Are Employees Buying the Balanced Scorecard

The balanced scorecard (BSC) has become a standard topic in management accounting textbooks and journals in recent years as companies seek new ways to maintain a viable position in the marketplace. This management tool has made its way to all types of profit and nonprofit organizations, and many report achieving excellent results with the approach. Despite the success often attributed to the balanced scorecard, however, Robert S. Kaplan and David P. Norton cite ineffective communication of strategy throughout organizations as a potential impediment to successful adoption of the scorecard approach. (1) Bridget Lyons and Andra Gumbus further argue that full communication is critical in order to gain the employee acceptance necessary to translate into success. (2) To date, some research has examined the balanced scorecard as a performance evaluation tool from the standpoint of evaluators. Marlys Lipe and Steven Salterio demonstrated that the balanced scorecard is still subject to bias and can sometimes fall short of its intended purpose of providing a more "balanced" approach to evaluating people. (3) Others have suggested ways to effectively reduce the bias. (4) Few published studies, however, have considered how the employees affected actually view the balanced scorecard. To evaluate this facet of BSC utilization, we surveyed MBA students who represented a cross-section of organizations, seeking to obtain their perceptions about several important aspects of management control systems at their companies. In doing so, we were able to assess whether significant weaknesses exist in BSC implementation at their organizations. We conclude that, on average, the balanced scorecards at the companies represented in this survey lack the necessary acceptance by those affected. Moreover, our survey indicates that this lack of acceptance is largely because of inadequate communication by management. Kaplan and Norton argue that a key determinant for the BSC's success is its ability to align intangible assets with a company's strategy. (5) They identify three categories of intangible assets associated with the learning and growth perspective: human capital, information capital, and organization capital. Drawing from this scheme, we grouped our primary survey results in terms of the companies' development of these intangible assets. As another barometer of perceived organizational success, we also asked survey participants to assess their companies' competitive outcomes. The survey results suggest that companies that have implemented the balanced scorecard may be relatively further along than non-BSC companies in terms of strategy alignment and adopting a continuous improvement environment, but they may fall short in communicating objectives to employees and generating the level of motivation intended. As a result, employee buy-in is significantly lacking at many of these firms, and BSC employees are not any more motivated than those in companies that do not use this management tool. Moreover, they are no more likely to view their performance evaluations as reflective of their true performance or to view compensation as related to performance measures. It is also noteworthy that even BSC companies may not be making sufficient strides toward a balance between financial and nonfinancial measures. Finally, BSC employees do not view their company's outcomes as better than competitors' in terms of performance in their respective markets. The results of this survey suggest, therefore, that to derive full benefits from the scorecard approach, companies must work harder to get employees at all levels on board with the method. BACKGROUND The basic premise of the BSC is that a company tailors its performance evaluation system to a well-defined mission and a strategy for fulfilling that mission. As its name suggests, the balanced scorecard approach seeks to strike a "balance" between financial and nonfinancial measures in evaluating the company and its personnel. …