BALACED SCORECARD: REVIEW OF LITERATURE

The Balanced Scorecard has been proposed in the literature and has been widely used in
management practice as a useful tool to support the effective implementation of the strategy of an
organization tool.
In the academic literature, it has been discussed about the limitations of financial indicators as a
basis for decision making (Dearden, 1969). He argues that the financial measures of business
performance are not fully reflecting the importance of current decisions on future financial
performance. In this context, the relationship between specific non - financial measures and
financial performance of the company has been the subject of many studies in both the U.S. and
Europe, finding empirical evidence supporting the hypothesis of a positive relationship between
both types of measures. Moreover, there is abundant literature on the advantages, methodology,
and steps to follow for a Strategic Planning within a company (see e.g. Bradford and Duncan, 2000).
It is important to highlight the series of articles published by the drivers of Balanced Scorecard (BSC),
Kaplan and Norton (1992, 1993, 1996), as well as several other articles published by magazines such
as Harvard Business Review, Strategic HR Review, Measuring Business Excellence, etc. A quick review
of these items leaves the reader with the impression that the BSC is the most comprehensive tool
for measuring organizational performance and its alignment with strategy execution.

1. CONCEPTUAL REVIEW OF LITERATURE
In Kaplan and Norton (1992), in which is proposed for the first time the use of the BSC, this tool is
defined as: "a set of measures that gives top managers a fast but comprehensive view of the
business". From this first article, Kaplan and Norton have developed this tool with a series of eight
articles published mostly in the Harvard Business Review, plus four additional books.
This first version of the BSC could be compared with the Tableau de Bord, used in France during the
last decades of the twentieth century according to Kaplan and Norton (1996a).
In Kaplan and Norton (1996c), the BSC is proposed as a new strategic management system
incorporating four processes: clarifying and translating the vision and strategy, communication,
training and strategic feedback, and planning and goal setting.
In Kaplan and Norton (1996a), it is established the three principles that allow the BSC of a company
to be linked to its strategy set: cause-effect relationships, performance inductor, and finances
linkers. "Ultimately, causal paths of all BSC indicators should be linked to the financial goals" (Kaplan
and Norton, 1996b: 67). This evolution of the BSC as a new model of leadership and strategic
management that relates the four perspectives of BSC' with the strategic objectives, was formalized
by Kaplan and Norton (2000a) in Strategy Maps.

1.1 ALTERNATIVE MODELS TO BSC
It is also important to consider that other researchers have raised parallel models AND similar to BSC
with some interesting variations. First, McNair et al. (1990) developed a program focused on a model
in three different levels: business units, operational area and activity centers or departments.
Second, another model is proposed by Adams and Roberts (1993), which focuses on the analysis of
the evolution of the indicators. Finally, the model Maisel (1992) is the most similar to that developed
by Kaplan and Norton, matching the four perspectives which focus on the objectives of the strategy
and overview of the company and develop indicators for each of these perspectives. Meanwhile,
Edvinsson (1997) proposed the Skandia Navigator, a system that tries to measure intellectual capital
in organizations, which has also become popular, but not at the level of the BSC.





2 REVIEW OF EMPIRICAL LITERATURE
2.1 PERFORMANCE
ARTICLES IN FAVOR OF THE BSC
Braam and Nijssen (2004) suggest that the use of the BSC to complement corporate strategy has a
positive impact on firm performance. Tsang et al. (1999) argue that performance measures provide
useful information to guide management decisions and examine different approaches to measure
maintenance performance. Griffith and Alexander (2002) claim that the BSC is an opportunity to
make a more successful organization. Libby et al. (2004) suggest that the requirement for an
assessment to justify an evaluation to a superior or the provision of a report on the BSC increases
with the use of single measures and also examine the perceived quality of the BSC. Kristensen and
Westlund (2004) show that the values of employee and customer satisfaction show the effect of
intangible and also have tried to formalize a system of measurement for the modern enterprise.
Bremser and Barsky (2004) provide specific examples of how firms can implement and integrate a
system of measures of R&D. Berler et al. (2005) concluded that the use of the BSC has activating the
conceptual framework towards a strategy of Knowledge Management for a health center. Moller
and Schaltegger (2005) state that the eco-efficiency not only provides a source of data for
sustainability but also serves as a link between the BSC and the accounting environment at the
corporate level. Wu and Chen (2006) indicate a positive impact on strategic performance measures
and these were significantly correlated with operational activities. Janssen et al. (2006) present a set
of five alternative indicators to improve the results of the implementation of the strategy and
describe how the BSC served as a model to support a case of market penetration. Smith and
Goddard (2002) argue that the performance should address four broad functions: strategy
formulation, development instrument of measures, interpretation of results, and encouraging
responses to information.

CRITICAL ARTICLES OF BSC
Lohman et al. (2004) have attempted to show the limitations of performance measurement systems
and concluded that the empirical results differ somewhat from the literature and develop a Program
Measurment Systems (PMS).
Lipe and Salterio (2000) show that only the common measures for all the Strategic Business Units
(SBU's) and the unique measures of each SBU affect evaluations of companies.
Norkelik (2000 and 2003) makes harsh criticism to the BCS, especially regarding to the causes of
performance.

2.2 FORMULATION OF STRATEGY
Butler et al. (1997) propose a strategic model using part of the BSC. They show a European case of
determination, development, and implementation of the BSC for the use by top management. Rigby
(2001) states in his work that each company uses an average of 11 strategic tools per year. Strategic
plans, mission and vision, benchmarking, and customer satisfaction measures are popular. It
concludes that the relationship between tool use and financial performance is ambiguous. The BSC
has a ratio of 43.9 % usage. In addition, he studied what tools business management companies use,
if the companies are satisfied using them, and if the companies that use them are better than other
companies. Lee and Lo (2003) notes that agility is needed, therefore adaptation processes in the
world of business today. Lowe and Jones (2004) present the experience of a holding company in
New Zealand. Managerial experience within the organization, in the process of identifying what
things impact on the markets is counted. These factors are measured by Key Performance Indicators
(KPI 's). Greasley (2004) demonstrates the need to choose and, in some cases, develop tools and
instruments based on the context of process improvement effort. He studies the use of BSC as a
technique that allows the reconciliation of the multiple objectives of the stakeholders.


2.3 IMPLEMENTATION
In terms of implementation, it is fundamental to highlight the contributions of Wachtel et al. (1999)
that link the SBUs with the perspective of customers. They build a BSC for a health center. Kanji and
Sa (2002) propose a model that incorporates the factors of success in the BSC based on the
philosophy of Total Quality Management (TQM). Papalexandris et al. (2004) show the experience
and obstacles for the implementation of a BSC with a software in Greece while Chand et al. (2005)
explain the strategic contribution of an Enterprise Resource Planning (ERP) when it is adapted to a
BSC.

2.4 STRATEGIC MAPS
From the selected articles, two authors analyze the importance of strategy maps. Kaplan and Norton
(2000a and 2000b) describe its use both in companies and corporations and nonprofit organizations
or public sector companies. For Irwin (2002) strategic maps are a useful tool for strategic
development.

2.5 ALIGNMENT
Under this category, the found articles are trying to explain how the implementation of the BSC
affects in organizations and how certain areas can influence the process. Fleisher and Mahaffy
(1997) discuss how the Public Relations (PR) are complemented by the BSC and propose a valuation
model. According to Morgan and Rao (2002) the change of the process of strategic alignment and its
implementation has been supported by the use of performance measures, particularly in dynamic
environments where considerable effort is required.

3. CONCLUSION
According to the literature review, there is more evidence in favor for the use of this tool of strategic
direction, so it is concluded that favors business performance.

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