A critical analysis of Balanced

Scorecard as a performance
measurement tool: an overview of its
usage and sustainability
A iti al a alysis of Bala ed o e a d as a pe fo a e easu e e t tool: a o e ie of its usage a d sustai a ility

TABLE OF CONTENTS

TOPICS PAGE

LETTER OF TRANSMITTAL i
DECLARATOIN ii
ACKNOWLEDGEMENT iii
ABSTRACT iv-v

CHAPTER INTRODUCTION 4-7

ONE
1.1 Background of the study 5
1.2 Objective of the study 5
1.3 Scope of the study 5
1.4 Methodology 6
1.5 Limitations of the study 7
CHAPTER BALANCED SCORECARD 8-15
TWO
2.1 Overview of the Balanced Scorecard (BSC) 9-11
2.2 Objective 12
2.3 Design 12-13
2.4 Original design method 13
2.5 Improved design method 14
2.6 Popularity 14
2.7 Variants and alternatives 14-15
CHAPTER CRITICAL ANALYSIS ON THE CONCEPT & 16-25
THREE USING OF BALANCED SCORECARD
WHETHER IT IS THE UNIVERSAL SOLUTION
FOR THE BUSINESS MANAGEMENT?
3.1 Crucial investigation of the concept and using of
Balanced Scorecard 17-21
3.2 A comprehensive new approach for the
measurement and management 21-22
3.3 Is the Balanced Scorecard a universal key to the
business management? 22-23
3.4 Balanced Scorecard: a question of conjecture and
application 23-25
CHAPTER CHAPTER FOUR: THE SUSTAINABILITY OF 26-32
FOUR THE BALANCED SCORECARD
4.1 The Balanced Scorecard: an instrument for
sustainability management 27-28
4.2 Different possible approaches of integrating
environmental and social aspects 28-30
4.3 The process of formulating a sustainability Balances
Scorecard 31-32

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CHAPTER FINDINGS 33-36

FIVE

5.1 Balanced Scorecard links the performance

measurement for better business management and it is
an universal solution 34

5.2 The sustainable Balanced Scorecard 34

5.3 Why sometimes BSC fails? 35

5.4 Development of the perspective of Balanced

Scorecard
36

CHAPTER CONCLUSION AND RECOMMENDATIONS 37-39

SIX

6.1 Conclusion 38
6.2 Recommendation 39
REFERENCES & BIBLIOGRAPHY 40-46

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Table Page

Table 1: Limitations of the study 7

Table 2: Objectives of the Balanced Scorecard (BSC) 12

Table 3: Design procedures of the Balanced Scorecard (BSC) 13

Table 4: Different possible approaches of integrating

environmental and social aspects 28

Table 5: Reasons for the failure of the Balanced Scorecard (BSC) 35

Table 6: Recommendation for the organization before the measurement of

the performance by the Balanced Scorecard (BSC) 39

Chart Page

Chart 1: Overview of the Balanced Scorecard 11

Figure Page

Figure 1: Process of formulating the Sustainable Balanced Scorecard 31

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CHAPTER ONE: INTRODUCTION

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1.1 Background of the study

The business organization must have to follow the rules & regulation and without the proper
connection of the business organization it is not possible to have the success. But the thing is
it is so much necessary to have the performance measurement of the business organization.
The Balanced Scorecard (BSC) helps in this perspective. Without the proper implementation
and without the perfect measurement of the business organization, the management cant be
able to take any sorts of decision about the organization. Besides, it is so much important to
know about what is going on and what is so much necessary for the business organization.
The Balanced Scorecard (BSC) helps in reducing all sorts of problems and it is so much
necessary for the business organization to reduce those.

On the other side, the Balanced Scorecard (BSC) is the proper solution for the measuring of
the perfect performance. There are some of the perspectives about the Balanced Scorecard
(BSC) which may help in giving the perfect service to the management of the business
organization.

1.2 Objective of the study

The objective of preparing this report was to find out:

To review the concept of Balanced Scorecard.

Sustainability of Balanced Scorecard.
Why sometimes the Balanced Scorecard fails?
Proper implementation of Balanced Scorecard and its importance.
Is Balanced Scorecard is a universal solution for measuring the performance?
Is Balanced Scorecard can be developed?

1.3 Scope of the study

This report was prepared by studying many articles, reports, journals, and thesis papers,
books on the Balanced Scorecard (BSC) to find out the proper concept and then find out the
objective. Some organizations dont find the Balanced Scorecard (BSC) useful but in actual
sense they are wrong. To solve these I have to go through many papers to find out the proper
concept of the Balanced Scorecard (BSC) and to find out the actual meaning of using it.

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1.4 Methodology
My thesis paper is not on any specific company. It an overall view on the concept, using and
sustainability of the Balanced Scorecard. For making this report more presentable and
meaningful, I have gone through many articles on the Balanced Scorecard. I have analysed
the articles of Stan Davis named An investigation of the effect of Balanced Scorecard
implementation on financial performance, Ruzita Jusoh named The performance
consequence of multiple performance measures usage, Hoque & James named Linking
Balanced Scorecard measures to size and Market Factors: Impact on Organizational
Performance, Paul Hepworth named Literature review of the Balanced Scorecard,
Bernard Marr named The Balanced Scorecard and Intangible assets: similar ideas,
unaligned concepts. From these articles I have taken a brief review on the performance
measurement activities of the Balanced Scorecard as well as its usage in the business
organization.

Then from the article of Robert S. Kaplan named Conceptual Foundation of the Balanced
Scorecard I got an overall concept on the Balanced Scorecard. Besides, this helped me in
finding out the future opportunities of the usage of the Balanced Scorecard.

From the journal of practical consulting, I have found an innovative paper named An
integrated Balanced Scorecard strategic planning model for the non-profit organization
which is written by Jan L. Ronchetti. From this paper I have analysed the using of the
Balanced Scorecard as a performance measurement tool by the non profit organization.

Besides, to cover and fulfil my objective of the study, I have analysed some reports on the
Balanced Scorecard published by CIMA & WILEY. I have found from those reports that the
Balanced Scorecard links the internal components of the performance and helps a lot to
connect them.

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1.5 Limitations of the Study

There were many limitations in this study. I have faced many problems in preparing this
thesis paper. Some of the limitations that I have faced in my study are:

LIMITATIONS OF THE STUDY

In the main constraint of the Balanced Scorecard (BSC) there is insufficient

information in different journals and articles.
There were a lot of arguments of different experts in different reports and thats
why it became hard to find out the actual and final solution.
Besides, time shortage is a big sorts of constrain because the thing is, it is very
difficult to complete a thesis paper within only a short period of time.
In Bangladesh, there is much lacking in the information about the Balanced
Scorecard (BSC) as the experts of Bangladesh only have a few journals on this.
I didnt have so much deep knowledge about the Balanced Scorecard (BSC) thats
why I have to go through many articles, books, journals, reports & theories.

Table 1: Limitations of the study

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CHAPTER TWO: BALACED SCORECARD

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2.1 Overview of the Balanced Scorecard (BSC)

The balance score card or BSC is a semi-standard structured report that is used as a tool of
strategy performance management. This tool is supported by automation tools and design
methods. Managers can use these tools to keep track of employees activities and monitor the
consequences of their activities so that they can control employees performance. According
to the report of 2010 annual survey of management tools undertaken by Bain & Company it
is the most effective strategy performance management tool.

Some of the experts described about the Balanced Scorecard as:

The balanced scorecard retains traditional financial measures. But financial measures tell
the story of past events, an adequate story for industrial age companies for which investments
in long-term capabilities and customer relationships were not critical for success. These
financial measures are inadequate, however, for guiding and evaluating the journey that
information age companies must make to create future value through investment in
customers, suppliers, employees, processes, technology, and innovation (Kaplan, 2001).

Balanced Scorecard is a strategic model tool which helps in measuring the performance
and to achieve the balance which supports the progress against the pre determined
objectives, without the sub optimization. (Smith, 1993)

The original model of balanced scorecard proposed by Kaplan and Norton consists of four
perspective to identify and choosing effective measures. They are financial, customer,
internal business processes, and learning and growth.

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Financial perspective
Financial perspective identifies limited pertinent high-level financial measures
(Aaker, 2000). In specific, designers were inspired to pick up measures that helped to
answer the question "How do we look to shareholders or investors?"

Customer perspective
This perspective helps in identifying and selecting measures that answer the question
"How do customers see us?"

Internal business perspective

This perspective inspires to choose measures that answer the question "What must we
focus on?"

Learning and growth perspective

This perspective encourages to identify and to select measures that answer the
question "How can we carry on improving, creating value and modernizing?"

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IMPROVE SHAREHOLDER VALUE

REVENUE GROWTH PRODUCTIVE

STRATEGY STRATEGY
Financial Perspective

VALUE FROM INCREASE IMPROVE IMPROVE

NEW CUSTOME COST ASSET
PRODUCT STRUCTURE UTILIZATION
R VALUE
CUSTOMERS

OPERATION
CUSTOMER PRODUCT
Customer Perspective AL
INTIMACY LEADERSHIP
EXCELLENCE

Internal Perspective

INCREASE ACHIEVE
OPERATION BE A GOOD
INNOVATIVE CUSTOMER
AL NEIGHBOUR
VALUE
EXCELLENCE

Learning & growth perspective

EMPLOYE CORPOR
TECHNOL
E COMPE- ATE
OGY
-TENCIES CULTURE

Chart 1: Overview of the Balanced Scorecard

Source: Harvard Business Review, Robert S. Kaplan, 2000

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2.2 Objective of Balanced Scorecard

For implementing the balance scorecard in the field, organization must identify the objective
of balance scorecard. The Balanced Scorecard, developed by Kaplan and Norton at Harvard
University, provides an excellent framework for defining goals and objectives and translating
them into specific measures (Kaplan, 2000). Objectives defined using this framework is
Balanced in that they are defined from four perspectives:

OBJECTIVE OF THE BALANCE SHEET (BSC)

The Customer Perspective emphasizes satisfying the needs and wants of

customers.
The Financial Perspective focuses on the stakeholder concern about how efficient
and effective the unit is at using its resources and capitals.
The Internal Business Perspective highlights excellence at performing internal
processes and in employee competencies and skills.
The Innovation & Learning Perspective stresses on dynamic improvement and
the creation of value.

Table 2: Objectives of the Balanced Scorecard (BSC)

Source: Accounting Review, Robert S. Kaplan in 2001

2.3 Design
The main objective of designing a balanced scorecard is to identify a few numbers of
financial and non-financial measures and to assign target to them so that organization can
monitor whether they are meeting expectations or not (Arthu, 1994). If there is any fall or
deviation, managers can take necessary actions to improve performance (Banker, 1998).

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According to Kaplan & Norton's writing on the subject in the late 1990s, designing a balance
scorecard requires four steps. They are:

DESIGN PROCEDURES OF THE BALANCED SCORECARD (BSC)

Converting the vision into operational goal.

Collaborating the vision and connect it to distinct performance.
Business planning and guideline setting.
Feedback, learning and fitting strategy consequently.

Table 3: Design procedures of the Balanced Scorecard (BSC)

Source: Harvard Business Review, Robert S. Kaplan, 1996

In particular, people state a "strategic linkage model" or "strategy map" as being a balanced
scorecard (Barth, 1994). This design of balanced scorecard helps a manager to recognize
various measures and to monitor and control individual performance.

2.4 Original design method

The original design of balance scorecard contained simple tables segmented into four sections
termed as "financial", "customer", "internal business processes", and "learning and growth"
(Beaver, 1999). It requires selecting five or six measures for each perception to design a
balanced scorecard

Organizations face problems in selecting effective measures. They must choose the best
measures to design major model of balanced scorecard. Though early-style balanced
scorecards are difficult to design in a manner that builds confidence that they are well
designed, they are still designed and widely used.

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2.5 Improved design methods

The improved design method was developed in the mid-1990s (Bowbrick, 1992). This
improved model selects measures based on a set of "strategic objectives" planned on a
"strategic linkage model" or "strategy map" (Box, 1994). The strategic objectives are
assigned to four measurement perspectives to link the dots for creating visual presentation of
strategy and measures (Bushman, 1996). This sort of approach delivers greater contextual
justification for the measures chosen so that managers can work together harmoniously and
since 1996, this type of approach is widely used (Deloitte, 1994).

2.6 Popularity
64 percent of companies were found to measuring performances from various perspectives in
a manner that is similar to balanced scorecard and this record was found Kurtzman, in 1997
(Kurtzman, 1993). Government units, business units, military units and corporations, non-
profit organizations implements balance scorecard in various sectors (Edvinsson, 1997).

Though mangers face many difficulties in selecting effective measure and designing major
balanced scorecard, it is very popular in many organizations. In early time, balance
scorecards were designed by consultants and managers did not trust, and therefore, failed to
link with and use (Jones, 1995). Thats why they failed. But, if managers can select effective
measures and have confidence they can be successful in implementing balanced scorecard.

2.7 Variants and alternatives

Kaplan and Norton endorsed a number of alternatives to the original four box balanced
scorecard in their books and articles, since the balance scorecard was promoted in early
1990s (Kaplan, 1993). These alternatives have very limited implementation and are
classically suggested either by academics as vehicles for promoting other schedules or
mentors as an effort at differentiation to stimulate sales of consultancy or books (Kaplan,
1993).

Most of the suggested variations are similar. In 2002 a research paper made an effort to
identify a pattern in these variations mentioning three different types of variation and refers
them as generation which are a part of balanced scorecard (Ittner, 2003).

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1st generation of balanced scorecard design includes 'strategy map' or 'strategic linkage
model'; 2nd generation balanced scorecard design argues the strategy map / strategic linkage
model with a distinct article telling the long-term consequences required from the strategy
(the "destination statement" idea) involve the 3rd generation balanced scorecard design
(Corrigan, 1995).

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CHAPTER THREE: CRITICAL ANALYSIS

ON THE CONCEPT & USING OF
BALANCED SCORECARD WHETHER IT
IS THE UNIVERSAL SOLUTION FOR
THE BUSINESS MANAGEMENT?

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3.1 Crucial investigation of the concept and using of Balanced

Scorecard
The concept of the Balanced Scorecard (BSC) is new types of concept. This new concept is
used for the measurement of the performance. This performance measurement tool became a
comprehensive strategic management tool which is documented in four Harvard business
Review articles (Kaplan, 1994; Kaplan and Norton, 1992; 1993; 1996). This concept receives
more detailed explanation and a complete review in the book of Kaplan and Norton named
The Balanced Scorecard: Translating Strategy into Action (Kaplan and Norton, 1996). Some
writer also told about the concept of the Balanced Scorecard. Argyris of the Harvard Business
School suggests about the Balanced Scorecard:

Kaplan and Norton present an innovative management perspective that can be used to
translate strategy for the growth into operational terms. It represents the beginning of a
comprehensive and actionable theory of governance.

But the problem is in reality this concept of the suggestion is hardly scratches the surface of
Kaplan and Nortons concept. They stated that:

The Balanced Scorecard translates an organizations mission and strategy into a

comprehensive set of performance measures and provides the framework for strategic
measurement and management (Kaplan, 1996b).

This view about the performance measurement is correct but it doesnt qualify fully with the
radical types of approach that the balanced scorecard (BSC) provides (Kaplan, 1996b). For
the endurance of the future success, the balanced scorecard (BSC) is very much important
because it helps in obtaining the corporate goals. This can be achieved by the close scrutiny
and by the overall view of the corporate activities (Booth, 1996). Then the concept of the
balanced scorecard (BSC) becomes so much closely related and in an innovative way
(Kurtzman, 1993). This may affect the relationship. Now it becomes more complex and
complicated. This kind of concept gives more scrutiny solution.

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Actually the balanced scorecard (BSC) gives a solution to divide the total business
environment into 4 key areas. Besides, the extra additional areas can also be included but the
thing is there must have to be measureable action and the thing is this must have to be
considered by the whole government (Kaplan, 2001). On the other side, the main thing is the
government body must have to be formed in the sense of the measuring and using the
balanced scorecard (BSC) (Lingle, 1996).

The total organizational success can be achieved when the internal management uses the
balanced scorecard (BSC) and focuses on the whole matter of its concept (Lopes, 1996). If
the balanced scorecard (BSC) can be understood perfectly and properly then it becomes so
much easy to get the organizational success by the proper measurement. This scorecard
translates the whole mission, vision as well as the strategy of the organization into four
national elements (Jensen, 1994/95). Those are: financial, customer, internal business process
and the organizational learning and growth (Kaplan, 1996b).

The concept of the balanced scorecard (BSC) describes that, it is the performance
measurement matric. Besides, the definition says that:

The balanced scorecard (BSC) is a performance measurement metric used in the strategic
management system used extensively in business and by organizations worldwide. Benefits of
the system include increasing focus on results, aligning business activities with organization
strategy and improving performance and communications. The balanced score card proposes
that the organization should be viewed from four perspectives, with metrics developed, data
collected and analyzed for each of them. These four perspectives are: Financial, Customer,
Internal Business Processes and Learning and Growth (Anthony, 1965).

The concept of the balanced scorecard (BSC) becomes more and more actually defined to the
management of the business organization when it comes to the form of the performance
measurement (Kurtzman, 1993). On the other sides, for the research methodology as well as
for the betterment of the total performance measurement, the balanced scorecard (BSC) helps
the organization a lot (Kaplan, 2001). Besides, in 2004 about 57% of the global companies
were working on the using of the balanced scorecard (BSC) so it is very much important for
the total organizational betterment to use this (Brain, 2005).

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Actually the balanced scorecard (BSC) is a one kind of strategic planning as well as
management system which is used extensively in the whole business and in the industrial
workings, in the working of the government as well as in the non-profit organization
worldwide so that it may align in the activities of the business to the mission, vision as well
as objectives of the business organization for the improvement of the internal & external
communications, and monitoring the organizational performance against the whole strategic
goals (Kaplan, 1994).

This is a kind of new approach for the performance measurement. The using this balanced
scorecard (BSC) helps in the transforming an organizational goal and its strategic planning
from the attractiveness but the thing is the passive document into the marching orders from
the organization on the basis of daily (Hoffecker, 1994). Its using helps in the identifying the
planners about what should be done as well as what should be measured (Cortada, 1994). On
the other side, it helps in enabling the whole organizational success into a single form of
activities. The main thing in the balanced scorecard (BSC) is to measure the good
performance measurement. There are some of the main things in the proper management of
the balanced scorecard (BSC). This provides a way to see about the whole strategy of the
organization (Booth, 1996). On the other side, the balanced scorecard (BSC) focuses on the
employees attention to the matters of the activities and it is so much important to measure
that (Bewer, 2003). Besides, the providing of the common language to communicate is
provided by the balanced scorecard (BSC) & thats the main thing of the balanced scorecard
(BSC) (Chenhall, 2002).

The balanced scorecard (BSC) can be explicitly defined in the terms of the owner, unit of the
measurement, collection of the frequencies, quality of the data are well managing and the
perfect measurement of the performance (Epstein, 1996). This must have to be verified and
the data collection must have to be accurate in all the matters of the performance
measurement (Kaplan, 1993).

One approach that organizations may find helpful, is to formulate a destination statement,
possibly even before considering the scorecard objectives, which sets out a clear idea of what
the organization is trying to achieve (Hart, 1995). From the destination statement, a menu of
strategic options and the supporting strategy map illustrating the cause and effect
relationships that underpin the strategy can be derived (Newing, 1994).

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For many organizations, it is advisable to separate the strategy-mapping process from the
development of a scorecard (McWilliums, 1996). Research by professors Christopher Ittner
and David Larcker at Wharton Business School found that many companies mistake the
balanced scorecard (and other measurement frameworks such as the Performance Prism) as
an off-the-shelf checklist (Cortada, 1994). A lack of understanding of the non-financial areas
of performance that might advance strategy can allow self-serving managers to choose and
manipulate measures (Ittner, 1998).

Strategy, success or value-creation mapping is a way of facilitating agreement between

managers on those non-financial performance drivers that have the greatest impact on the
financial outcome (Ittner, 2003). The research by Ittner and Larcker (2003) highlighted the
difficulties that most companies have in trying to achieve this, with fewer than 30 per cent of
companies developing causal models (Lorsch, 1995). Moving to this stage requires a shift in
approach to planning and performance and time to think and develop rigorous causal models
and performance measures (Lorsch, 1995).

Ittner and Larcker also found that organizations adopting a causal business model experience
both high levels of managerial satisfaction and return on assets (Kaplan, 1996b). With the
potential for economic benefits dependent on getting a balanced scorecard implementation
right, it is perhaps surprising that so few managers devote time to this area (Kurtzman,
1993).

The value of the balanced scorecard as a tool for integrating sustainability concerns into
organizational strategy, and for embedding this throughout the organization (Ahn, 2001).

Research by Dr. Philip Barden found that the success of front-line performance improvement
in the UK National Health Service (NHS) is linked inextricably to the development of
partnerships between policy makers, strategists and front-line staff (Ashworth, 1999). What is
crucial to the success of the balanced scorecard and other performance improvement
initiatives is not the sophistication of such initiatives (Hussain, 1996). For public sector
organizations, it may be difficult to define who the customers are. The ultimate customer is
generally not the same as the body providing the funding (Bewer, 2004). Public sector
organizations have multiple stakeholders (government, service users, funding bodies, other
agencies) and it may be appropriate to include objectives for several different groups as part
of the customer perspective, before looking at, for example, the internal processes required
to meet the objectives of each different group (Bewer, 2003).

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The research findings suggest that front-line staff have a detailed knowledge and
understanding of health care delivery that can make a key contribution in specifying the
optimal source and extent of performance improvements (Chenhall, 2002).

3.2 Balanced Scorecard: A Perfect approach for the measurement and

management of performance
The Balanced Scorecard is a perfect approach for the performance measurement attributes.
There were many other performance measurement tools in the past. But the thing is those
traditional performance measurement tools didnt able to give the perfect solution. The
traditional performance measurement approach always failed when there were more costing
in the internal management. They cant give the exact result.

When the Balanced Scorecard came then it gave the proper performance measurement result
of the companies. Besides, it was perfect enough to remove all sorts of lacking of the
traditional approaches. In 1996 Robert S. Kaplan gave an overview of the Balanced
Scorecard in the Harvard Business Review.

Existing performance measurement approach (Balanced Scorecard primarily relying on the

financial accounting measurement, which is becoming more and more absolute (Kaplan,
1996b).

The Balanced Scorecard is an innovative strategic management tool for the performance
measurement. This innovative performance measurement approach was able to consider the
total 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 (Anthony, 1965).

The successful application of the balanced scorecard (BSC) in a number of overall

transformation projects which can be identified that it could also be a main medium to
communicate as well as to align a new strategic approach (Ittner, 2003). On the other hand, it
has been successful because it is able to identify linkages between the four key areas that
generate and perpetuate success (Kaplan, 2000). So this must have to be initiated in the
fullest manner to get the successful performance measurement on the organizational overall
activities (Kaplan, 2001).

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For the success of the balanced scorecard (BSC) the isolation consideration is the main thing
in the development of the organization (Hoffecker, 1994). The added value of the balanced
scorecard (BSC) is in the drawing together of all the key business areas and identifying and
exploiting the linkages that deliver success (Kaplan, 2001). These are explained in some
detail by Hoffecker and Goldenberg.

The impact of a decision in one area on the other areas can be recognized before the decision
is implemented, offering more strategic management visibility than would normally be
expected (Bewer, 2004). The overall emphasis must be on the organizational performance
measurement and this is a new thing for the success of the organization & this holistic
approach has resulted in better performance, resulting from more informed management
decision making (Hoffecker, 1994)

The Balanced Scorecard (BSC) 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,
1994), Mobil: Americas marketing and refining division (McWilliums, 1996), and The
Pepsi Dashboard (Jensen, 1994/95)

Jensen alludes to the Balanced Scorecard (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 (Jensen, 1994/95). The quality
and depth of external academic analysis, utilizing case study methodology suggests that the
concept has significant integrity (Brain, 2005). The overall view of the performance
measurement eludes the perfect measurement as the Balanced Scorecard (BSC) (Jensen,
1994/95).

3.3 Is the Balanced Scorecard a universal key to the business

management?
The overall system of the Balanced Scorecard (BSC) has been proved that this performance
measurement tool is very much effective and it is the universal key for the improvement of
the general performance measurement of the companies, agencies, government agencies,
industries, and non-profit organizations (Ashworth, 1999). There are some of the factors
which make the Balanced Scorecard as a universal solution.

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Besides, the past traditional approaches didnt able to give the proper performance
measurement of the financial as well as non financial instruments but the Balanced
Scorecard by its formulating components able to recover all the lacking of the previous
traditional approaches. For the performance measurement activities the Balanced Scorecard
(BSC) helps the overall organization in the all sorts of view.

The system of the Balanced Scorecard (BSC) allows the internal as well as the external
management to have a perfect view of the performance measurement of the company from
different sorts of perspectives (Bewer, 2003). This is a positive aspect to give the assistance
to the internal management of any company to measure the performance of their
organization. On the other side, this will help the manager to get a proper and a
comprehensive look on the overall organization (Brain, 2005). Then this system will also
enables the managers to find out the weak point of the organization and this is the main key
to the organization (Ahn, 2001). On the proper view of the organization this is so much
important to handle out this.

On the other hand, the Balanced Scorecard (BSC) is a kind of performance measurement
system which can give the managers the perfect tools so that there are some of the important
things in the decision making process (Lopes, 1996). Then the managers can be able to
concentrate on the analyzing of the different kinds & sorts of business concerns and then
applying those things as the solution to it (Vitale, 1994). The system of the Balanced
Scorecard (BSC) raises the overall capability of the managers so that there may have some of
the investigation part in different working processes simultaneously without the focus losing
(Atkinson, 2000). For all of these positive aspects, the Balanced Scorecard became universal
solution for the performance measurement.

3.4 Balanced Scorecard: a question of conjecture and application

The Balanced Scorecard sometimes arise question of conjecture and application. There are
some reasons for which this happens. In the past some researchers conducted on the actual
implementation of the Balanced Scorecard but the thing is some of them failed to find that. In
2000, Hoque and James surveyed the Australian manufacturing companies. But they didnt
find the proper solution regarding the balanced scorecard. Their survey failed to capture the
actual reliance on the Balanced Scorecard.

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Then, Malina and Selto investigate in 2001 on the Balanced Scorecard but the problem is
they also didnt find the perfect implementation of the Balanced Scorecard. They found the
evidence of an indirect relationship between the Balanced Scorecard and management control
function.

These thing arose questions that whether the Balanced Scorecard is the perfect performance
measurement tools or not? Then in 2003, Ittner provided contradictory opinion on these two
surveys. He argued that the two surveyed results were not right enough because they only
took the survey on the employees of the organizations and they didnt have perfect concept
on this performance measurement tools. Besides, this application of the performance
measurement tool can be success if there is no problem in the internal management.

Later, many researchers have found that the Balanced Scorecard must have to be analysed as
well as it must have to be implemented properly. Then the question will not arise again and
then it can be the perfect application for using as a performance measurement tools.

The Balanced Scorecard (BSC) has been overall applied successfully around the different
organizations of the world as well as across many diverse industries. The public sector
applicability of the concept has been discussed (Tonge, 1996) and in the 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 the overall
problems involving the application of the concept were more highlighted (Kaplan, 1996b).
The body of evidence supports the theory that the Balanced Scorecard (BSC) offers a
medium to deliver strategic vision while providing an evaluation system (Kaplan, 1993). 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); (McWilliums, 1996); (Newing, 1994). The BSCs
performance measurement capability has received much interest and attention (Birchard,
1995); (Brown, 1994); (Lingle, 1996). One consideration of this measurement utility was
enhanced by linking it into the concept of quality management (Cortada, 1994).

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The performance measurement capability of the Balanced Scorecard (BSC) has been
considered from a number of unique but valid perspectives (Davis, 1996); (Feurer, 1995);
(Smith, 1993); (Vantrappen, 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 ability to provide utility at all management levels, if the managers have an understanding
of the mechanics of the concept then the Balanced Scorecard (BSC) can be properly and
perfectly utilized. 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 utilize the information to support
decisions at their level (Jensen, 1994/95). By analyzing the literature review of all of these
researchers the decision can be taken that the Balanced Scorecard can raise questions if there
is problem in the proper formulation of the internal management.

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CHAPTER FOUR: THE SUSTAINABILITY

OF THE BALANCED SCORECARD

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4.1 The Balanced Scorecard: an instrument for sustainability

management
The Balanced Scorecard (BSC) is an instrument which is sustainable if the proper
justification made on the basis of the components of the performance measurement tools. On
the other side, with the help of the Balanced Scorecard it becomes so much easy to have the
controlling over the organization. Besides, the important part of the Balanced Scorecard is
that it is sustainable in any sorts of condition. Many researchers have concluded after their
research on the Balanced Scorecard that, this performance measurement tool is sustainable in
any situation. Sometimes it happened that the traditional performance measurement tool may
fail when there is any complexity in the management. But on the other side, the Balanced
Scorecard can recover those complexities and able to make the flow of success sustainable
cause in any sorts of complexity, this performance measurement tool can measure the
performance of the organization.

The Balanced Scorecard (BSC) translates strategy in terms of objectives, measures and
targets in the four perspectives. Rather than representing strategy as a loose collection of
indicators and measures, these are linked by cause and effect relationships (Birchard, 1995).
As this helps in linking the relationship so this helps in having the perfect control over the
organization. Besides, the management should be aware about the proper formulation of the
Balanced Scorecard for the betterment of measuring performance of both the financial as well
as non- financial instruments. By formulating and defining the goals and measures based on
the strategy top down from the financial perspective through the other perspectives, it
becomes clear which influence factors impact most the lagging indicators and thus ultimately
the achievement of the objectives (Epstein, 1996). These strategy-specific influence patterns
are reflected through cause-and-effect chains, which directly or indirectly link all the goals,
indicators and measures of the Balanced Scorecard (BSC) perspectives hierarchically towards
the financial perspective with its long-term financial goals. Then this fulfillment of the goal
helps in establishing the Balanced Scorecard sustainable in the organization.

The Balanced Scorecard (BSC) assists in the identification and the management of
simultaneous improvements of environmental, social and financial business goals (Cortada,
1994). Therefore, a sustainable Balanced Scorecard (SBSC) fulfills the central requirement of
the sustainability concept for a permanent improvement of the business performance in
economic, ecological and social terms (Zadek, 1999).

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A particular suitability of the BSC for the integration of all three sustain-ability dimensions
results from the possibility to also consider soft factors, which can-not be monetized
(Newing, 1994). Environmental and social aspects often show precisely these characteristics
(Senn, 1986).Thus, an SBSC helps to implement soft factors such as environmental or social
objectives within the core management of businesses instead of just adding satellite systems.

4.2 Different possible approaches of integrating environmental and

social aspects
There are some sorts of approaches which are so much helpful in the integration of the
environmental as well as the social aspects. The environmental as well as the social aspects
are in the existence of the Balanced Scorecard (BSC) (Kaplan, 1994). There are some sorts of
mechanism which are so much helpful in getting the overall view of the organization. On the
other hand, the organizational view can be found by the help of the economic and the social
shape of view (Kaplan, 1996b). Those approaches are:

Different possible approaches of integrating environmental and social aspects

1. Integration of the environmental & social aspects in four BSC perspective

2. Introduction of an additional non market perspective into the BSC

3. Deduction of a derivative environmental & social scorecard

4. Relationship of the approaches to build sustainable

Table 4: Different possible approaches of integrating environmental and social aspects

Source: Making Incount, Birchard, B., 1995

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1. Integration of the environmental & social aspects in four BSC

perspective
There must have the perspective of the Balanced Scorecard (BSC) in the view of
environmental & social aspects. When the environmental & social aspects will continue to
submerge the total position of the view, then the Balanced Scorecard (BSC) can be very mush
helpful in continuing the relevant source of aspect (Corrigan, 1995).

The environmental and social aspects are integrated in the four perspectives through
respective strategic core elements or performance drivers for which lagging and leading
indicators as well as targets and measures are formulated (Kaplan, 2001).Through this top-
down derivation those environmental and social aspects that are strategically relevant within
the framework of the four standard perspectives of the BSC are identified (Hoffecker, 1994).
Environmental/social aspects consequently become an integral part of the conventional
Scorecard and are automatically integrated in its cause effect links and hierarchically
orientated towards the financial perspective and a successful conversion of a business
strategy (Lopes, 1996).

2. Introduction of an additional non market perspective into the BSC

In the Balanced Scorecard (BSC) there must have some sorts of non-market perspective in
doing that. The other must have to understand the overall view of this performance
measurement activity.

The environmental and social aspects originate from non-market systems as social constructs
and many environmental and social aspects are still not integrated into the market
coordination (Kaplan, 1993).

In order to justify an introduction of an additional non-market perspective, environmental and

social aspects from outside the market system must explicitly represent strategic core aspects
for the successful execution of the strategy of the company considered (Feurer, 1995). Thus,
the necessity for an additional non-market perspective arises when environmental or social
aspects that cannot be reflected according to their strategic relevance within the four standard
the Balanced Scorecard (BSC) perspectives at the same time significantly influence the firms
success from outside the market system (Ittner, 2003).

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3. Deduction of a derivative environmental & social scorecard

The extra & derivative environmental & social scorecard must have to be deducted. Then
there will be no more extra things. On the other side, there must have to be continuing
services so that the originated part can be integrated. The integrating environmental and
social aspect into the BSC lies in the deduction of an environmental and/or social scorecard
(Ittner, 1998).

At this point, it is very important to note that a derived environmental or social scorecard
cannot be developed parallel to the conventional scorecard (Ittner, 2003). Instead, in order to
integrate sustainability management into mainstream business management (Lorsch, 1995).

4. Relationship of the approaches to build sustainable

There may have the relationship in the approaches and this will be very much helpful in
building the sustainability of the Balanced Scorecard (BSC) (Hoffecker, 1994). On the other
side, this must have to be maintained. Without the exact and perfect relationship it is totally
impossible to maintain this. On the beginning of the situation of the relationship, it will be
very much easier to maintain the Balanced Scorecard (BSC) in the overall performance
measurement perspective. This must have to be maintained.

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4.3 The process of formulating a sustainability Balances Scorecard

There are processes which are helpful in the formulation of the sustainable Balanced
Scorecard. The process is:

Choosing a strategic business unit

Identifying environmental & social exposure

Determination of the strategic relevance of environmental & social aspects

Internal Learning & Non-

Financial Customer
process growth market
perspective perspective
perspective perspective perspective

Figure 1: Process of formulating the Sustainable Balanced Scorecard

Source: Harvard Business Review, Robern S. Kaplan, 1996

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This process must have to be formulated perfectly so that there may have no sign of
unsustainability. The business unit must have to be selected perfectly. Then the proper
business units environmental & social aspect must have to be formulated. The strategic
determination and the relevance of the environmental & social aspect must have to be done
perfectly (Vantrappen, 1994).

After the strategic determination, the 5 perspectives must have to be done perfectly. The 5
perspectives are:

a. Financial perspective
b. Customer perspective
c. Internal process perspective
d. Learning & growth perspective
e. Non market perspective

These are the 5 perspectives. These must have to be properly utilized. Then the perfect
conditioning formulation can be done. By this proper formulation, the business organization
can easily handle the performance measurement of the Balanced Scorecard (BSC). Then the
sustainability of the Balanced Scorecard (BSC) can be achieved easily.

Without the sustainable Balanced Scorecard (BSC) it is not possible to continue the proper
performance measurement. On the other side, the business unit must have to be identified
through the segmentation and the customer oriented activities must have to be well
managed (Kaplan, 1993). Then the proper process of the formulation can be done and then
the Balanced Scorecard (BSC) can be sustainable.

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CHAPTER FIVE: FINDINGS

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5.1 Balanced Scorecard links the performance measurement for

better business management and it is an universal solution
After the preparation of the report it has been found that the Balanced Scorecard (BSC) is the
universal solution to the problem solving and it links the performance measurement for the
better business management. On the other side, it has been found that there are some sorts of
problematic features in the overall business activities. The Balanced Scorecard (BSC) solves
those problems.

On the other side, the Balanced Scorecard (BSC) helps the business management to build the
linkage between the performance measurements for the better management. The proper &
perfect business management always in the condition that there must have no sorts of
conditioning features and it is a must to solve that. The Balanced Scorecard (BSC) has four
features and those four features help in maintaining the linkage.

5.2 Balanced Scorecard is sustainable

The Balanced Scorecard (BSC) is absolutely sustainable. Because when the proper
management can be done and when the formulation process can be done perfectly, then the
sustainable Balanced Scorecard (BSC) can be established. There are some sorts of features
which may help in maintaining the sustainability. The perspectives should also be well
formulated. The financial and customer perspective helps in maintaining the total business
organization perfectly and then the internal business process can be run in a perfect manner
so that the sustainability can be measured. Besides, the thing is the Balanced Scorecard
(BSC) is sustainable universally and it can be used in any moment to continue the
performance measurement activities.

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5.3 Why sometimes BSC fails

It has been found that because of some of the matters, the Balanced Scorecard (BSC) can be
failed sometimes. Those are:

Reasons for the failure of the Balanced Scorecard (BSC)

Some of the organization has no rigorous linkage between the performance

measures and the strategies. Then it may happen that the organization cant be able
to measure the proper performance by the Balanced Scorecard (BSC). On the other
side, it may happen that the proper management cant be maintained perfectly
because of the shortage in the linkage.

Sometimes organization cant be able to develop a formal casual model or cant

develop a perfect value-driven map. Then the Balanced Scorecard (BSC) cant be
able to measure the perfect management.
Some of the organization doesnt use the non financial measures to financial
performance. Then in that case, the Balanced Scorecard (BSC) cant be able to
measure the perfect performance.
There are some of the organization which doesnt have attempted to validate the
linkage between their non financial measures and the future financial measures
results. In that case, the Balanced Scorecard (BSC) fails.
When the organization have major implementation problem, then the organization
cant use the Balanced Scorecard (BSC) because, in that case that tool cant work
properly.

Table 5: Reasons for the failure of the Balanced Scorecard (BSC)

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5.4 Development of the perspective of Balanced Scorecard

By analysing from the depth of different articles, journals as well as reports, I have found that
there should have some of the development in the perspective of Balanced Scorecard. From
my point of view a new perspective can be developed. It is important to have Efficiency &
Effectiveness perspective because it is so much important to have the efficiency in the
organization. The production as well as internal management activities must have to be done
more effectively. These things must have to be measured by the performance tool. If the
Balanced Scorecard can be developed in this perspective, then it will be easy for the
organization to handle the overall organizational performance more perfectly.

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CHAPTER SIX: CONCLUSION AND

RECOMMENDATIONS

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6.1 Conclusion
The perfect performance measurement tool is the Balanced Scorecard (BSC). On the other
side, there are some of the measures but the perfect measure is the Balanced Scorecard
(BSC). It is the universal solution and it is the tool which is so much helpful in maintaining
the proper management. The company always try to manage its performance measurement
activities by the help of the Balanced Scorecard (BSC). It is very much sustainable and if it
can be implement perfectly, and then the perfect performance management for the
organization can be done.

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6.2 Recommendation
There are some of the recommendations about the Balanced Scorecard (BSC). Because it has
been found that though the Balanced Scorecard (BSC) is the universal solution for the perfect
performance measurement, it sometimes fails. So the recommendations are:

The sustainability of the Balanced Scorecard (BSC) must have to be maintained

by the proper formulation process.
The leadership must have to be developed.
The total systematic development of the linkage must have to be maintained so
that any kinds of systematic error can be reduced perfectly.
The formal causal model must have to be well shaped.
The proper value driven map must have to be done perfectly.
The strategic linkage must have to be developed.
The financial drivers must have to be managed perfectly so that in the
performance measurement of the financial instruments, there may have no
problem in the Balanced Scorecard (BSC).
The implementation must have to be done perfectly and also in a proper manner,
so that there may have no sorts of problems

Table 6: Recommendation for the organization before the measurement of the

performance by the Balanced Scorecard (BSC)

When these can be properly utilized, then the perfect performance measurement by the
Balanced Scorecard (BSC) can be done. It has been found that sometimes, the Balanced
Scorecard (BSC) fails. This is because the perfect management are not dene. So the
management has to follow these recommendations and then the Balanced Scorecard (BSC)
will work properly.

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