Chapter 2

CEIS Health Report 2006
3.6 - Relationships between Balanced
Scorecard and activity based costing
Frittoli G. 1 , Granzotto S. 2
3.6.1 The Balanced Scorecard and the Activity Based Costing
During the eighties, critics of management accounting systems were developed and their
“lost relevance” on the real needs of the management was pointed out 3 . The demand for
intelligence for the management control has greatly increased in the last 20 years. One of
the elements that most affected this demand (increasing and satisfying it at once) is the
development of information technology. The possibilities of collection, communication
and availability of data have greatly increased; at the same time, and as a consequence,
needs for information and control increased too. Management experts and companies
have responded to the crisis of measurement systems with many experimentations and
new management accounting systems more suited to new technologies and new management
“philosophies” (total quality management, just in time, reengineering, …). The
most meaningful experiences are about cost management techniques, “activity based” 4
systems, and speaking of management control, the Strategic or Advanced Management
Accounting (SMA or AMA) became successful 5 . On this article, we will discuss the relation
between two of these methodologies: Balanced Scorecard (BSC) and Activity Based
Costing (ABC), showing the connections between them and illustrating the opportunities
that their usage may give. We will focus on their usage in the health care industry; for the
description of those methodologies, you can find more in-depth explanations on the
bibliography 6 .
Kaplan 7 , in response to a question regarding the relationship between BSC and ABC,
answered that they are “complementary”. The analysis of their relationship is all but unim-
1 Ce.Ri.S.Ma.S. Centro di ricerche e studi in management sanitario.
2 Chief financial Officer of Fondazione Sospiro.
3 Johnson and Kaplan (1987).
4 With “cost management” we refer to target costing, kaizen costing, life cycle costing, … With “activity based systems” we refer to
Activity Based Management (ABM), Activity Based Costing (ABC), Activity Based Budgeting (ABB).
5 There is a wide bibliography on this issue. We suggest here two “classics” of management accounting: Kaplan and Atkinson (2000),
and Horngren, Foster, Datar (1997).
6 Here are some works on performance management that we suggest: Cooper e Kaplan (1988 e 1991), Adkins (2006) Simons
(2000, 2005); about ABC and ABM: Brimson, Antos (1994), Bubbio (2001), Casati, Vichi (2002) and Cooper (2005);
about BSC, of course besides Kaplan and Norton’s works (1992, 1996, 2001 e 2003) we suggest Baraldi (2005) the most complete
analysis of both methodology and its application in health care industry.
7 Kaplan and Norton (1992, 1996, 2001, 2003) invented the Balanced Scorecard.
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