BalancBalanced scorecard and causal model development preliminary findingsed Scorecard and Causal Model Development Preliminary Findings

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Balanced scorecard and causalmodel development:preliminary findings

Rozhan OthmanFaculty of Economics and Management Sciences, IIUM,

Kuala Lumpur, Malaysia

Abstract

Purpose The purpose of this research is to show a preliminary examination of the effects of thedevelopment of the causal model of the strategy in the implementation of the Balanced Scorecard.Studies on the Balanced Scorecard adoption show that many organizations that adopted the Balanced

Scorecard did not develop a causal model of their strategy. The study seeks to examine the differencesin Balanced Scorecard implementation of adopters who developed a causal model of their strategy andthose who did not.

Design/methodology/approach Mailed survey was used to collect the data.

Findings It was found that Balanced Scorecard adopters who did not develop a causal model oftheir strategy experienced specific problems more than those who developed a causal model of theirstrategy. It affected the outcomes and ease of implementation of the Balanced Scorecard.

Research limitations/implications The small number of responses obtained in this study due tothe relatively recent adoption of the Balanced Scorecard in Malaysia limits the generalizability of thisstudy. However, it does provide insights on the hypotheses to be examined in future studies.

Practical implications The findings of this survey suggest that the successful implementation ofthe Balanced Scorecard requires that organizations develop and articulate a causal model of theirstrategy.

Originality/value This study is probably the first attempt to examine the role of causal modeldevelopment in effective implementation of the Balanced Scorecard.

KeywordsBalanced scorecard, Performance levels, Strategic planning, Malaysia

Paper type Research paper

IntroductionOne of the key ideas in the Balanced Scorecard (BSC) is the development of a causal

model of the strategy (Norreklit, 2003). This model is supposed to describe the

cause-effect relationship of an organizations strategy (Bourguignon et al., 2004). Thedevelopment of the strategy map and subsequently the scorecard is supposed to be

based on this causal model. This model represents the business hypothesis of the

strategy. Yet, evidence indicates that many organizations that adopted the BSC did not

develop a causal model of their strategy. There is the need to understand whether this

has any impact on the implementation of their BSC program. This study is an

examination of the impact of the development of the causal model on the effectiveness

of BSC programs.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0025-1747.htm

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Received July 2005Revised December 2005Accepted January 2006

Management Decision

Vol. 44 No. 5, 2006

pp. 690-702

q Emerald Group Publishing Limited

0025-1747

DOI 10.1108/00251740610668923


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BSC and causal modelThe development of the causal model of strategy is a key concept in the BSC. Thestrategy map, one of the tools in the BSC method, is essentially a graphical depiction ofthe causal model of an organizations strategy (Kaplan and Norton, 1996; Moorajet al.,

1999; Norreklit, 2000) It essentially tells the story of the organizations strategy(Amarangtunga et al., 2001). The relationship depicted in the strategy map thenbecomes the basis for the developing the scorecard. The scorecard spells out theshort-tem and long-term objectives of the strategy. Some researchers argue that in spiteof the importance of the causal model in the BSC, no specific method is available to helporganizations develop it (Malmi, 2001; Speckbacher et al., 2003).

Even though the BSC is not presented as a strategy formulation technique, theemphasis on developing a causal model of the strategy indicates the necessity ofhaving a properly developed strategy before the tools of the BSC are used to map outthe implementation of the strategy. Whatever techniques an organization uses, the endproduct should be a plan that describes the strategic outcomes and how these outcomesare to be achieved. This relationship needs to be presented in the form of a businesshypothesis of the organization.

Causal model of strategyKaplan and Nortons (1996, p. 30-1) discussion about the causal model indicates that itis the basis upon which the management system envisioned in the BSC method issupposed to be developed. This causal model is supposed to depict the cause-effectrelationship across all four perspectives.

The development of the performance measures in the BSC should be derived froman understanding of the sequence of cause-effect relationship of the strategy. It shoulddescribe the relationship between the outcomes sought by the organization and theperformance drivers of the strategy. Merely specifying the outcomes or keyperformance indicators is not sufficient. It will not help members of the organizationunderstand how an objective is to be achieved (Kaplan and Norton, 1996, pp. 149-50). Aclear understanding of the performance driver-outcome relationship is crucial incommunicating the strategy.

Developing the causal model of the strategy is also important because it provide themilestones for the development of the scorecard. The scorecard describes the temporalrelationship of the strategy. Thus, it has to be based on an understanding of how thestrategy is to be implemented over time. This means that the causal model of thestrategy is supposed to help organizations understand how decisions made today willaffect future outcomes (Kaplan and Norton, 1996, p. 160).

Evidence on BSC implementationVarious studies on the adoption of the BSC show that one problem encountered bymany organizations is their inability to develop a causal model of their strategy. Malmi(2001) found that the adopters of the BSC in Finland experienced difficulty indeveloping the causal model of their strategy. Even though the respondents claimed tohave developed their performance measures from the cause-effect model their strategy,they were not able to describe their model very well. Malmi concluded that claimed linkappeared to be weak.

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A study of BSC adoption in Austria and Germany also found that about half of thecompanies that adopted the BSC did not develop a causal model of their strategy(Speckbacher et al., 2003). Davis and Albrights (2004) survey of the literature on theBSC shows that 77 percent of companies that adopt the BSC in the USA fail to develop

a causal model of their strategy.These findings raises the question of how does the absence of a causal model of the

strategy affect the level of effectiveness of the BSC program. There is the risk that thefailure to develop a causal model of the strategy will cause organizations to developperformance measures that is not tied to how the organization intends to compete. Theoutcome is a collection of measures that is fragmented and has little value add to theorganization. The BSC ends up becoming an exercise in developing more paper workand information collection that does not have a strategic impact.

Research agendaThe objective of this research is to examine the BSC adoption experience amongMalaysian companies. It will seek to examine whether the development of a causalmodel of the strategy makes a difference in the effectiveness of the BSC program. Thissurvey is intended to be a preliminary survey given that the adoption of the BSC isrelatively recent in Malaysia and the number of companies that have done so are notmany. It is expected that the number of response available will be small. However, thisis not uncommon in studies on the adoption of new management techniques. Braamand Nijssens (2004) study of BSC implementation in Dutch companies involved 41companies. Davis and Albrights (2004) study of the BSC in the USA involved 14branches of a bank. Malmis (2001) study of BSC use in Finland involved only 17companies. Speckbacheret al.(2003) relied on data from 43 companies in Austria and42 companies in Switzerland. The expected small number of responses makes the

nature of this study an exploratory one. The purpose is not to seek generalizablefindings but to understand better the context of effective BSC use among therespondents and unearth issues needing further attention.

The basic issue that will be examined in this study is to what extent adopters of theBSC among Malaysian companies also developed a causal model of their strategy.Based on the findings in other countries, it is expected that not all BSC adoptersdeveloped a causal model of their strategy. The second issue to be examined is whetherthere is any difference in the outcome of the BSC program between adopters whodeveloped a causal model of their strategy and those who did not. Given theimportance of developing the causal model, it is expected that there will be differencesin the outcomes of the BSC program.

This study is also a follow up to an earlier case study conducted by this author. This

case study had, among other things, found that the absence of a causal model in theimplementation of the BSC had created certain problems (Othman et al., 2006). Thisincluded the lack of buy-in and the lack of clarity of the actions needed to achieve theperformance measures set by management. While the case study provided in-depthunderstanding of the problems faced by a company, there is the need to assess theextent these problems are shared by other BSC adopters. It is hoped that this surveywill shed more light on the extent such problems are encountered by other BSCadopters in Malaysia.

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MethodologyThis study used mailed survey to collect data on BSC adoption among Malaysiancompanies. A questionnaire addressing the issues identified in the extant literature onthe BSC was developed. It consisted of items:

(1) features of the BSC program, including whether a causal model of the strategywas developed in the BSC program;

(2) the outcomes of the BSC program; and

(3) problems encountered in their BSC program.

Respondents were asked to provide their responses using 5 point Likert scales thatmeasured the extent they agree or the extent an item describes the situation in theirorganization. The sections seeking information on the features of the BSC programsought simple yes or no responses to whether a specific element was developed inthe BSC program. The questionnaires were sent to the Chief Executive Officers of thecompanies.

The sample consisted of randomly selected public listed companies. Where thelisted company is a holding company, its subsidiaries were chosen for this study. Thisis because the BSC method is most suited for business units having activities coveringthe whole value chain of a business (Kaplan and Norton, 1996, p. 300). The totalnumber of companies chosen was 311 firms. Thirty eight companies responded to thesurvey, giving a response rate of 12.2 percent. The mean sales of the respondent firmsis RM534 million (USD1 RM 3.80 in 2005).

FindingsAs mentioned earlier, the relatively recent adoption of the BSC among Malaysiancompanies limits the number of responses expected from this survey. The small

number of responses obtained renders the use of statistical tests, parametric ornon-parametric, meaningless since it is unlikely to result in statistically significantfindings. This limitation simply means that the finding of this survey should beconsidered as indicative of the experience of the respondents only. Furthermore, thepurpose of this study is to explore issues related to causal model development in BSCadoption. The theory on the role of causal model development in the BSC isunderdeveloped and has not been subjected to empirical examination. The role of anexploratory study is to gain insights and information and to break broad and impreciseproblem statements into more precise problems (Ahmad and Ali, 2003). It is hoped thatthis study will provide a basis for proposing hypotheses for more rigorous examinationin future studies.

Respondents characteristicsSeventeen (44.7 percent) of the respondent firms have adopted the BSC. The earliestadopter of the BSC did so in 2000. More than eighty percent of the adopters did so after2001. Table I provides data on when the BSC was adopted by the respondents.

An examination of the mean sales of the adopters of the BSC shows that they have amean of RM819 million. The non-adopters have a lower mean sales of RM371 million.This indicates that the BSC adopters tend to be larger companies, as measured by 2004sales.

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Outcome of BSC adoptionThe finding on the effects of BSC adoption is shown in Table II. The most importantbenefit from the use of the BSC is its role in helping communicate the organizationsstrategy. This is followed by its role in helping organizations align their activities. The

items with mean scores of more than 3.0 indicate that many of benefits attributed to theBSC were realized by the responding organizations. These include cleareraccountability, developing the link between short-term and long-term goals, betterperformance management, improvement in financial performance and competitivenessand improved strategy implementation.

The respondents were also asked to indicate the elements that were a part of theBSC program that their organization developed. Table III shows the percentage of theBSC adopters using the various the elements in their BSC program. It shows thatalmost all of BSC adopters developed financial and non-financial measures as well asused perspectives to link them, a smaller percentage (88.2 percent) developed thestrategy map. An even smaller percentage (52.9 percent) developed a causal model ofthe strategy.

Effects of developing causal modelThe data was examined to determine whether the presence of a causal model of thestrategy made any difference in the outcome of BSC adoption. Table IV shows thatcomparison of mean score of items measuring the effect of the BSC. The data showsthat BSC adopters who developed causal models of their strategy had a higher meanscore for 5 out of 9 items measuring the impact of BSC adoption. However, thedifference in mean scores for items 5 and 6 are small. Only item 2 (improvedorganizational competitiveness), item 8 (see more clearly the link between short-termand long-term goals) and item 9 (the ability of the BSC to help reduce conflict) showquite a substantial difference in the mean score. Items 3, 4 and 7 in Table IV show thatthose companies that developed a causal model of their strategy had lower mean scoresthan those that did not develop a causal model. There is no difference in the perceptionof improvement in financial performance between those who developed a causal modeland those who did not.

Table V presents the mean score and ranking of the problems encountered in theBSC program. The two issues attaining a mean score of 4 or more indicates theimportance of developing internal expertise in BSC implementation and the value ofparticipation. It also shows that developing participation among managers helped the

Year of adoption Companies Percentage

2000 2 12.52001 1 6.32002 2 12.52003 5 31.32004 4 25.02005 2 12.5Not reported 1Total 17 100

Table I.Year the BSC wasadopted

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Elements Percentage

Develop financial and non-financial measures 94.1Used perspectives that linked financial and non-financial issues of the strategy 94.1Develop a strategy map 88.2Develop a management system based on the BSC 70.6Assessment of competitive scenario 58.8Examine relative position of competitors 58.8Formulate a cause-effect model of the strategy 52.9Formulate a profit model of the business 52.9Identify future trends in the environment 41.2

Table IIElements included in BS

progra

Rank Outcome Mean Standard deviation

1 The BSC makes it easier to communicate yourorganizations strategy 4.294 0.588

2 The activities of different parts of the organizationare better aligned to the strategy 4.117 0.600

3 Managers in your organization are now clearer of theresults they are accountable for 4.000 1.000

3 You will keep on attempting to implement the BSCeven though youve not seen the benefits yet 4.000 0.935

4 It is now easier to manage performance in yourorganization 3.823 0.882

5 The BSC enabled your managers to see more clearlythe link between short-term and long-term goals 3.765 0.831

5 Your organization is now able to overcome theweaknesses in strategy implementation itexperienced in the past 3.765 0.831

6 The BSC program has significantly improved yourorganizations competitiveness 3.588 0.7957 There was noticeable improvement in financial

performance after introducing the BSC 3.250 0.7758 The use of the BSC had reduced conflict in your

organization 3.176 0.9519 It is too early to say what the effect of the BSC

program is 2.882 1.53610 It is not possible to conclude that whatever

improvement your organization had experiencedwas mainly due to the BSC initiative 2.823 0.951

11 You have not been able to see substantial benefitfrom implementing the BSC 2.250 1.125

12 The BSC program is not worth the trouble 1.294 0.686

13 There were more negative than positive effects fromthe BSC program 1.235 0.664

13 You will not recommend others to attempt the BSCmethod 1.235 0.562

14 Your organization has decided to stop the BSCprogram 1.235 0.562

Table IRanking and mean scorof effects of BSC adoptio

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organization gain insight into issues top management had not been aware of. Thisseems to be consistent with the expected benefit of developing participation asdiscussed by Kaplan and Norton (1996, p. 252). The finding also shows thatdeveloping, monitoring and rewarding the non-financial aspects of performance was achallenge. This can be seen in the mean scores of the items ranked in the 3, 5, 6 and 8thpositions. The items relating to the development of a causal model of the strategyindicates that developing the model was not easy and required many assumptions to

be made. However, the item ranked in the 25th position shows that the respondents didnot feel that developing the causal model was simply guess work.The mean score for these problems was compared between those who developed a

causal model of their strategy and those who did not. Table VI presents thiscomparison. Items where the mean score for both categories is less than 3 are excludedfrom this table since these are not rated as important problem by the respondents. Themean scores in the table shows that BSC adopters who did not develop a causal modelof their strategy had more difficulty in developing non-financial measures (item 5) andin cascading their scorecard to lower levels (item 7), faced a lack of the enthusiasm forthe BSC program (item 18), developed performance monitoring that was more focusedon financial measures (item 20) and tend to see the development of a causal model ofthe strategy as more of a guesswork (item 21) who BSC adopters that developed a

causal model of their strategy.Those who did not develop a causal model also perceived that they were better able

to resolve all contradictions in the performance measures develop (item 12) but foundthat doing so was not easy (item 14) compared to those who developed a causal model.Those who did not develop a causal model consider the inability to track non-financialmeasures (item 6) more of a problem than those who developed a causal model. Thedata also indicates that organizations that developed a causal model of their strategywere better able to gain consensus among their managers when translating their

Effect Causal model Mean

1 There was noticeable improvement in financial performance With 3.250after introducing the BSC Without 3.250

2 The BSC program has significantly improved your With 3.778organizations competitiveness Without 3.325

3 It is now easier to manage performance in your organization With 3.667Without 4.000

4 The activities of different parts of the organization are better With 4.000aligned to the strategy Without 4.250

5 Managers in your organization are now clearer of the results With 4.111they are accountable for Without 3.857

6 Your organization is now able to overcome the weaknesses in With 3.778strategy implementation it experienced in the past Without 3.750

7 The BSC makes it easier to communicate your organizations With 4.111strategy Without 4.500

8 The BSC enabled your managers to see more clearly the link With 4.000

between short-term and long-term goals Without 3.5009 The use of the BSC had reduced conflict in your organization With 3.444Without 2.875

Table IV.Differences in mean scoreof effects of BSC adoption

between respondents thatdevelop a causal modeland those that did not

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Rank Problems encountered Mean Standard deviation

1 Developing internal expertise on the BSC was animportant element of your BSC program 4.250 0.8562 Top management learned a lot of new things as a

result of getting managers involved implementingthe BSC 4.000 0.790

3 Developing reward and incentives for managers whowere responsible mainly for non-financial measureswas more difficult 3.765 0.970

4 The consultant engaged by your organizationgreatly helped the BSC initiative 3.667 0.985

5 It was more difficult to develop non-financial thanfinancial measures 3.529 1.280

6 The information system of your organization couldnot be developed to track the performance of many of

the non-financial measures 3.500 1.1557 Cascading the scorecard to lower levels encountered

a lot of difficulties 3.467 1.1258 You found that it was not possible to track the

performance of all the non-financial measures 3.375 1.1479 The cause-effect model of the strategy that was

developed had to be based on a lot of assumptions 3.333 0.65110 The ease of implementing the BSC was enhanced as

more people were involved in the process 3.312 1.01411 The information system of your organization could

not capture all the performance measures 3.294 1.26312 Your organization was able to resolve all

contradictions between the performance measuresdeveloped 3.235 0.831

13 The time taken to implement the BSC was too long 3.176 1.07414 It was not easy to resolve the contradictions in the

performance measures developed 3.176 1.23615 The BSC method your organization used did not help

you anticipate the behavioural problems youencountered 3.000 1.134

16 Developing the strategy map was more difficult thanexpected 3.000 1.265

17 It was easy to attain consensus among yourmanagers when translating the intent of yourstrategy into an action plan 2.937 0.998

18 Even though there was no opposition to the BSCinitiative, there was, however, a lack of enthusiasmfor it 2.889 1.114

19 The performance targets set for your managers werewell accepted by them 2.875 0.885

20 In the end, the performance monitoring in your BSCsystem was more focused on financial measures 2.823 1.237

21 There was considerable difficulty monitoring theperformance measures because too many wasdeveloped 2.647 1.222

(continued)

Table VRanking and mean sco

of issues and problemfaced by BSC adopte

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strategy into action (item 17) compared to those that did not develop a causal model.However, they found developing the strategy map more difficult than expected (item16). Those who develop a causal model also found implementing the BSC easier asmore people were involved in the process (item 10). This is not the case with those whodid not develop a causal model of their strategy.

DiscussionThe findings of this study seem to suggest that the development of the causal of thestrategy appears to make a difference in some of the outcomes. For those items wherethose who did not develop a causal model had higher mean scores, there are a numberof possible of explanations. For item 3 easier to manage performance, one possible

reason those who did not develop a causal model had a higher mean score is that theyhave a simpler conceptualization of their strategy and thus see the process ofmanaging performance as much easier. These organizations may simply focus ondeveloping key performance measures and consider managing performance as theprocess of monitoring these measures. They do not see managing strategy asmanaging the set of cause-effect relationship in the strategy.

The same explanation may also apply for the higher mean score for items 4(different parts of the organization are better aligned) and 7 (easier to communicatethe strategy). Those who did not develop a causal model of their strategy mayhave a simpler understanding of what constitutes aligning the organizationsactivities to the strategy. They probably perceive the ability to develop keyperformance measures at the organizational level and cascading these measures

downwards as all that is needed in attaining alignment. And given their simplerunderstanding and expectation, they would also find communicating the strategyto be much easier than those who have to describe their strategy in terms of acausal model.

It is interesting to note however, that in spite of the fact that those who did notdevelop a causal model perceiving the BSC as enabling them to communicate theirstrategy, the data in Table VI shows that they encountered more problems incascading the scorecard, developing non-financial measures, had more difficulties

Rank Problems encountered Mean Standard deviation

22 Getting key managers to attend BSC meetings that

required their involvement was a problem 2.588 1.06423 Reaching consensus on the performance measures

was easy 2.471 1.12424 Your organization began encountering problems in

managing the BSC system once the consultantsengaged finished their job 2.454 1.036

25 Developing the cause-effect model of the strategywas more a guess work than a systematic process 2.333 1.155

26 Winning over support from your managers wasdifficult 2.312 1.014

27 The time taken to implement the BSC wasdistracting people from their job 2.294 1.046Table V.

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resolving contradictions in their performance measures, encountered a lack ofenthusiasm among their employees and were less able to attain consensus indeveloping an action plan than those who developed a causal model. A possibleinterpretation of this data is that while the respondents felt that they were able to usethe BSC to communicate their strategy, their subordinates who were the recipients ofthe message did not necessarily understand the message or simply did not develop

Problems encountered Causal model Mean

1 Developing internal expertise on the BSC was an important element With 4.125of your BSC program Without 4.375

2 Top management learned a lot of new things as a result of getting With 3.889managers involved implementing the BSC Without 4.125

3 Developing reward and incentives for managers who were With 3.889responsible mainly for non-financial measures was more difficult Without 3.625

4 The consultant engaged by your organization greatly helped the With 3.667BSC initiative Without 3.667

5 It was more difficult to develop non-financial than financial With 3.222measures Without 3.875

6 The information system of your organization could not be With 3.125developed to track the performance of many of the non-financial Without 3.875measures

7 Cascading the scorecard to lower levels encountered a lot of With 3.000difficulties Without 3.875

8 You found that it was not possible to track the performance of all With 3.250the non-financial measures Without 3.500

9 The cause-effect model of the strategy that was developed had to be With 3.333based on a lot of assumptions Without 3.333

10 The ease of implementing the BSC was enhanced as more people With 3.750were involved in the process Without 2.875

11 The information system of your organization could not capture alls With 2.889the performance measure Without 3.125

12. Your organization was able to resolve all contradictions between With 3.111the performance measures developed Without 3.250

13 The time taken to implement the BSC was too long With 3.333Without 3.000

14 It was not easy to resolve the contradictions in the performance With 3.000measures developed Without 3.500

15 The BSC method your organization used did not help you anticipate With 3.143the behavioural problems you encountered Without 2.875

16 Developing the strategy map was more difficult than expected With 3.222Without 2.714

17 It was easy to attain consensus among your managers when With 3.000translating the intent of your strategy into an action plan Without 2.875

18 Even though, there was no opposition to the BSC initiative, there With 2.667was however, a lack of enthusiasm for it Without 3.125

19 The performance targets set for your managers were well accepted With 2.778by them Without 3.125

20 In the end, the performance monitoring in your BSC system was With 2.556more focused on financial measures Without 3.125

21 Developing the cause-effect model of the strategy was more With 1.889guesswork than a systematic process Without 3.667

Table VComparison of problem

encountered borganizations th

developed a causal modof their strategy an

those that did n

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much interest and commitment to the program. Likewise those who did not develop acausal model perceived that they were able to use the BSC to achieve organizationalalignment. However, the data in Table VI indicates that they faced more difficultiesachieving this than those who did develop a causal model.

It also appears that the absence of a causal model also created problems indeveloping the non-financial measures of the strategy and in formulating an actionplan. Those who did develop a causal model were able to use the model as a sharedstrategic framework in thinking about the issues in implementing the BSC. This mayexplain why the data in Table IV shows that those who developed a causal model sawthe BSC program as helping them reducing conflict. The causal model helped reduceambiguities about the strategy and helped foster a common understanding.

ConclusionThis preliminary study found evidence to suggest that developing a causal model of astrategy affects the implementation of the BSC. It shows that those who did notdevelop a causal model encountered considerable problem in implementing the BSC.Among other things, the absence of a causal model created difficulties in developingthe non-financial measures, developing an action plan of the strategy and the processof cascading the scorecard to lower levels of the organization.

The absence of a causal model of the strategy may lead organizations to developperformance measures that are unconnected to the strategic issues of the organization.While these measures may help make it clear to members of the organization what arethe outcomes expected from them, it does not necessarily help to integrate theiractivities in a coherent and synergistic manner.

Performance measures are essentially information needed to enable control andmonitoring of organizational performance. Braam and Nijssen (2004) argue thatperformance will be harmed if the measures are seen as an end instead of a mean.Developing measures is not a substitute for developing a sound strategy. Developing asound strategy requires that the strategy be articulated in the form of a cause-effectmodel. The absence of causal model of the strategy is akin to a person driving a car inan unfamiliar place without a map. He may be clear of this final destination but hehasnt got a clue how to get to the destination.

As mentioned earlier, a limitation of this study is the small number of respondentsavailable. This is largely due to the relatively recent diffusion of the BSC amongMalaysian organizations. While this limits the ability to conduct statistical test toassess the generalizability of the findings, its does inform us on the importance ofdeveloping a causal model of the strategy in BSC adoption. Some of the findings areconsistent with that made by BSC researchers in other countries. More studies will beneeded to scrutinize further the findings of this study. The findings of this study can

serve as hypotheses for future studies.Specifically, future studies should test thefollowing hypotheses:

H1. The perceived effectiveness of a BSC program is positively related to:developing internal expertise on the BSC; and extent of participation ofmanagers in the initiative.

H2. BSC adopters who develop a causal model of their strategy tend to perceivethe BSC program as enhancing their organizations competitiveness.

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H3. BSC adopters who develop a causal model of their strategy tend to perceive abetter linkage between their short-term and long-term goals.

H4. BSC adopters who develop a causal model of their strategy tend to perceive

their BSC implementation as having less difficulty in: developingnon-financial measures; cascading of the performance measures; themonitoring of non-financial measures; and developing consensus inimplementing the BSC.

H5. BSC adopters who do not develop a causal model of their strategy tend toperceive the process of implementing the BSC as more likely to create conflictin the organization.

To test the above hypotheses, future studies need to use multiple methods. Some of theissues in the above hypotheses need to be tested using qualitative studies to gain moreinsight into the dynamics of BSC implementation. Among other things, the views ofmanagers affected by the BSC program should be sought. This study sought theresponse from CEOs, who are also in many cases the champions of the BSC initiative.This may create some bias in the response given that they are the owners of theinitiative. Feedback from those affected by the program will provide a more accuratepicture of the impact of the BSC programs.

Surveys using a larger sample and a higher response rate are needed. This willenable the use of statistical tests to ascertain the generalizability of the findings of thisstudy. This may require a replication of this study in a few years time. It is hoped thatby then there will more BSC adopters to provide a bigger sample and generate a higherresponse rate. A repeat of this study in a few years time involving the early adopterswill provide longitudinal data and would enable an assessment of the long-term impactof their BSC initiative. This will provide a better picture of the effects of BSC adoption.

There is the need to also examine whether the use of quantitative measures ofperformance as espoused by the BSC is suitable for all organizations. Is there apossibility that the BSC is more suited for organizations competing in a stableenvironment emphasizing efficiency. The emphasis on quantifiable performancemeasures may reinforce variation minimization behaviour in organizations.Organizations competing in a dynamic environment may require variationmaximization (Benner and Tushman, 2003). These organizations may find theemphasis on explicit quantitative measures inflexible. A variable measuringcompetitive approach and competitive environment should be included.

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Corresponding authorRozhan Othman can be contacted at: [email protected]

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