Balanced Scorecard Design and Performance Impacts: Some ...

JAMAR Vol. 6 · Number 2 · 2008The averages reported in Table 6 for theorganisations that have implemented at theteam and individual levels are higher for allbut one outcome and one benefit measurehowever there are no statistically significantdifferences. A number of other bases werealso used for categorising firms as high andlow implementers, but these had no notableimpact on results. While no support isprovided for the third proposition as themajority of firms have implemented theBSC to lower levels of the organisation it islikely that there is some benefit to doing so,although it has not been captured in thisstudy.Additional Test on Cause and Effect andCompensationWith strong support for proposition one andsome support for proposition two,additional tests were run. These additionaltests considers whether compensation andcause and effect characteristics contributedto BSC effects independently, or if therewas some form of interaction effectbetween the two. Firms were partitionedinto four groups based on the existence orabsence of cause and effect and link fromnon-financial measures to compensation.The results of Mann-Whitney U-testsbetween groups are shown in Table 7.The tests demonstrate that thecompensation characteristic has littleindependent effect on BSC benefits andoutcomes (group one v three). When causeand effect is not part of the BSC design, theinclusion of compensation provides nosignificant difference in benefits. Theresults do provide evidence that the use ofcause and effect logic has an independenteffect on BSC benefits, although it appearsto be more important when compensation isalso included.All of the outcome measures and nine of the11 benefits were significantly higher whencause and effect logic was used with a BSCtied to compensation (group three v four).When the compensation link was absent,four of the benefit measures weresignificantly higher with the use of causeand effect, although all of the reportedaverages for benefits and two of theoutcome measures were higher (group onev two). In comparing a BSC design withboth compensation and cause and effect toone that only includes the latter (group twov four), only one benefit is significantlyhigher, although the outcome of ‘overallsuccess’ is moderately significant.The additional tests, in conjunction with theinitial proposition tests, suggest that linkingnon-financial BSC measures tocompensation may not be a requisite forsuccessful use of the BSC, and that causeand effect is the dominant characteristicconsidered in this study of BSC design.However, if compensation is included aspart of BSC design, there appears to be aninteraction effect with cause and effect.Whether the compensation characteristic isincluded or not may relate to the role thatthe BSC plays in the control package mix,or upon other contingent circumstances.Discussion and ConclusionThis study was designed to find out howBalanced Scorecards have been applied inpractice and whether different BSC designsresult in varying benefits and performanceoutcomes. A number of interesting findingsemerged. First, deriving measures usingcause and effect logic seem to enhanceperceived benefits and performanceoutcomes from the BSC. Given the widerange of benefits received, it is difficult topoint out any single underlying factordriving these results. However, as cause andeffect logic seemed to bring more benefitsfor firms that linked compensation to nonfinancials,benefits could partly be due tothis type of BSC making management byobjectives based control system reflect whatis truly believed to be of strategicimportance in the organisation.The reliance on cause and effect may helpto reduce and prioritise objectives,providing more focused target setting andaccountabilities, compared to a BSC whereobjectives are grouped into perspectives butno clear understanding exists on theirinterdependencies. Balancing variousoutcome measures with drivers of thosemeasures in management by objectivessystems may bring many of these benefits.30