cost reduction activities, such as increasing

16

productivity, are not in favour of implementing the BSC. A possible explanation is that the implementation of formal control systems requires a lot of time and could be seen as being counterproductive. A focus on increasing productivity means that employees are less aware of BSC capabilities. They are less likely to perceive of it as a useful tool and less likely to use it. Similar to the results of the study by (results are not reported), BSC perception of ease of use and BSC perception of usefulness are associated with BSC awareness. BSC perception of ease of use positively affects BSC perception of usefulness. Finally, BSC perception of ease of use and BSC perception of usefulness positively affect BSC intention to use. As shown in Table 4, the behavioural aspect of the employees towards BSC implementation is associated with improved levels of performance, as predicted by H1. It seems that ease of use is the most important factor that leads to improved performance. It is positively associated with improved performance in the learning and innovation, customer, and internal processes perspectives. Furthermore, awareness of the BSC capabilities is associated with higher levels of financial performance. Inexplicably, awareness of BSC capabilities is negatively associated with the internal processes perspective. Figure 2 summarizes our findings.

5. CONCLUSION In this study we examined whether mapping between the firms strategy and management control using the BSC had a positive impact on corporate performance. We focused on behavioural issues affecting the implementation of the BSC in companies. We hypothesized that a fit between strategy and the BSC would have an impact on the behaviour of BSC users, which could lead to better results. We also controlled for the firms internal characteristics and external environment

17

that could affect the choice of the firms strategy and the implementation of the balanced scorecard as a management control tool. We examined four behavioural factors that affect BSC implementation, which are BSC awareness, perception of ease of use, perception of usefulness, and intention to use. Islam and Kellermanns (2006) showed that these factors were interrelated and that awareness about BSC capabilities was the first step that drove employees perception of ease of use and usefulness, which in return increased the likelihood that employees would buy into the BSC and become more willing to use it. Our study has confirmed these findings. We argue that the link between these factors and the firms strategy would enhance employees understanding of BSC capabilities and strengthen their view that the BSC could help the firm to improve; thus, it could lead to advancing a firms performance. BSC implementation is a complex task that requires careful planning, preparation, and thorough understanding. Hence, we expect those firms with clear and planned strategiesdeliberate strategies, as defined by to be more successful in communicating BSC capabilities and selling the BSC to their employees. Alternatively, firms with emergent strategies do not have a clear strategic vision, and BSC implementation might cause confusion among the users if they experienced continuously changing objectives. In agreement with our expectations, we found that a planned strategy facilitated BSC implementation, as it fostered employee buy-in of the control system. Employees of firms with deliberate strategies were more likely to be aware of BSC capabilities, have better perceptions about its ease of use and usefulness, and were more willing to use the tool. We also found that the perception of BSC ease of use was the most important factor from which different performance measures were derived. Our explanation is that employees awareness of BSC capabilities and usefulness is essential but not enough to drive performance. It is employees perception that the

18

BSC is easy to use that drives effectiveness, which leads to improvement in performance. Finally, we found that the development of strong communication and information systems was vital for BSC implementation, as it helped to increase awareness of BSC capabilities. These findings could be interesting to firms implementing, or planning to implement, the BSC, as it provides them with a perspective on how to maximize their benefits from using the BSC as a management control system. We propose that firms provide employees with planned objectives that embrace the different BSC measures and clear guidelines on handling the BSC in order to eliminate possible frustrations that could occur during implementation and ensure employee buy-in. Limitation of the study This is one of the studies exploring the survey data of the manufacturing companies who are using the BSC. This study has tested some hypotheses, and the results are encouraging. However, the results cannot be generalized, because there are some limitations of the study, and further investigation is needed. We recognize that, during the period when the survey was conducted, in 2008, the world economy, including that of the USA and Canada, was undergoing an economic depression. Understandably, it may be argued that the survey period was not a normal one, which could have caused the sample size to be small. The current study mailed out the survey questionnaires to all types of companies at random, based on sales and industry description criteria. The study result shows aggregate inferences for industries in general rather than for a particular type of industry. The result of the use and implementation of the BSC could be different depending on a type of industry, which requires further investigation. Future study for BSC implementation and its implications on performance is required based on the industry-specific data of the companies.

19

20

Figure 1: Balanced scorecard implementation model

Internal Factors

Strategy

BSC Implementation Factors

Performance

External Factors

21

Figure 2: Summary of Results

22

Performance Internal CharacteristicsSizeSales from New ProductsMarket Share*Productivity*Informatio n SystemsEmployee Retention

Financial

BSC Implementation Factors Perception Ease of Use Strategy Awareness Intention to Use Perception Usefulness

Customer

Internal Processes

Internal CharacteristicsCompetition*Pr oduct TechnologyManufacturing Technology*Information TechnologyLegal Environment*Customer PreferencesProduct Life CycleSocial Environment*

Learning and Innovation

23

Table 1: Measures of strategy, BSC implementation factors, performance, internal and external factors Strategy:
Please indicate your opinion about the following statements.
Strongly Strongly Disagree Agree

1. We typically don't know what the strategic priorities of our business strategy should be until we engage in some trial and error actions. 2. My Organisation's strategic priorities is carefully planned and well understood before any significant competitive actions are taken. 3. Formal strategic plans serve as the basis for our competitive actions. 4. My Organisation's strategic priorities are typically not planned in advance but, rather, emerge over time as the best means for achieving our objectives become clearer.

1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7

5. Competitive strategy for my Organisation typically results from a formal business planning 1 2 3 4 5 6 7 process (i.e., the formal plan precedes the action).

BSC implementation factors:

Measures of BSC Awareness I know the feature of the balanced scorecard approach I am aware of the cost of deploying balanced scorecard I know the extent of benefits that can be derived by deploying the balanced scorecard I dont know the type of business activities in which balanced scorecard information can be deployed Perceptions of BSC Ease of Use The balanced scorecard approach is easy to learn The balanced scorecard approach is clear and understandable The balanced scorecard approach is easy to use The balanced scorecard approach is flexible The balanced scorecard approach is hard to follow Perceptions of BSC Usefulness Using balanced scorecard would improve company performance Using balanced scorecard in the company would increase productivity Using balanced scorecard would enhance effectiveness in the company I find balanced scorecard would be useful in my company. Intentions to use BSC

1 1 1 1

2 2 2 2

3 3 3 3

4 4 4 4

5 5 5 5

6 6 6 6

7 7 7 7

1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5 5

6 6 6 6 6 6 6 6 6

7 7 7 7 7 7 7 7 7

24

Assuming I had access to BSC, I intend to use it Given that I had access to BSC, I predict that I would use it

1 1

2 2

3 3

4 4

5 5

6 6

7 7

Performance:
With four (4) representing the industry average, please indicate your Organizations overall performance over the past 3 years in the following areas by rating it on a scale below ranging from one (significantly below average) to seven (significantly above average). If any of the following performance indicators is NOT currently used in evaluating your Organizations performance, please indicate by selecting zero (0) beside those specific performance indicators.
Significantly Below Not Average used Significantly Above Average

Financial Perspective Rate of return on investment (ROI) Percentage of market share Sales growth Cash flow from operations Customer Perspective Product (or service) quality Customer satisfaction with product/service delivery process Percentage of sales from new products Development of markets for new or existing products Internal Processes Perspective Comparative costs with similar unit of competitors (or service provider) Decrease in percentage of waste and rework (or error correction) Decrease in percentage of total cost to net sales (services or products) Decrease in percentage of sales returns Your companys budget for waste management Learning and Innovation Perspective Employee satisfaction Investment in information technology/E-commerce
0 0 1 1 2 3 4 5 6 7 2 3 4 5 6 7 0 0 0 0 0 1 1 1 1 1 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7 0 0 0 0 1 1 1 1 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7 0 0 0 0 1 1 1 1 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7

25

Workplace relations Employee health and safety Employee training and development

0 0 0

1 1 1

2 3 4 5 6 7 2 3 4 5 6 7 2 3 4 5 6 7

Internal Variables: 1. Firm size:


Annual Sales (Please check the relevant box) Less than $ 100,000 $ 500,000 to $ 999,999 $ 100 million or more $ 100,000 to $ 499,999 $ 1 million or more $ 500 million or more

2. Other factors:
Not used 0 0 0 0 0 Low usage 1 1 1 1 1 High usage 6 7 6 7 6 7 6 7 6 7

2. Percentage of sales from new products or services 3. Increase/change in market share 4. Employee productivity 5. Information systems capabilities 6. Employee retention

2 2 2 2 2

3 3 3 3 3

4 4 4 4 4

5 5 5 5 5

External Variables: Negligibly intense


1. How intense is competition for market share
1 2 3 4 5 6 7

Extremely intense

How stable is the technological environment facing your organisation?

Very stable (changing slowly)


2. 3. 4. Product technology (made or used) Manufacturing technology (to make products or to provide services) Information processing technology
1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6

Very dynamic rapidly)


7 7 7

(changing

During the past 5 years, the legal and/ or political compliance requirements for product or service provision by your organisation have:

5. Remained about the 1 same

Have greatly

proliferated

During the past 5 years, the tastes and preferences of your customers have become:

6. Much easier to predict

Much harder to predict

The expected life cycle of the products in your industry is:

26

7. Very stable (changing 1 slowly) 8. Very stable (changing 1 slowly)

Very dynamic rapidly) Very dynamic rapidly)

(changing

How stable is the social environment (such as conservation, green movement) facing your firm?
2 3 4 5 6 7

(changing

27

Table 2: Results of Factor Analysis


Factor Analysis for the Attributes of Strategy Component Loading Variance Explained (%)

We typically don't know what the strategic priorities of our business strategy should be until we engage in some trial -.480 and error actions. My Organisation's strategic priorities is carefully planned and well understood before any significant competitive .606 actions are taken. Formal strategic plans serve as the basis for our competitive .841 actions. My Organisation's strategic priorities are typically not planned in advance but, rather, emerge over time as the best -.622 means for achieving our objectives become clearer. Competitive strategy for my Organization typically results from a formal business planning process (i.e., the formal .672 plan precedes the action). Factor Analysis for the Attributes of BSC Awareness I know the feature of the balanced scorecard approach I am aware of the cost of deploying balanced scorecard Component Loading .931 .893 74.1 Variance Explained (%) 42.9

I know the extent of benefits that can be derived by .931 deploying the balanced scorecard I dont know the type of business activities in which -.658 balanced scorecard information can be deployed Factor Analysis for the Attributes of Perception of Component Loading BSC Ease of Use The balanced scorecard approach is easy to learn The balanced understandable scorecard approach is clear .903 and .919 .863 .878 -.760

Variance Explained (%)

The balanced scorecard approach is easy to use The balanced scorecard approach is flexible The balanced scorecard approach is hard to follow

75.1

Factor Analysis for the Attributes of Perception of Component Loading BSC Usefulness

Variance Explained (%)

28

Using balanced scorecard would improve company .949 performance Using balanced scorecard in the company would increase .896 productivity Using balanced scorecard would enhance effectiveness in .926 the company .944 I find balanced scorecard would be useful in my company. Factor Analysis for the Attributes of BSC Intention to Component Loading Use Assuming I had access to BSC, I intend to use it .95 Variance Explained (%) 90.2 Variance Explained (%) 86.3

Given that I had access to BSC, I predict that I would use it .95 Factor Analysis Perspective for the Attributes Financial Component Loading .823 .648 .561 .737 the Attributes Customer Component Loading New Product s Product (or service) quality .138 Customer Satisfactio n .838 .553 -.329 .137

Rate of return on investment (ROI) Percentage of market share Sales growth Cash flow from operations Factor Analysis Perspective for

48.9

Variance Explained (%)

Customer satisfaction with product/service delivery process -.232 Percentage of sales from new products Development of markets for new or existing products .632 .838

57.8

Factor Analysis for the Attributes of Internal Processes Component Loading Perspective Comparative costs with similar unit of competitors (or .574 service provider) Decrease in percentage of waste and rework (or error .770 correction) Decrease in percentage of total cost to net sales (services .737 or products)

Variance Explained (%) 41.4

29

Decrease in percentage of sales returns Time to market (make available to public) new products Your companys budget for waste management

.593 .560 .593 Variance Explained (%)

Factor Analysis for the Attributes of Learning and Component Loading Innovation Perspective Employee satisfaction Investment in information technology/E-commerce Workplace relations Employee health and safety Employee training and development .568 .786 .617 .810 .857

54.2

30

Table 3: Pearson Correlation


Strategy BSC_Awarness BSC_Ease_of_Use BSC_Usefulness BSC_Intention_to_Use Financial Customer_New_Product Customer_Satisfaction Internal_Processes Learning_Innovation

Strategy BSC_Awarness BSC_Ease_of_Use BSC_Usefulness BSC_Intention_to_Use Financial Customer_New_Product Customer_Satisfaction Internal_Processes Learning_Innovation Size Sales from New Products Market Share Productivity Information Systems Employee Retention

1 . 562** . 465** . 466** . 477** .309* -0.182 0.155 0.078 0.123 0.129 0.022 0.143 -0.02 0.176 0.141

1 . 610** . 895** . 777** .334* -0.023 0.116 -0.041 -0.073 0.266 -0.021 0.241 -0.181 .392* -0.016 1 . 680** . 698** 0.275 0.295 0.148 . 404** . 451** . 399** 0.232 -0.107 -0.106 0.107 -0.101 1 . 827** 0.252 0.006 0.157 0.012 -0.105 0.183 0.098 0.303 -0.06 . 418** 0.066 1 0.223 -0.047 0.209 0.037 0.027 .340* 0.039 0.097 -0.276 0.153 0.095 1 0.013 0.182 0.235 0.267 . 414** -0.013 .338* -0.043 . 477** 0.237 1 0 . 599** . 605** -0.125 0.064 0.036 0.117 0.068 -0.135

1 0.166 -0.05 -0.071 -0.181 0.05 0.083 0.036 0.207 1 . 693** -0.04 0.274 -0.026 0.094 0.24 0.092 1 0.203 0.252 0.064 0.185 0.204 0.141

31

Competition Product Technology Manufacturing Technology Information Technology Legal Environment Customer Preferences Product Life Cycle Social Environment

. 471** 0.21 .313* 0.238 0.219 .274* 0.213 0.119

. 422** . 471** . 480** .291* 0.084 . 509** . 413** . 396**

0.11 0.106 0.205 0.285 0.066 0.138 -0.024 0.181

. 413** . 448** . 488** .332* -0.031 . 536** . 408** . 393**

.366* 0.27 . 477** 0.281 0.082 .283* 0.198 .300*

0.005 0.257 .310* 0.152 0.021 -0.108 0.193 0.178

0.096 -0.065 0.107 0.206 -.314* 0.032 0.056 .299*

0.047 -0.046 0.063 -0.138 0.046 -0.043 -0.008 0.127

0.167 0.007 0.106 . 455** -0.039 -0.199 -0.043 0.097

0.201 0.015 0.148 . 480** -0.122 -0.144 0.036 0.1

Manufacturing Technology

Sales from New Products

Information Technology

Customer Preferences

Information Systems

Employee Retention

Product Technology

Social Environment

Legal Environment

Product Life Cycle

Market Share

Competition

Productivity

Size

Size Sales from New Products Market Share Productivity Information Systems Employee Retention

1 -0.082 -0.068 -0.233 -0.153 -0.077

1 -0.11 .318* 0.042 .292*

1 .637** .483** .411**

1 0.12 .459**

1 0.231

32

Competition Product Technology Manufacturing Technology Information Technology Legal Environment Customer Preferences Product Life Cycle Social Environment

-0.009 0.135 0.169 0.199 0.036 -0.056 -0.043 -0.081

0.158 0.044 0.037 0.257 0.084 0.068 0.019 0.015

.394** .311* .307* 0.122 .344* 0.19 .433** .379*

0.26 -0.034 -0.011 0.044 0.021 0.027 0.103 0.118

0.293 .351* 0.241 .309* .357* 0.204 .414** .391*

0.12 0.279 0.16 0.248 0.165 0.119 0.288 0.293

1 .314* .395** .415** 0.158 .348** .395** 0.257

1 .677** .466** 0.004 .415** .700** .414**

1 .471** -0.23 .421** .614** .463**

1 -0.063 0.146 .331* .330*

1 -0.159 -0.047 -0.004 1 . 420** . 358** 1 .385** 1

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

33

Table 4: Results of Performance regression on factors affecting BSC implementation


Financial Perspective
.731* .081 .180 -.327 -.030 2.147* .173 .032

Customer Perspective New Products Customer Satisfaction


-.231 .406* .096 .983 .140 .269

Internal Perspective
-.808* .697*** .275 .375 .282

Processes F

R2

R2

BSC Awareness Perception of BSC Ease of Use Perception of BSC Usefulness BSC Intention to Use

-.296 .153

R2
.044

F
.430

R2

Learning Innovation Perspective R2


-.380 .719**

and F

3.225** -.278 .529

.312

3.848**

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

Table 5: Results factors affecting BSC implementation on Strategy


BSC Awareness R2 F Perception of BSC Ease of Use R2 F Perception of BSC Usefulness R2 F BSC Intention to Use R2 F

Strategy .526*** .316

22.6*** .338*** .216

12.12** *

.39***

.218

12.79** *

.394*** .228

13.845***

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

34

Table 6: Results factors affecting BSC implementation regression on Internal Factors


BSC Awareness R2 F Perception of BSC Ease of Use R2 F Perception of BSC Usefulness R2 F BSC Intention to Use R2 F

Size Sales from New Products Market Share Productivity Information Systems Employee Retention

.032 .063 .407** -.466** .282* -.148 .375 2.897* *

.096 .107 .002 -.036 .031 -.087 .124 .638

-.099 .153 .405** -.398** .226 -.164 .375 2.695**

.025 .099 .297** -.462* .018 .127 .275 1.775

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

35

Table 7: Results factors affecting BSC implementation regression on External Factors


BSC Awareness R2 F Perception of BSC Ease of Use R2 F Perception of BSC Usefulness R2 F BSC Intention to Use R2 F

Competition Product Technology Manufacturing Technology Information Technology Legal Environment Customer Preferences Product Life Cycle Social Environment

.198 .108 .202 -.009 .127 .266 -.043 .074*

.433

3.434***

-.042 -.063 .207 .238 .137 .129 -.198 .039

.189

.901

.116 .050 .147 .054 .048 .288* -.019 .049

.39

2.71**

.276 -.023 .39** -.054 .116 .001 -.151 .081

.197

2.321**

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

36

Table 8: Results of Strategy regression on Internal Factors


Strategy R2 F

Size Sales from New Products Market Share Productivity Information Systems Employee Retention

.001 .027 .101 -.140 .204 .012 .088 .548

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

Table9: Results of Strategy regression on External Factors


Strategy R2 F

Competition Product Technology Manufacturing Technology Information Technology Legal Environment Customer Preferences Product Life Cycle Social Environment

.356* -.175 .306* .076 .301* .220 -.026 -.119 .386 3.064***

*** p < .01 (2-tailed), ** p < .05 level (2-tailed), * p < .1 level (2-tailed)

37

REFERENCES Budde, J. 2007. Performance measures congruity and the balances scorecard. The Journal of Accounting Research, Autumn, 177-203. Chen, C., and K. Jones. 2009. Are employees buying the balanced scorecard? Management Accounting Quarterly 11, (1) (Fall): 36-44. Chenhall, R. 2003. Management control systems design within its organizational context: Findings from contingency-based research and directions for the future. Accounting, Organizations and Society 28, (2,3): 127-168. Davis, F. 1989. Perceived usefulness, perceived ease of use, and user accep. MIS Quarterly 13, (3): 319-340. Davis, F., R. Bagozzi, and P. Warshaw. 1989. User acceptance of computer technology: A comparison of two. Management Science 35, (8): 982-1003. DeBusk, G. K., Killough, L. N., Brown, R. M., 2005. Financial Measures bias in the use of performance measures systems. Advances in Management Accounting 14, 61-89. De Geuser, F., S. Mooraj, and D. Oyon. 2009. Does the balanced scorecard add value? empirical evidence on its effect on performance. European Accounting Review 18, (1): 93-122.

38

Govindarajan, Vijayaraghavan. 1984. Appropriateness of accounting data in performance evaluation: An empirical examination of environmental uncertainty as an intervening variable. Accounting, Organizations and Society 9, (2): 125-135. Govindarajan, Vijay. 1988. A contingency approach to strategy implementation at the business-unit level: Integrating administrative mechanisms with strategy. Academy of Management Journal 31, (4) (Dec): 828-853. Govindarajan, V., and A. Gupta. 1985. Linking control systems to business unit strategy: Impact on performance. Accounting, Organizations and Society 10, (1): 51-66. Hayes, David C. 1977. The contingency theory of managerial accounting. The Accounting Review 52, (1) (Jan): 22-39. Hirst, Mark K. 1983. Reliance on accounting performance measures, task uncertainty, and dysfunctional behavior: Some extensions. Journal of Accounting Research 21, (2) (Autumn): 596-605. Hoque, Z., and W. James. 2000. Linking balanced scorecard measures to size and market factors: Impact on organizational performance. Journal of Management Accounting Research 12, : 1-17. Islam, M., and F. Kellermanns. 2006. Firm- and individual-level determination of balanced scorecard usage. Canadian Accounting Perspectives 5, (2): 181-207.

39

Ittner, C.D., Larcker, D.F., Randall, T., 2003. Perfoance implications of starategic performance measurement in financial services firms. Accounting, Organizations and Society 28, 715-741. Johanson, U., M. Skoog, A. Backlund, and R. Almqvist. 2006. Balancing dilemmas of the balanced scorecard. Accounting, Auditing & Accountability Journal 19, (6): 842857. Kaplan, R., and D. Norton. 1992. The balanced scorecard--measures that drive performance. Harvard Business Review 70, (1) (Jan): 71-79. Kaplan, R. S., and Norton, D. P., 1996. Using the balances scorecard as a strategic management system. Harvard Business Review 74 (Jan-Feb), 71-79. . 2001a. Transforming the balanced scorecard from performance measurement to strategic management: Part I. Accounting Horizons 15, (1) (Mar): 87-104. Khandwalla, P. 1972. The effect of different types of competition on the use of management controls. Journal of Accounting Research 10, (2): 275-285. Lau, C.M., Sholihin, M., 2005. Financial and nonfinancial performance measures: how do they affect job satisfaction? The British Accounting Review 37, 389-413. Langfield-Smith, K. 2007. A review of quantitative research in management control systems and strategy. Handbook of Management Accounting Research 2, : 753-783.

40

Maiga, A., and F. Jacobs. 2003. Balanced scorecard, activity-based costing and company performance: An empirical analysis. Journal of Managerial Issues 15, (3): 283-301. Miles, R, C. Snow, and A. Meyer. 1978. Organizational strategy, structure, and process. Academy of Management.the Academy of Management Review 3, (3): 546-562. Mintzberg, H. 1978. Patterns in strategy formation. Management Science 24, (9): 934948. Porter, M. 1980. Competitive strategy. New York: NY: Free Press. Van der Stede, W., Chow, C.W., Lin, T. W., 2006. Strategy, choice of performance measures, and performance. Behavioral Research in Accounting 18, 185-205.

41