Communicating Strategy and

Organizational Performance
An Empirical Study of The Effectiveness of The
Balanced Scorecard
Outline
What is BSC?
What is Strategy?
Original Research
Literature Review
Research Proposal
Balanced Scorecard is a method and a tool
which includes:

a strategy map where strategic objectives are placed over

four perspectives in order to clarify the strategy and the
cause and effect relationships that exists among them.

strategic objectives which are smaller parts of the strategy

interlinked by cause and effect relationships in the
strategy map.
A Strategy Map
Cause and Effect Relationship
 The Balanced Scorecard

The method helps separate creation of strategy

from strategy implementation, which can push
power downwards while making the leaders'
jobs easier.

It can also help detect correlation between

activities.
 The Balanced Scorecard
For example, the process objective of
implementing a new telephone system can
help the customer objective of reducing
response time to telephone calls, leading to
increased sales from repeat business.
Actual Usage of the Balanced Scorecard
Kaplan and Norton found that companies
are using the scorecard to:
Clarify and update budgets
Identify and align strategic initiatives
Conduct periodic performance reviews to learn about and
improve strategy.
 A Comprehensive View of Business
Performance
The
scorecard
drives
implementati
on of strategy
using
perspectives
which
generally
include:
What is a Strategy?
BH Liddell Hart: “the art of distributing and applying
military means to fulfill the ends of policy”
George Steiner: “there is very little agreement as to
the meaning of strategy in business world” (point out
five definitions of strategy)
Henry Mintzberg: “People define strategy in different
ways” (point out four definitions)
Michael Porter: “it means deliberately choosing a
different set of activities to deliver a unique mix of
value” Competitive strategy is about being different.
 What is a Strategy?
There is none. (Fred Nickols – 2010)
Strategy is not planning. Strategy deals with competitive situation in
an uncontrolled environment.
Planning deals with situations in a controlled environment.
In essence, the job of the strategist is to understand and cope with
competition
Original Research
Original Research
Communicating and Controlling Strategy: A US
FORTUNE 500 Company
Mary A. Malina and Frank H Selto (April 2001)
This study investigate its research questions with qualitative,
interview data obtained from individuals directly involved
with the company's DBSC.
Reports evidence on the effectiveness of the BSC as a
management control and strategy communication device.
Casual relationship between effective management control,
strategic alignment and BSC
Original Research
Research Method:
Sampling: feedback from two DBSC designers, three
managers who use DBSC to evaluate distributors, and nine
of 31 distributors.
Data Collection:
Archival data (policy documents and quarterly DBSC
scores)
Semi-Structured interview format obtained via
telephone in mid-1999
8 questions with 100% response rate
Coding Interview Data: two extreme coding procedures are
Completely free coding unconstrained by prior theory
Strict use of codes based on theoretical constructs.
Original Research
Type of change introduced in the paper:
1. Narrow research questions to just two:
 Whether BSC add value to companies?
 If so, how does it contribute to organizational
performance?
2. Use Survey plus interviews with structured questionnaire
 A structured survey from an empirical study of Fabian De
Geuser, Stella Mooraj, and daniel Oyan (2009)
3. Industry wide study instead of single company focused
Original Research
Results & Findings:
 The BSC is an innovative strategy communication and
management control development
 The BSC present significant opportunities to develop,
communicate, and implement strategy.
 Managers respond positively to BSC measures by
reorganizing their resources and activities
 Managers believes that improving the BSC performance is
improving their business efficiency and profitability
Original Research
Result and findings:
 Factors were found to negatively affect perception of the
BSC and cause conflict and tension between the company
and its distributors
 Measure are inaccurate of subjective
 Communication of the BSC is one-way (top-down)
 Benchmark are inappropriate but used for evaluation
Original Research
Results and findings:
Distrusters on average have realized observable
improvement in financial performance
Literature Review
Literature Review
1. Strategic alignment and middle-level managers’ motivation in a
balanced scorecard setting
A Research Paper By: Valerie Decoene & Werner Bruggeman
Ghent University, Ghent, Belgium 2006

 Develop and illustrate a model of the relationship between strategic alignment,

motivation and organizational performance in a balanced scorecard (BSC)
context
 BSC is a comprehensive system of strategically aligned performance measures.
 A theory illustration case study is described to provide evidence for the
theoretical model.

FINDINGS:
 Effective strategic alignment calls for the active involvement of manufacturing
executives in the BSC design and implementation process.
 Effective strategic alignment empowers and motivates manufacturing
executives.
 A combination of effective strategic alignment and a BSC-based compensation
plan has a positive effect on the extrinsic motivation of manufacturing
executives.
Literature Review
2.The balanced scorecard: short term guest or long-term resident?
Can the balanced score-card overcome the defects inherent in
traditional performance measures?
A Research Paper By: Jackie Brander Brown and Brenda McDonnell

 Management need to decide which operations, processes, competences and skills

their organizations must excel at if customer demands are to be met adequately.
 If an organization is to be successful and remain successful, it must continually
make improvements both: to its existing services and develop and introduce new
ones. It is only by this continual improvement process/innovation it can grow by.
 This study covered the hotel management industry across UK.

FINDINGS:
 It appears to be a very definite need to be clear about the business unit for which
the score-card is being developed.
 Effective establishment of strategies, common goals, critical success factors and
performance measurements are main means to achieve growth
 The establishment/ development of effective performance measures appropriate to
the employee morale and staff development, should be identified as being
especially vital to the hotel sector.
Literature Review
3. BSQ strategic formulation Framework
A hybrid of balanced scorecard, SWOT analysis and quality function
deployment
By: Y.K. Ip and L.C. Koo
Asia International Open University (Macau), Hong Kong, China (2004)

 The combination of balanced scorecard (BSC), SWOT analysis and quality function
deployment (QFD) provides a pragmatic approach for managerial and consultant
practitioners to build a strategic framework
 The strength of QFD originally linked up direct customer requirements with
production design
 A non-profit-making association, (HKQMA) is used as a case study to demonstrate
how to build an organizational strategic plan..

FINDINGS:
 Using traditional focus groups is an effective strategy to produce data and insights
for future strategies, decisions and action plan.
 The higher the performance gap, the higher the need for an organization to
improve in the difference between importance score and performance score
 Identifying the critical to quality (CTQ) factors takes precedence over all quality-
management processes
Literature Review
4. Balancing dilemmas of the balanced scorecard
A Research Paper By: Ulf Johanson, Matti Skoog, Andreas Backlund and Roland Almqvist
School of Business, Ma¨ lardalen University, Sweden`2006

 Debate various critical issues in the implementation and use of the balanced
scorecard (BSC) as a management control tool
 The paper contributes to the BSC debate by collecting insights from empirical
findings, as well as exploring various theoretical aspects.
 It is motivated by an overall high rate of implementation failure in various
practical settings..

FINDINGS:
 No organization can attain complete balance in the management control
process.
 Transforming a management control model is a matter of long-term,
sustainable evolution
 The features of connectivity, regularity and stability have a potential to assist
more comprehensively in allocating attention to, and control of, the
organization in relation to the defined management control (scorecard)
agenda.
 The paper concludes that there is a need for further debate and research on
these dilemmas.
Literature Review
5. Balanced scorecards for strategic and sustainable continuous
improvement capability
A Research Paper By: Mandar Dabhilkar and Lars Bengtsson
Department of Industrial Engineering and Management, University of Gavle, Sweden.2004

 Illustrates how strategic continuous improvement (CI) capabilities were developed

in three Swedish manufacturing companies that have implemented the Balanced
Scorecard (BSC).
 BSC is a multidimensional approach to performance measurement and
management control that is linked specifically to organizational strategy.
 A multiple case study was conducted at three engineering industry companies in
Sweden that manufacture heat transfers.

FINDINGS:
 Certain mechanisms in the management control system, as well as the presence of
an advanced work organization, may help in sustaining the strategic CI capability.
 In order to sustain this strategic CI capability over the years and thus obtain
commitment, there seems to be a need for an advanced work organization
 In order to sustain the developed strategic CI capability, organizations have to
devolve autonomy and empower individuals to manage their own processes.
Literature Review
6. Third-generation balanced scorecard: evolution of an effective
strategic control tool
A Research Paper By: Gavin Lawrie and Ian Cobbold
2GC Active Management, Maidenhead, UK 2004

 Describes changes to the definition of the framework that have occurred since
the start of BSC, recognizing within these changes three distinct generations of
balanced scorecard design.
 It relates these developments to literature concerning strategic management
within organizations, observing that the changes made have improved the utility
of the balanced scorecard as a strategic management tool.
 It shows the linkages between BSC and strategy in the three BSC generations.

FINDINGS:
 More modern ideas about BSD design processes and structure are indeed
“better” than the original device described by Kaplan and Norton.
 Modern BSC designs are more likely to have a beneficial consequence for the
organizations adopting the tool.
 While more recent BSC designs are substantial improvements on original ideas,
there is still room for improvement.
Literature Review
7. Linking strategy into operational management
A survey of BSC implementation in Finnish energy sector
A Research Paper By: Harri Haapasalo, Kari Ingalsuo and Timo Lenkkeri
Department of Industrial Engineering and Management,
University of Oulu, Finland 2006

 Find means of connecting strategic management and operative performance

measurement.
 Level of use and utilization of BSC, the influence of specific features, the most
used metrics and features of successful implementation of it in the energy
sector.
 Facilitates in depth discussion the company’s vision, strategy and critical
success factors and translate them into specific measures and objectives in
action.

FINDINGS:
 Maintaining a vision and a strategy has not been very prevalent in Finnish
electricity/energy companies.
 Benchmarking on other industries, where BSC has been in use, leads to better
results faster in the energy sector
 In the construction phase of the BSC, the process of searching for the metrics is
more important than finding them.
Literature Review
8- BALANCED SCORECARD:
A rising trend in strategic performance measurement
A Research Paper By: Khim Ling Sim and Hian Chye Koh
Western New England College, 2001

 Traditional performance measurement systems have been criticized as being too

narrowly focused on financial figures and functional level performance such
 This study investigates whether there are any linkages between business success and
the use of strategically linked performance measures
 Long-term survival of a business is dependent upon meeting market needs through
long-term value creation process.
 Information collected from 83 electronics companies located within the USA

FINDINGS:
 BSC can be used as a tool for monitoring the long-term value creation process.
 Employee satisfaction is a good measure for the innovation and learning perspective.
 Shorter product development time is often the end results of increased employee
training and the use of innovative techniques.
Literature Review
9. Strategic management of electronic commerce:
an adaptation of the balanced scorecard
A Research Paper By: Helen Hasan and Hendrika (Rita) Tibbits
Australia, 2000

 BSC is built on the premise that measurement is a prerequisite to strategic

management.
 Electronic commerce is rapidly becoming concerned with the many different
ways organizations do business and is therefore an area of strategic concern to
organizations.
 A case study of the implementation of the balanced scorecard in a public utility
is analyzed and how the adaptation of BSC can be retained as a strategic
choice.

FINDINGS:
 From the internal operations view, e-commerce affects not only business
processes but also business structures.
 BSC provides a means of identifying links between strategic objectives and
concrete measurements throughout an organization.
 E-commerce is introducing fundamental changes to traditional business models
in many businesses so that the adaptation of the BSC will help in coping with
change to achieve excellence in strategy deployment.
Literature Review
10. A constant growth model of the firm:
empirical analysis of the balanced scorecard
A Conceptual Paper By: Erkki K. Laitinen
Department of Accounting and Business Finance,
University of Vaasa, Finland 2006

 Presents a microeconomic model to analyze theoretically BSC, to develop a

simplified model version and to apply it empirically.
 The model assumes exponential production and demand functions with constant
scale factors and elasticity's.
 It is estimated for Nokia’s time-series 1993-2002 and partly for 35 Compustat
firms.

FINDINGS:
 It gives novel empirical evidence on parameter estimation and strategic behavior
in BSC framework.
 In growth strategy, price discounts may lead to declining profitability, while
productivity is increasing. This results in peculiar causal relationships in strategic
mapping of BSC.
 Most firms show decreasing returns to scale that are found also in a cross sectional
analysis.
Research Proposal
Research Proposal
Strategy Communicating and Organizational
Performance- BSC (Revised): Saudi Oil & Gas
Service Providers

Research questions :
Whether the BSC adds value in strategy communicating,
and
If so, how does it contribute to organizational
performance.
Research Proposal
Industry & Sample (Revised)
 Oil, Gas Industry
 Large Firms (1000+ employees)
 Local companies and Foreign corporations based in Saudi
 The BSC is a long term oriented and a continuous process
 Oil & Gas Industry regarded as long-term, well managed
companies, and have sufficient resources to assign BSC
responsibilities to key staff that championing its continued
development and implementation.
 Oil & Gas represent the main source of income in Saudi
Research Proposal
Hypotheses (combined from the two original researches)

1. The BSC is an effective strategy communicating tool

2. The development of the BSC is positively associated with the
organizational performance of the firm
3. The higher the support of top management to the
development of BSC, the better the organizational
performance
4. The better the translation of the strategy through BSC , the
better the organizational performance
5. The more the BSC encourages strategic input from all levels of
the org, the better the org performance
Research Proposal
Design (qualitative research) (Revised)
Who? Designers of BSC, Managers involved, and
Executives of Oil & Gas firms operating in Saudi.
What? Information about BSC effects in strategy
communication and organizational Performance.
When? Before and after implementation of the BSC
Where? Saudi Oil and Gas Industry
Why? To generalized or limit the result of the original
researchs (BSC is an effective tool in strategy
communication and organizational performance.
Research Proposal
Data Types and Sources
Secondary data:
 Companies participated in BSC conference in Bahrain and Dubai
or those registered in www.bscol.com

Primary data:
 Interview with consultation firms
 Interview with BSC champions. (Revised)

 Employee questionnaire. (Revised)

Research Proposal
Questionnaire and Interview (Revised)
Interview questionnaire from the original research

Survey questionnaire from the recent research (Does

the BSC add value? Empirical Evidence of its Effect on
organizational performance by Fabian De Geuser and
Stella Moraj, and Daniel Oyon in 2009)

Note: Validity and Reliability tests need to be done!

The Survey
A primary data collection tool
Comprised 68 closed questions
Following the Foster and Swenson (1997) approach,
using multi-item proxies
Scale:
0 (failure)
1 (little success)
2 (average success)
3 (High success)
4 (Extremely success)
 Foster's Methodology:

Foster's Methodology is basically a sequence of steps to partitioning

computation/data into pieces (tasks), determining communication
between these pieces (tasks), grouping the pieces (tasks) that have
intense communication to one another, then finally mapping these
groups into several processors we have.

Foster's Methodology:

Partitioning
Communication
Agglomeration
Mapping
Thank You