Chapter 2 Literature Review.pdf - DSpace@UM - University of Malaya

2.1 Introduction
CHAPTER 2
LITERATURE REVIEW
This chapter provides a review on existing literature on related topics which forms the
starting foundation for the study. The literature review is divided into two categories
where the first dwells on literatures pertaining on the subject of performance.
Meanwhile the second category focuses on the balanced scorecard with its history and
developments investigated. The characteristics, adoption and customization of the
scorecard are also explored to verify its relevance in the educational context. In this
category the variations of the BSC and the electronic versions of the scorecard are also
identified and analysed to investigate on possible customizations made to fit different
organizations.
2.2 Research Gap
Throughout the review, the will be evident that most research focused on methods for
improving overall performance of the organisation although limited study is made on
the use of the balanced scorecard for measuring the achievements of individuals
(Karathanos and Karathanos, 2005). This is especially true for performance
measurement of lecturers in a non-profit oriented public higher learning institution
(Chen et al., 2006). Furthermore, the complexities involved in the teaching profession
(Anderson et al, 2001) necessitate the need for a customised PM tool that is suitable for
measuring the accomplishments of individual lecturers (Storey, 2002; Stiefel et al.,
2005).
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2.3 Performance
According to the Compact Oxford English Dictionary (p.839, 2002) performance is
defined as ‘the action or process of performing’. Another definition of the word
represents the ‘capabilities of a machine or product’. Lebas (1995), on the other hand,
defines performance as the prospective likelihood to carry out particular actions in order
to successfully achieve set goals within the given time frame and constraints of the
actor and the situation. The author continues to emphasize that a specific term for
performance is one that many find it somewhat difficult to agree upon. Different parties
have differing ideas about what performance actually represents (Venkatraman and
Ramanujam, 1986; Armstrong, 2000). Performance in one context can carry a
completely different meaning when used in a disparate environment. For example,
performance in a computer network environment can mean the effectiveness and
efficiency of the equipments used in telecommunication attempts. Alternatively,
performance in a business deal may denote to complete and deliver obligations that
have been agreed upon based on a written contract between the seller and the purchaser.
On the other hand, performance can be defined as the actual results achieved compared
to results that were expected or desired (Dess and Robinson, 1984). A room for
improvement or a need for reassessing the prior actions taken exists when the actual
performance falls below expected results. The difference in actual results compared to
what was expected is called a performance gap. Thus performance improvement is
needed to narrow the gaps, if any exists.
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Still some schools of thought prefer to consider performance as a blend of behaviours
and outcomes as defined by Brumbrach (1988, cited in Armstrong, 2000):
Performance means both behaviours and results. Behaviours emanate
from the performer and transform performance from abstraction to
action. Not just the instruments for results, behaviours are also
outcomes in their own right – the product of mental and physical effort
applied to tasks – and can be judged apart from results.
This definition takes on the idea that performance involves both the actions
(behaviours) taken during the process of attempting to achieve targets and outputs as the
results from the effort. Following this, Armstrong (2000) emphasize the need for
managers to address the potential of employees and accomplishments while managing
performance.
Nevertheless, performance should be about achieving or accomplishing targets that has
been set prior to executing the work or act. Similarly as suggested by Venkatraman and
Ramanujam (1986), “… performance is the time test of any strategy”. If the appropriate
amount of effort is given to accomplish expected performance, excellence is achievable.
Moreover, the definition of performance very much depends on the situation and its
constraints besides who holds the decision making with regards to the performance
achieved (Lebas, 1995).
Nevertheless, to determine if performance is achieved, measures have to be developed
to evaluate the accomplishments and establish the rate of completion. Most of all,
performance should not be about producing reports. Instead it should be about the
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decision made or direction taken with the available information of the current situation.
At this point, performance measurement and performance management comes into the
picture.
2.3.1 Performance Measurement (PM)
PM can be described as a means of assessing the achievements of an individual, group
or even an organisation with regards to meeting set objectives through statistical
evidence which can come in the form of financial data, market share, or even the assets
one possess. PM did not really occur until Peters and Waterman (1982) conducted a
research with the consulting firm McKinsey, and subsequently produced the book ‘In
Search of Excellence’. The book dwells on crucial issues that most organisations are
inclined to ignore and assets that they already possess but fail to pay attention to.
According to the authors, the leadership of an organisation plays an important role in
determining the future and success of the company. Instead of focusing on numerical
values such as increasing production, the senior management of organisations should
play the role of prioritizing existing assets of the company such as appreciating and
nurturing the staff’s contributions in terms of the ideas they give, acknowledging and
servicing the needs of customers while improving on what the organisation does best
instead of venturing too much into new directions that do not guarantee success.
Following the success of the book, big industry players, international organisations
including researchers and scholars were motivated to search for the true meaning of
excellence and the key to gaining a more competitive position in the ever challenging
and dynamic business environment. Furthermore, the perpetual growth of competition,
change in the way people work, internationalisation, change of the roles played by
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managers and the impact of new technologies make constant improvement on
performance the spotlight of organisations these days (Neely, 1999).
PM was often linked to achieving favourable financial results where metrics formed for
measurement relied a lot on monetary gains (Chan, 2004) which in a way or another
promoted vast developments of numerous accounting packages (Bipath, 2007).
However, since the 1980s and 1990s, society has started to criticise the employment and
complete reliance on financial indicators as missing other important factors that reflect
the organisation’s overall health (Neely, 1999). Correspondingly, organisations started
to realise the importance of measuring other areas of performance that can reflect the
relationship between the organisation and its assets instead of depending alone on
financial indicators that tend to represent past achievements and short term goals rather
than focus on the future direction of the organisation (Kaplan and Norton, 1996b; Dixon
et al., 1990 cited by Neely, 1999).
Folan and Browne (2005) predicted that in the subsequent years, the evolution of PM
would persist and it would shift towards focusing on the external environment of an
organisation. Instead of the conventional method of thinking that an organisation has
obvious boundaries and finite relationships with other organisations, PM development
will gradually turn its emphasis to comparing the ‘health’ of an organisation with its
competitors.
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Figure 2.1 which is adopted from Phadnis (2002), illustrates the evolution of
measurement and how the focus of PM has changed from financial emphasis to
strategic and operational through the centuries.
Financial
Strategic
Operational
Double- entry
Book keeping
Management
Accounting
Figure 2.1
Shareholder
Value
Competitive
Advantage
Benchmarking
Business Process
Reengineering
Evolution of Measurement (Phadnis, 2002)
Customer
Satisfaction
15th Century 19th Century Late 19th Century
Competencies
/ Capabilities
Balanced
Scorecard
Operational
Improvement
Time
According to Atkinson (1997 cited by Henri, 2006), PM plays three important roles in
managing performance. Firstly, PM provides coordination by narrowing the focus and
attention of decision makers on the priorities and goals of the organisation. Secondly, it
offers a tool for monitoring by using performance reports to declare how well
expectations of stakeholders have been accomplished so far. Next, PM serves as a
diagnostic tool in examining the cause and effect relationships between actions taken
and the results achieved thereby allowing corrective actions to be taken to improve any
undesirable situations. Henri (2006) further reveals that from the three roles identified,
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the information gained can be used to justify actions taken and plans for future ventures.
Also PM brings the attention of managers to critical success factors for the organisation
and objectives that should be the target of staff. In one way or another, PM allows an
organisation to determine its current position with relation to past achievements, the
ultimate purpose of the enterprise, the best methods for accomplishing the purpose and
how the organisation can ascertain if its purpose is complete and realized (Lebas, 1995).
In their paper, Folan and Browne (2005) mentioned that there are several processes that
contribute to the development of PM. Initially, recommendations for PM such as
frameworks or systems for PM would be put forward. These recommendations may
represent measures and structures for PM that subsequently serves as the foundation for
the development of a PM framework and system design. At this point in time, it is
important to gain top management support when developing measures for PM that
should reflect the operational activities of managers and the staff while enquiring their
opinions with regards to the development of each measure especially customer
satisfaction related ones (Stalk and Hout, 1990 cited by Folan and Browne, 2005).
Above all, PM should provide a connection between staff performance evaluation that
also encourages feedback from both the appraiser and the appraised (Band, 1990 cited
by Folan and Browne, 2005).
Nevertheless, PM will continue to receive the utmost attention of managers as the
perpetual search for new support in ensuring that organisational objectives are met is
developed (Venkatraman and Ramanujam, 1986; Cavalluzzo and Ittner, 2004; Folan
and Browne, 2005). Moreover improvements cannot be made without establishing the
present performance. By having PM, rooms for improvement to identify where
development is needed can be properly determined (Armstrong, 2000). Nonetheless,
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PM is only successful if there is an organisation wide agreement with the targets to be
achieved through the use of consistent and relevant measures (Kaplan and Norton, 1992
– 2001). Above all, in the process of achieving excellent performance, it is important to
be aware of what is being measured and what are the goals and objectives that need to
be accomplished.
2.3.2 Performance Measurement (PM) versus Performance Management
Often there is a misunderstanding of the meaning of the terms performance
management and PM which results in both being used interchangeably (Radnor and
McGuire, 2004). Performance management is described as activities and processes that
provide the environment for PM where relevant actions and communication with
respect to the performance achieved can be made. As clearly described by the Gartner
Group (Geishecker, 2002), ‘performance management is an umbrella term. It comprises
all processes, methodologies, metrics and technologies that enterprises use to measure,
monitor and manage business performance’. In other words, performance management
can be said to be the processes that create the culture of excellent performance and
course of actions that assess progress unlike PM which are measures for performance
(Armstrong, 2000). For example in a computer network setup, performance
management consists of a set of procedures involved in evaluating how effective the
equipments work together in providing connections.
Armstrong further describes performance management as being both tactical and
integrated simultaneously where it strategically attempts issues that concern the whole
picture with respect to the performance of the organisation and the culture that needs to
be created to encourage excellent performance. Meanwhile, it integrates in two
directions, one being vertical integration where performance management takes on the
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ole of ensuring an organisation wide alignment of strategies and objectives to
accomplish by cascading down the strategic direction and goals of the enterprise.
Similarly it allows horizontal alignment by providing a similar approach throughout the
organisation in terms of development for employees that is parallel to that of the
management. By ensuring alignment throughout, value is created and delivered back up
the organisational structure as illustrated in Figure 2.2 adopted from BetterManagement
(2006).
Figure 2.2
Cascading Strategic Objectives through Performance Management
(BetterManagement, 2006)
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According to Lebas (1995), performance management takes place prior to PM, where
the latter supports the former. Figure 2.3 is illustrated for this research to reflect PM as
the subset or the yolk of performance management where the separation of both
elements is deemed impossible as PM provides the supporting justifications for actions
taken in performance management.
Performance Management
Performance
Measurement
Figure 2.3
Relationship between Performance Management and PM
Alternatively, one may think that PM can be independent without performance
management. However, the independence of PM would not produce any beneficial
effects if corresponding actions with regards to the performance achieved is not
reviewed and made in performance management.
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Figure 2.4 was derived in this research to illustrate performance management as a cycle
that involves 3 distinctive stages that work toward achieving desired performance.
Formal performance review
Focus individual contribution
Feedback on achievements
Performance
appraisal
Performance
Planning
Continuous feedback and
counselling
Performance monitoring
Figure 2.4
Performance Management Cycle
Performance
Coaching
First and foremost, performance planning takes place to ascertain the expected results or
specific goals. During this stage, it is important for managers to understand that an
agreement (contracting) with employees with regards to targets to be achieved and
measures used to evaluate performance is planned and reached.
Set objectives and targets
Identify skills and needs
Contract performance
Simultaneously, it is also crucial to recognize the needs of employees during the
process of achieving set targets. When the performance contract is agreed by all parties
involved, performance coaching transpires where the superior of an individual or head
of a unit continuously provide feedbacks and encouragements with regards to
accomplishments observed. Ongoing feedback should be constantly given to address
issues of under achievement at a timely manner so that employees are given ample time
to improve their performance (Pulakos, 2007). Meanwhile, acknowledging and
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ecognizing efforts by employees is equally important in exhibiting appreciation for the
attempts made.
Additionally, Pulakos (2007) continued to emphasize that it is important to note that
feedbacks should not be one-directional. Instead, managers should seek to gain the
opinions of employees with regards with current performance and if things could be
done differently. A continuous collaboration and effective communication between
managers and employees will give light to addressing problems from different angles
(Mulvaney et al. 2006). Finally performance appraisal documents the formal review of
individual achievements at the end of a formal evaluation period that are usually
complemented with feedbacks relating to the results attained.
As emphasized by Lebas (1995), performance should not revolve around past
achievements. Instead performance is about how competent a unit is in achieving goals
and evaluated based on the achievements. Thus, performance management involves
building the future form of a unit in attempts to achieve excellence. Performance
management is therefore vital in focussing organisations towards achieving strategic
objectives where individual staff objectives can be accurately aligned with
organisational goals. In other words, performance management can be seen as a path for
staff development and ultimately creating an organisation wide effort towards achieving
the same goals. Similarly, Armstrong (2000) emphasized that performance management
should not revolve around conventional schools of thought that performance is about
top-down monitoring. Instead, the process should be flexible and able to evolve in
accordance to how the performance of employees can be developed which includes
planning for future performance improvement. Some concerns that were raised include
increasing more performance coaching rather than imposing punitive actions for under
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performance and recognizing individual performance rather than collaborative efforts
alone to ensure the process is recognized as not bias (Ketelaar et al.,2007).
Another important characteristic of performance management as highlighted by Aguinis
and Pierce (2008) is that performance management is an event that takes place all year
round that is typically driven by managers and is supported by PM which measures
achievements with respect to set targets. Performance management requires managers
to continually monitor the current achievements of the organisation while providing the
required support to deviate from any likelihood of under performance. It has been
shown by Cascio (2006, cited in Aguinis and Pierce, 2008) that organisations which
perform formal performance management are 51% more inclined to do better
financially and 41% better in promoting customer intimacy, employee retention and so
on than others that do not. Through performance management, and the proper execution
with the appropriate actions taken to address the needs of employees, excellence can be
achieved.
2.3.3 Performance Planning
While performance management controls the activities that ensure excellence and the
people involved in realising it, performance planning creates the framework that guides
the effort (Armstrong, 2000). In this planning phase, managers attempt to identify the
objectives, skills and development needs of employees to successfully fulfil
performance expectations (Mulvaney et al., 2006). It is crucial for communication
between managers and employees with regards to performance expectations at this
stage to easily identify if set targets are achievable (Pulakos, 2007). By discussing
individual interests and expectations, a mutual agreement between the manager and the
employee can be achieved and likewise both parties will agree on the accuracy of the
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appraisal conducted (Kirkpatrick, 2006). Instead of focusing on past achievements,
performance planning involves looking forward to recognize how individuals can
contribute to the organisation. By doing so, the welfare of employees is not disregarded
while focusing on the future function of staff in accomplishing strategic organisational
goals (McCarthy, 2005).
Occasionally, past performance records may have to be analysed to predict future
circumstances and requirements to enable excellence. However, it is not used as the
main basis for the performance plan. Instead, managers must look into the future
direction of the organisation and how development in skills and support can assist the
endeavour. At this point, the organisational objectives have to be clear and of utmost
importance to enable the formation of a performance plan, that truly represents the
goals of the establishment. The product of the performance plan is the performance
agreement (performance contract) which lists the objectives, measures for assessment,
expected targets for individual as well as organisational performance.
2.3.4 Performance Contracting
A performance contract, also known as performance agreement, is the outcome of the
performance planning phase which establishes an agreement between individual
employees and the management with respect to performance expectations. The contract
outlines the objectives, required expertise and knowledge, key performance indicators
(KPIs), performance measures used for evaluating accomplishments and ultimately the
organisational goals (Horton and Farnham, 2007). At this point of time, the employee
continues to communicate with the respective superior with regards to the expectations
and set targets stated in the agreement. Changes can be made to the performance
contract with the consent of management and the agreement from the employee.
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Consequently, the employee and the corresponding superior signs to acknowledge the
contract and its contents. With the performance contract, employees are accountable
towards their final performance as expectations from the management have been clearly
indicated in the agreement after a two-way communication and agreement from both
sides have been achieved.
Subsequently, continuous tracking and PM of an individual’s performance is based on
the agreed performance contract. Therefore, the development of the performance
agreement is a joint effort between the immediate superior and an employee.
Occasionally, a review will be conducted to reassess the performance contract in the
middle of a formal evaluation period to determine its relevance.
Performance contracts have long been implemented in numerous countries such as
Belgium, Canada, Netherlands, Brazil and the United Kingdom (Ketelaar et al., 2007).
In the study by Ketelaar et al. (2007), the public service departments in the mentioned
countries used performance contracts in managing the performance of senior civil
service servants to improve the effectiveness and efficiency of services provided by
government departments. The result of the study revealed several benefits received after
implementing performance contracts. Based on the results, employees could clearly see
and understand performance expectations and how personal contributions added value
to the organisation. In addition to that, the results showed that the performance contracts
encouraged accountable towards final performance while providing a platform for
management to re-evaluate the method of performance appraisal used.
Nevertheless, the study also highlighted several risks that performance agreements may
cause. The results displayed the potential for the decline in loyalty among the civil
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servants as performance agreements mean the employees were obliged to achieving the
set targets. In some of the results, indicators for performance were cumbersome and too
complex to identify while some managers were reluctant to share personal opinions
with regards to setting performance contracts. Another weakness was found to be the
difficulty in identifying individual contributions in a team effort.
It is also important to highlight that performance contracts should vary for different
levels of staff (Armstrong, 2000). Different job roles and responsibilities constrain the
set targets in a performance agreement for an individual. The main purpose of a
performance agreement is to direct the focus of the employee to set targets that will
eventually contribute to accomplishing the organisation’s long term strategies.
2.3.5 Performance Appraisal
Performance appraisal also known as performance review, formally documents the
achievements of an individual with regards to set targets. Unlike performance contract,
performance appraisal is documented at the end of a formal evaluation period where the
strengths as well as the weaknesses of the individual are reviewed based on the results
from PM (Aguinis and Pierce, 2008). Complete dependence on performance appraisals
alone to determine the accomplishments of individuals in ensuring excellence is
reached, may lead to the discovery of under performance at the very last minute when
measures for improvement can no longer be implemented to improve the situation.
Therefore it is important to understand that performance appraisal is one of the sub-
steps of performance management in ensuring excellent performance management.
Nevertheless performance appraisals provide a formal review and documentation of
performance where both the employee and the respective manager can offer feedbacks
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with regards to the results of the evaluation (Pulakos, 2007). It should be clarified that
the performance appraisal is not the sole responsibility of the management. Instead it
should be used as a tool by the employee to discover self development needs
(Kirkpatrick, 2006). Furthermore, the performance appraisal can be used as a
justification in support of future development for the employee whether for career
advancement or workshops for growth of skills and knowledge required to continually
achieve excellence. Besides that, the results from a performance appraisal are useful to
determine if the plans for the future direction of the organisation are feasible and what
measures to take to evade any future untoward situations. The organisational benefits of
using performance appraisals can be simply summarized as below (Farr and Levy,
2007). According to Farr and Levy (2007), the performance appraisal can fetch several
organisational benefits by researching on the results from performance reviews to study
the usefulness and effectiveness of development programmes that potentially identifies
the needs of employees and clarify individual responsibilities while providing the
justifications for career advancements.
Employee acceptance towards a performance appraisal is strongly dependent on the
perceived trust in the superiors that the management has sufficient experience to
perform the evaluations and that the management supports the needs of the staff. In
addition to that, when employees are encouraged in influencing the results of the
performance appraisal through personal feedback, the satisfaction of staff toward a
performance appraisal can be significantly improved and strengthened (Whiting et al.
2008).
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2.3.6 Types of PM Techniques
Performance can be measured in many ways, be it using examination scores achieved to
assess the academic excellence of a student or the market value of a public listed
company to estimate its financial health. As such there is a huge availability of
techniques for measuring performance. Some of the more commonly used PM
techniques would include Benchmarking, Key Performance Indicators (KPIs), Relative
Value, Appraisals, Six Sigma, Total Quality Management (TQM) and so on. However,
not all are applicable in the context of evaluating individual staff.
For one, benchmarking involves evaluating current performance with regards to a
leader in the same context (Lema and Price, 1995). Obviously, this is appropriate in the
perspective of an organisation or department where best practices can be used as
guidance towards excellence. On the other hand, it would be unfair for benchmarking to
be used for staff evaluation because people vary in the way they work and in how they
would like to improve. By doing so, the staff is encouraged to follow the best practices
of a “champion” which limits creativity and indirectly endorsing conformity.
Meanwhile, KPIs are useful when used concurrently with other PM techniques such as
the BSC. By itself, the tool only provides financial and non-financial metrics that
indicate the rate of achievement relative to set objectives. At the same time, Relative
Value only determines the subjective value or value relative to the average value of an
asset to an organisation (Arimura et al., 2004). The evaluation of an individual requires
more objective measures to estimate performance.
Appraisal on the other hand, is one of the most common forms of staff PM technique.
However, it has been criticized for its somewhat bureaucratic nature that endorses
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conformity due to its structured nature (Coens and Jenkins, 2002; Armstrong, 2000).
Instead of promoting creativity, appraisals force staff to focus efforts on adapting and
contributing only to measured areas that will guarantee rewards. A perfect analogy of
conformity would be where students memorize theories as the teacher only rewards
them for having theoretical knowledge, rather than recognize practical experience and
the comprehension of what is learnt as well. As remarked by Ballantine et al. (1996), a
structured and static PM may limit the organisation’s potential to address the constantly
changing environment. Clearly, such a PM would only be suitable in a static
environment where tasks are somewhat repetitive and the staff are unlikely to deviate
from their responsibilities. In such environments, the staff are likely to increase
efficiency but work effectiveness is improbable to happen, as rewards are gained by the
quantity produced rather than the quality maintained.
Meanwhile, Six Sigma is another PM tool that emphasizes on quality improvement.
Nevertheless, this tool has been disapproved for its focus on scientific tools such as
statistical techniques, Failure Modes and Effect Analysis (Bendell, 2006). Yet again,
staff evaluation requires a more holistic approach and cannot completely rely on
scientific assessment. Lastly, TQM is another management strategy that stresses on the
awareness of quality to fulfil customer requirements. This however, has been
highlighted as one of its weaknesses for stressing specifically on only one aspect and
neglecting other factors that constitute success (Wessel and Burcher, 2004).
Nevertheless, completely not utilizing any form of PM is equally impractical. Any task
requires focus and direction for it to be accomplished well. Therefore, targets must be
set (Amaratunga et al, 2000; Hass et al., 2005) to fortify decision making at every level
of the organisation let alone boost the accomplishments of expected outcomes. The
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BSC endorses such efforts in addition to improving communication (Niven, 2002) with
key stakeholders with regards to the expected outcomes to aid performance
management. Moreover its cyclical nature promotes cause and effect relationships to
feedback on improvements in areas of under performance (Kaplan and Norton, 1996b)
by placing the responsibility on individuals for their own development. With feedback
and learning, employees can reflect on past and current performance to continually
improve and contribute to the organisation in a positive manner. In addition to that, by
using the scorecard, high level aspirations can be easily communicated by transferring
down corporate level strategies to employees’ personal scorecard and therefore aid an
organisation-wide alignment of strategies.
Furthermore, when a standard technique for PM of staff is used throughout the
organisation, some critical issues, that may initially be overlooked, can be resolved.
One such situation is when different units adopting distinct techniques of PM which
results in staff being evaluated differently. Through organisation wide agreement, a
proper PM technique that truly measures the performance of all individuals in the
company can be adopted. This is to make certain that the evaluation of staff’
performance is standard throughout the organisation. Storey (2002) emphasized that
different managers may have different expectations from the staff resulting in
diversified results that may not fit well to the expected outcomes from a particular
department. This situation does not contribute well towards the organisation’s goals as a
whole. Instead, a jointly constructed and integrated PM will ensure consistency and that
the whole organisation moves together towards its goals and targets rather than just
focusing efforts on increasing the productivity of a specific department.
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Furthermore, a PM method would only prove to be effective if staff start realising the
long term intentions of the organisation and work their way towards achieving them.
However, how can a method for PM demonstrate its success? Clearly, one that allows
feedback and learning to take place. In other words, the PM method should involve the
process where affected individuals can respond to and learn from the outcomes of the
assessment. Besides that, an organisation should be able to review the validity and
practicality of its strategies. Most, if not all, traditional performance measurements do
not emphasize on this. On the contrary, the BSC promotes learning from the results of
assessing performance (Kaplan and Norton, 1996b).
2.3.7 PM in the Educational Context
According to Brent (1999 cited in Cardoso et al.,2005), typical missions of higher
education institutions would be to promote the advancement of knowledge, through
knowledge discovery, the application of knowledge discovered and the dissemination
of knowledge. From this, Cardoso et al. (2005) identified 3 business processes relating
to missions of higher education institutions. Firstly, the teaching or training process
which relates to the application of knowledge. Next, the research process where the
discovery of new knowledge takes place. Lastly, the sharing process which involves the
dissemination of knowledge. Likewise, the vision of University Malaya (UM) is to be
an internationally renowned institution of higher learning in research, innovation,
publication and teaching. Similarly, UM’s mission is to advance knowledge and
learning through quality research and education for the nation and for humanity
(University of Malaya, 2008).
To fully accomplish all long term strategies, a higher learning institution should adopt a
performance management approach that ensures continual efforts towards this purpose
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and can provide evidence for the attainment of their missions and vision. Moreover, it
cannot be denied that the education industry is as likely to face external pressures as
any other organisations. With globalization, higher education institutions have to face
the reality of having to continually provide and deliver excellent education.
It is a common misconception to believe that large student number intakes, high
graduation rates, state of the art resources and facilities and good scholastic rankings
actually project the quality of education offered by an institution of higher learning
(Stewart and Carpenter-Hubin, 2001). To date, educational institutions are judged based
on similar measures. However, one may think whether these measures actually reflect
the quality of education in the institution. Such measures may be used as external
performance indicators of how well the institution is doing compared to others. Clearly
external indicators are targeted towards a particular audience, namely the students and
parents, education ministry and potential sponsors. In this circumstance, the institution
is only concerned with image management to maintain its reputation and influence the
preferences of the target audience.
Too often, institutions have misunderstood that by achieving external indicators, it is
successful internally. In reality, such management style would not add well towards the
achievement of long term objectives of most higher education institutions (Umashankar
and Dutta, 2007). Instead, to ensure a healthy culture, the institution has to ascertain
that internal performance measures are linked to the corporate goals that attempt to
improve the organisation’s operations and not simply competing with peer institutions
(Hamid et al., 2007). In that way, the organisation should focus on internal measures
according to the nature of work of the staff and link them to the strategic goals of the
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organisation which attempt to solve external pressures and consequently resulting in
academic excellence.
Internal PM, which is targeted at faculty members, academic administrators and so on,
should be linked to the organisational goals which provide essential information
towards proper resource allocation and internal policy to achieve academic excellence
(Hamid et al., 2007). In other words, educational institutions should use appropriate
measures of performance to self-improve instead of, as a means of competing with rival
institutions. By viewing inwardly, and seeking to progress and develop better, the
institution will naturally outperform competitors. Note however that equal magnitude of
emphasis should also be given to external PM. By completely focusing on internal PM
only and ignoring external factors, the organisation may not be able to endure the
pressures of its dynamic environment. A suitable tool for performance management and
measurement should be adopted to encourage knowledge discovery and sharing that can
support the internal factors that determine the organization’s health and potential to
succeed.
2.3.8 Challenges in PM and Performance Management
While PM and performance management are attempts to assess and improve the
accomplishments of an organisation, there is no doubt that there will be challenges that
accompany the effort. From the literature gathered, some of the barriers encountered
during PM and management are identified. Among them is the difficulty of determining
the appropriate goals where objectives conflict (Neely, 1999; Cavalluzzo and Ittner,
2004) which may be caused by the complexity in establishing the suitable metrics for
measuring subjective performance that is not easily quantifiable (Cavalluzzo and Ittner,
2004). Metrics for measures are somewhat subjective in different situations and can be
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vague to the owners of the KPI. An ill defined performance measure gives false
representation of how activities can be evaluated (Neely, 1999) thus results in
inaccurate information of current performance.
Besides that, gaining complete agreement in relation to measures used and how
evaluation is conducted is difficult to obtain. Different parties have personal interest and
ideas of PM and evaluation (Mulvaney et al. 2006). This may be caused by the
existence of PM systems currently in use. Some managers believe that the current PM
and performance management systems used are sufficient and therefore may resist
using any newly introduced systems. There is a strong likelihood for that to occur
especially when an individual department or unit has implemented its own form of
performance management. If the problem persists and is not solved, integration of PM
throughout the organisation cannot be established which may lead to poor alignment of
the PM systems with organisational strategies (Cavalluzzo and Ittner, 2004).
The weaknesses and failures of information systems to deliver accurate and timely
information with regards to performance (Mulvaney et al. 2006) may bring about
employees’ resistance to rely on PM systems to improve individual performance. More
often than not, managers are overwhelmed with irrelevant information that does not
truly represent the current situation of organisation to support decision making with
regards to future directions. The usual practice would be to measure everything and not
realise the relevance of each (Neely, 1999).
Often times, organisations have the intention to improve performance. However, the
lack of senior management commitment to utilize and depend on the information
generated by PM systems (Bourne, 2005; Cavalluzzo and Ittner, 2004) can also lead to
39

adverse effects that PM should bring about. By not relying on the provided PM systems,
the organisation may instead end up using alternative methods that prove to be
unsuitable in maintaining and improving performance.
A performance improvement survey with 117 respondents from employees of public
sectors worldwide, by BetterManagement.com (2006) revealed the following results
with regards to cultural challenges in performance management in Figure 2.5 (adopted
from BetterManagement, 2006).
Figure 2.5
Cultural Barriers of Performance Management in the Public Sector
(BetterManagement, 2006)
There is bound to be some potential resistance to the receptiveness of lecturers towards
new PM schemes. In the educational context, with several proposals and directives
introduced by the Ministry of Higher Education, adapting to a new initiative may take
even more time. Moreover, PM directives are made by the top management and have
40

little or no involvement from the teaching staff making resentment towards new
schemes very likely. Academic staff often sees new directives as coercion to work
towards the requirement of the senior management rather than having the freedom to
independently improve and develop their professional skills (Storey, 2002).
2.3.9 Features of a good Performance Management System
Based on Lebas (1995), the following features have been identified as characteristics
that a good performance management and measurement system should have:
� Providing cause and effect relationships to easily learn from past mistakes and
achievements.
� Offering individuals complete control over their performance.
� Allowing communication between the individual and management.
� Creating the opportunity for individual development.
� Supporting senior management decision making by providing timely and
accurate information.
2.4 Balanced Scorecard (BSC)
The evolution of the balanced scorecard began in 1990 when a one-year study,
“Measuring Performance in the Organisation of the Future”, on 12 companies by the
Nolan Norton Institute was conducted to produce a new PM model that could address
the current problems faced by most companies in that era. The study was mostly
inspired by the dissatisfaction with current financial measures that reported on past
achievements instead of providing strategic feedbacks that could help decision makers
mold a firmer foundation for a better economic future (Chan, 2004). With the
participants, the consultants of the study, which was led by David Norton as the study
leader and Robert Kaplan who acted as the academic consultant, several conclusions
41

were formed which mainly highlighted that complete reliance on conventional financial
measures could not give the full picture of the overall health of an organisation.
According to the results, financial measures failed to deliver the information with
regards to the efficiency and effectiveness of internal business processes, lacked focus
and attention on the needs of customers and knowledge and innovation progress in the
organisation. The result of the study was the development of the Balanced Scorecard
which is discussed in the Harvard Business Review ( Kaplan and Norton, 1992).
In 1996, the authors continued to publish a book (Kaplan and Norton, 1996a), entailing
how managers could adopt and implement the scorecard into their organisations.
Following that, several more papers and books were published to provide further
information on how the scorecard could be used in organisations that required certain
degrees of customization on the BSC to address unique needs.
Since its inception, the BSC has evolved from reporting to a strategic management tool
that offers added advantage to managers who adopt it. From assisting strategy setting to
the alignment and cascading of top level objectives, the scorecard is used as a
communication tool between internal and external stakeholders (Gumbus and Lyons,
2002; Schatz, 2000 both cited in Bipath, 2007).
The BSC, introduced by Robert Kaplan and David Norton in 1992 is a set of
management tool that allow for a holistic, integrated view of business performance. In
the current business environment, many organisations realize that maintaining focus on
a one-dimensional measure of performance (i.e. increased profits or ability to manage
cost effectively) is inadequate. Traditionally, organisations used tools or measurements
such as Economic Value Added (EVA), Earnings Before Interest and Taxes (EBIT),
42

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), Activity
Based Costing (ABC), Statistical Process Control (SPC), Process Measures, Customer
Metrics, Free Cash Flow, and the Balanced Scorecard to measure the current position
of the organisation with regards to achieving corporate goals. However, in recent years,
it is undeniably common to hear about BSC being adopted and gaining popularity since
it advocates using a balanced form of measurement that organisations require in
juggling with various challenges in today’s dynamic business environment (Fernandes
et al., 2005).
Furthermore, Bipath (2007) has found that studies have shown that most organisations
tend to develop extraordinary missions and vision but are weak at ensuring that these
long term goals will be accomplished. To resolve the issue, the scorecard offers a new
way to link missions to strategies and further transforms them into operational
objectives and measures that can be achieved by all levels of staff.
While key performance indicators (KPIs) aid in setting targets of achievements that
spells out success, the appropriateness and balance of its implementation to evaluate the
contributions of individuals is yet to be certain. Studies have shown that, conventional
assessments like KPIs, are inclined to monitoring only the financial achievements
accomplished (Kaplan and Norton, 1996b), which is more suited for the organisational
level. Furthermore, the failure to identify the needs of customers and poor strategic
emphasis was linked to the weaknesses of traditional financial measures (Neely, 1999).
In addition, as mentioned by Onsman (2003), these KPIs only report on the
development and progress towards targets, which typically depend on historical data,
instead of encouraging performance planning which is significantly needed and
appropriate at the individual level.
43

Unlike KPIs, the balanced scorecard (BSC), by Kaplan and Norton (1996b), takes into
account other aspects that measure the overall performance of an organisation. In fact,
the underlying concept of BSC is that, by balancing other crucial goals, the natural
result would be financial success (Stewart and Carpenter-Hubin, 2001; Onsman, 2003).
Furthermore, the BSC concept encourages planning out expected performance to drive
the future instead of relying on measures of past achievements.
2.4.1 Characteristics of the scorecard
The Balanced Scorecard introduced by Robert Kaplan and David Norton in 1992, was
developed to measure the performance of organisations in a holistic manner and
overcome the weaknesses of conventional performance management tools. Instead of
just focusing on financial measures, which tend to reflect past performances, the
principal behind the scorecard emphasizes on the need to give equal priority on other
factors that influence the success of the organisation. By balancing all aspects, financial
success would a natural outcome. The scorecard comprises of 4 key perspectives as
displayed previously in Figure 1.1 in Chapter 1:
� Financial perspective: takes into consideration the interests of shareholders of
the organisation
� Internal business process perspective: includes identifying factors that have to
be excelled internally. How can we fulfil the hopes of our staff and business
partners?
� Customer perspective: involves measuring how customers see the organisation.
Do our services, products and relationships match-up to the expectations of our
customers?
44

� Learning and growth (sometimes called Innovation and learning) perspective:
considers measures that have to be taken to ensure that the organisation
continually improves and adapt to its external environment.
From the 4 perspectives, it is clear that the scorecard highlights the importance of a
balanced performance management by emphasizing on every aspect thereby providing a
more complete overall assessment of the organisation’s status (Stewart and Carpenter-
Hubin, 2001). Another viewpoint which was adopted from Ballantine et al. (1996), of
how the scorecard maintains that a balanced focus is needed on all 4 perspectives can be
viewed as illustrated in Figure 2.6. According to Ballantine et al. (1996), “… the
relationship between the components is equidistant forming a square….to ensure that
the strategic intent is adhered to, the emphasis is on the balance of all factors. An
imbalance in any one aspect will be quickly observed”. In other words, when a certain
degree of priority is given to one perspective, the same should be applied on the other 3
perspectives to maintain the balance of the scorecard.
Customer
Perspective
Financial Perspective
Learning and Growth Perspective
Figure 2.6
Intensity of
focus
Internal Business
Process Perspective
The Balance in the Balanced Scorecard (Ballantine et al., 1996)
45

Kaplan and Norton (1992 - 2005) further emphasize that the scorecard does not act as a
substitute to assessment for financial performance. Instead, the BSC should be viewed
as a complement to it by providing the organisation with the capability to monitor the
accomplishments thus far and to determine the intellectual capital required for further
growth and development. In addition to that, organisations have to limit their attention
to just a few essential measures (Storey, 2002). Most if not all, organisations tend to
hastily add new measures that seemed good at that time without considering their
importance. By adding unnecessary new measures, organisations may tend to lose focus
and overall performance may be unbalanced especially when too much emphasis is
given to one aspect in the expense of others. Like many invalid assumptions,
organisations are inclined to think that emphasis on one aspect will result in the other
(Stewart and Carpenter-Hubin, 2001). Treacy and Wiersma (1995, cited in Ward and
Peppard, 2002) also suggested that, in order to achieve market leadership, organisations
have to be leaders in operational excellence, customer intimacy and product leadership.
With the vast amount of external competition these days, organisations have realised
that in order to survive and sustain, product innovation that meet customer requirements
and market trends have to be continually developed where the consequences of not
maintaining customer loyalty can significantly bring about adverse effects towards the
success of the organisation. Moreover, the fact that an organisation is run by its staff,
proper human resources management have become a crucial issue to maintain its
productivity through promoting the skills and development of employees.
By putting equal magnitude on all 4 perspectives, a wider participation from
organisational members to jointly establish mutually agreed goals is required to make
way for the alignment of short-term goals towards the long term strategic objectives of
the entire organisation where the needs of different stakeholders are taken into thought
46

(Kaplan and Norton, 1996b; Greasley, 2000). It is very common for most organisations
to develop missions and vision that distinguishes them from others. However, as
mentioned earlier, organisations are also very likely to be weak at implementing
strategies to accomplish future goals (Bipath, 2007). This can be the due to poor
communication of the predicaments involved in the day-to-day operations with the top
management which results in little understanding of the responsibilities of the staff and
eventually brings about weak support and motivation from employees to contribute to
the organisation as a whole. It is therefore crucial that there is continuous two-way
communication between the decision makers and the implementers of strategies. By
adopting the scorecard, top level aspirations can be easily linked to strategies that are
translated into operational targets and measures to enable comprehension of how
individual performance contribute back up the organisational structure.
Usually, the balanced scorecard is used in unison with other PM tools such as CSFs and
KPIs, as suggested by Ward and Peppard (2002), who also mentioned that before a
scorecard can be developed, the business objectives of the organisation have to be
established. Subsequently, the construction of the organisation’s BSC is initiated by
classifying the objectives according to corresponding perspectives. The corresponding
critical success factors (CSFs) for each business objective are also identified
simultaneously while considering all long and short term goals and the internal and
external environment of the organisation. When integrated with CSFs, the scorecard can
serve to connect measures to business objectives while CSFs can be used to identify
crucial factors that will guarantee success in realizing the goals of the organisation. In
other words, the result of the two provides additional useful information with regards to
the actions that need to be taken to ensure the full implementation of objectives to
effectively point management to the right direction where attention is needed.
47

Figure 2.7, adopted from WIPFLi (2005), illustrates an example of a scorecard for a
hospital that attempts to improve its services and how the successful implementation of
each CSF in the corresponding perspective affects subsequent CSFs in other
perspectives.
Figure 2.7
Example of a BSC with CSFs (WIPFLi, 2005)
For instance, for the CSF ‘Growth Revenue’ to be successfully implemented, the CSFs
‘Improve Community Image’ and ‘Strengthen Physician Relationships’ have to take
place before it can be realized. In this scorecard, it can be seen that the execution of
CSFs in other perspectives would lead to the realization of the CSFs in the financial
perspectives and ultimately the goal or objective of the organization.
48

Overall, organisational objectives are analysed to subsequently determine functional
strategies that reflect the tasks and responsibilities of each unit in the organisation
towards achieving long term goals. Subsequently, strategies are formulated to ensure
the respective CSFs are maintained and consequently translated into operational
objectives that relate to lower levels of staff. In each perspective, objectives and the
corresponding measures, also known as key performance indicators (KPIs) are
established. These are also known as a set of metrics that are used to monitor achieved
performance with respect to set goals. Alternatively, the balanced scorecard can be
incorporated with a marking guide that scales each business process, to assist in
identifying potential processes that may need to be redesigned (Greasley, 2000).
Following the development of the corporate scorecard, the construction of departmental
and personal scorecards ensues by cascading top level KPIs down to these focused
scorecards according to the focus and goal of the specific business unit. The
departmental scorecard will exhibit how the unit’s strategies will contribute back up the
organizational level objectives. By doing so, alignment of organisational strategies will
be assured.
Kaplan and Norton (1992 - 2005) noted that the scorecard offers managers four new
management processes that contribute to the linking of long term goals to short term
tasks when used independently or combined by offering a platform for translating
vision to operational day-to-day objectives, a communication link between top
management and all levels of staff by cascading long term goals and allowing all levels
of staff to understand the purpose of their day-to-day activities and how each relate
back to the organisational objectives, prioritising important activities in business
planning and providing an environment for feedback and Learning by evaluating the
performance accomplishments in relation to set targets. As highlighted by the authors in
49

their publication in 1993, managers must continually monitor if current strategies are
still relevant and if new measures have to be introduced to evaluate the achievements of
new goals.
The scorecard offers a new way of linking numerous performance management
activities ranging from setting business, departmental and individual goals, resource
provision, to feedback and learning from real-time experiences that were previously
unconnected (Kaplan and Norton, 1996b).
2.4.2 BSC adoption
The review of literature suggests that the balanced scorecard has been implemented all
over the world since its introduction. The Gartner Group reported in a 1998 study that
“at least 40% of Fortune 1000 companies will implement a new management
philosophy….. the Balanced Scorecard…. by the year 2000”. This is later confirmed by
Kaplan and Norton (2001) who reported that the scorecard has been adopted by 50% of
Fortune 1000 companies in North America in addition to 40% of companies in Europe
that use a variant of the scorecard. Also according to Fielden (1999 cited by Pineno,
2004), some 54% of companies surveyed, were already using the scorecard for
performance management. This is later confirmed by Gumbus (2005) that “a total of
50% of Fortune 1000 companies in North America use the BSC”.
Numerous international organisations including Sears, Mobil, CIGNA Property and
Casualty Insurance Company have claimed to have undergone positive transformations
towards organisational management, ever since adopting the scorecard. On another
note, a utility company based in Canada, Nova Scotia Incorporated, started
implementing the balanced scorecard in 1996 as a measurement system to ensure that
50

operations are focused towards the success of organisational strategies. However,
adopting the BSC alone does not completely guarantee success. It is important that the
employees understand the reason behind employing the method and how the scorecard
works. This in turn ensures that employees can determine ways to contribute towards
the success of organisational strategies (Niven, 1999). For this reason, Nova Scotia
Incorporated realised the potential of the scorecard and went ahead with using it such
that it does not only serve as a PM system but also as a strategic performance
management system and a communication tool to ensure there is organisation wide
awareness of the organisational vision and strategies. This was done through the process
of cascading the balanced scorecard whereby scorecards were developed for every level
of organisation and aligned towards the corporate strategies (Cardoso et al., 2005).
According to a report by Kaplan and Norton (2001), the first non-profit organisation to
have adopted the balanced scorecard as a means of measuring performance was United
Way Southeastern New England (UWSENE). UWSENE is a perfect example to show
that the ‘customers’ from the customer perspective need not necessarily be groups that
brought monetary gains to an organisation. Instead, UWSENE treated donors as the
customers. Likewise as observed by Wilson et al. (2003 cited in Chen et al., 2006), the
Canada National Department of British Columbia Buildings Corporation (BCBC)
modified the scorecard to contain a shareholder perspective instead of a financial
perspective.
The US Department of Energy (DOE) employed the BSC to improve business systems
performance. DOE emphasized that the scorecard does need not be just suitable for the
private sector but can be tuned for the public sector. Instead of focusing on financial
gains, public sectors can use the scorecard to measure the effectiveness and efficiency
51

of operations, thereby ensuring the best service to customers. Given the fact that the
public sector works under tight budgets and is not a profit centre but a performance
centre, accountability and proper management is of greater importance, making the
interests of customers and key stakeholders issues that should not be overlooked. As
such, PM in the public sector is something that is gaining attention (Cavalluzzo and
Ittner, 2004) in efforts to boost the perception of the society towards public services.
It is also crucial for an organisation to understand which perspective may be of greater
importance to the establishment. In some cases, non-profit organisations may structure
the scorecard with the organisational mission as the top perspective, subsequently the
customer perspective, internal business process perspective, learning and growth
perspective and lastly the financial perspective (Kaplan and Norton, 2001b). On the
other hand, a profit organisation may wish to place the financial perspective with
greater emphasis. Nevertheless, it is important that organisations are aware that all
perspectives have to be addressed equally or the performance evaluation would be
unbalanced (Ballantine et al, 1996).
On the local front, several high profiled companies specifically Petronas, DRB-Hicom,
AMBank Group, Sunway Group, Tenaga Nasional Berhad and Pos Malaysia have also
adopted the approach in the hopes of improving performance. As indicated in the 2004
Annual Report, The Employee Provident Fund (EPF), the Malaysian social security
organisation, started embracing BSC in 2003 to devise a strategic plan for the following
three years. Like other organisations that are using the method, EPF believes that the
new PM system involves all levels of staff thereby ensuring that the whole organisation
is involved in the implementation of its long term strategies. EPF is another good
example to demonstrate that the scorecard can be modified to appeal to the
52

organisation’s unique requirements. Using the scorecard approach, the organisation
identified 4 main perspectives of focus namely, to be ‘excellent in customer service,
innovation, operation and regulatory compliance’. Currently, based on the 2006 Annual
Report, the organisation reported positive results after employing the performance
management method. With the successful execution of the balanced scorecard for
strategic planning and the complete development of individual Key Performance
Indicators (KPIs) for 600 executives, the organisation was able to achieve improved
performance. This is proven by the fact that EPF accomplished better than expected
results for 7 out of 11 organisational KPIs which constitute 7 corporate strategic
objectives.
Table 2.1 lists the corporations that employ the scorecard, highlighted in this section
and the sources of information:
Table 2.1
BSC adoption in Organisations world wide
Corporation Local Abroad Source
� Sears
� Mobil
� CIGNA
Property &
Casulty
Nova Scotia
Inc.
United Way
Southeastern
New England
(UWSENE)
�
� Automating the Balanced Scorecard.
Maximizing corporate performance through
successful enterprise-wide deployment. An
SPImpact: Balanced Scorecard white paper.
[Available at:
www.rocketsoftware.com/files/22/
automating.pdf]
� � Niven, 1999
� Nova Scotia's Corporate scorecard [Available
at:
http://www.novascotiabusiness.com/en/home/a
boutus/annualreport2006/CorporateScorecard.a
spx]
� � Kaplan and Norton (2001)
53

Corporation Local Abroad Source
Canada
National
Department of
British
Columbia
Buildings
Corporation
(BCBC)
� � Wilson et al. (2003 cited Chen et al., 2006)
US
� � [Available
Department of
at:http://professionals.pr.doe.gov/ma5/MA-
Energy
5Web.nsf/Business/Balanced+Scorecard?Open
(DOE)
Document]
� Whirlpool
� British
Airways
� World
Cargo
� Tetra Pak
� � Mooraj et al. (1999)
� Petronas
� 3A Added Advantage Asia Pte Ltd
� DRB-
http://www.3a.com.sg/Past_participants.htm
Hicom
� AMBank
Group
� Sunway
Group
� Tenaga
Nasional
Berhad
�
� Employee � � Employee Provident Fund (EPF) 2004 – 2006
Provident
Annual Reports [Available
Fund (EPF)
at:http://www.kwsp.gov.my/index.php?ch=p2r
eports&pg=en_p2reports_annual]
54

Figure 2.8 presents the results of a study conducted by Ingle and Schiermann (Niven,
2002), that illustrates the effectiveness of PM.
Figure 2.8
Results of Performance Management Implementation (Niven, 2002)
As can be seen, organisations that prioritized measuring performance are more likely to
surface as leaders in the respective industries. Similarly, PM leads towards better
financial health. It was reported that an astonishing 97% of organisations that adopted
the scorecard at the last major change effort, experienced success. In addition to that,
Niven (2002) highlighted in his book that 90% of the respondents from a survey
administered by the Institute of Management Accountants expressed satisfaction and
worth of the implementation of BSC in their organisation.
2.4.3 BSC in the Education Industry
While it is a common belief that non-profit organisations such as public universities
have not been pressured to ensure their survival, for the fact that continuous stream of
funding would always be provided by the government, in reality, they are facing
growing competition from private education providers and the pressure of
55

accountability to the stakeholders (Ramachandran and Foo, 2007; The Star Newspaper,
2008). Henceforth, the universities are required to establish certain performance
indicators (PIs) to show to the public how well they are performing. Additionally, the
universities also need to exhibit the achievement of their vision, mission, and strategies
to all stakeholders including the government, existing and potential students, parents
and potential employers. An investigation was conducted to identify the universities
worldwide that have implemented the balanced scorecard as a performance
management and PM tool with customizations made on the BSC to reflect the distinct
needs of each institution. Please refer to Appendix A for the full list of universities
worldwide that have adopted the BSC. From the observation made on the list collected,
it is obvious that several universities have customized scorecards to suit the needs of
the individual universities by renaming some or adding additional perspectives. It is
clear that the scorecard is not only suitable in profit-oriented organizations but as well
as educational institutions such as those named in the list as it dwells on maintaining
and improving performance through a balanced overview of the organizational health.
2.4.4 Customization of the BSC
Some have the perception that the balanced scorecard as a PM tool, may not be suitable
for the academic industry and may be more beneficial to profit-oriented organisations.
In different instances, it has been proven that the scorecard can be personalized to
attend to the needs of the organisation (Cardoso et al, 2005; Chen et al, 2006).
Likewise, as pointed out by Kaplan and Norton (2001), the financial perspective should
not be the main focus of organisations as it promotes managing short term strategies
instead of emphasizing on organisational missions and vision. The BSC, as mentioned
earlier is designed to take into account a holistic view that measures the overall
performance of an organisation. Complete emphasis on financial indicators not only
56

does not secure the future of the organisation, it also advocates ensuring short term
goals are achieved (Kaplan and Norton, 2001; Chan, 2004). Instead the scorecard
emphasizes on placing equal importance on other factors such as customer satisfaction,
internal business process success and an organisation-wide learning and growth culture
to continuously make it relevant in the industry.
A private university in Taiwan adopted the balanced scorecard in an attempt to respond
to its financial crisis. For Chin-Min Institute of Technology (CMIT), the scorecard was
introduced to revolutionise the organisation to address external threats that were
jeopardizing its survival. Even though higher education institutions can be categorized
as non-profit organisations, it is crucial that financial management is not ignored (Chen
et al., 2006). Ultimately, without sufficient funds the institution would not be able to
achieve its long term strategies.
Like many organisations that have realised the potential of the balanced scorecard, a
Management, Social Sciences and Information University in Lisbon integrated the
scorecard in its decision support system for University Effectiveness and Efficiency
project where a strategic information system is used in the creation and structuring of a
new Master Degree in Decision Support System (Cardoso et al., 2005). Similarly, the
scorecard was selected over other management methods for its strengths in strategic
planning, strategy implementation and as a communication tool to all levels of staff.
Creating a new higher degree programme involves somewhat the same processes as
formulating the strategies for an organisation. In a similar manner, the Rossier School
of Education at University of Southern California used the balanced scorecard to gauge
the effectiveness of its academic programme (Sutherland, 2000 cited by Umashankar
and Dutta, 2007).The targets and strategies of the new programme have to be
57

established before the degree can be offered to ensure an organisation wide
understanding of the goals to be accomplished in order to develop successful Master
degree graduates!
2.4.5 Strengths of the BSC
From the numerous existing related literatures, there is strong conviction for the
scorecard in terms of delivering benefits to any organisation that adopt its concept. By
implementing the BSC, an organisation can expect to receive the following benefits:
� Forward focused (Michalska, 2005) – Long term strategies are given higher
priority to focus efforts on the future direction of the organisation.
� Performance Tracking (Griffith, 2000) – continual year round performance of an
individual or a department or unit can be easily tracked for current
accomplishments. By doing so, under performance can be quickly corrected
with constant monitoring.
� Provides focus (Waters, 2007) – By highlighting on the main issues of the
organisation, operations can be directed to implement what is critical to the
success of the enterprise.
� Strategic alignment (Pangarkar and Kirkwood, 2008) – With organisation wide
alignment of strategies, efforts can be narrowed down and linked to ensure
fulfilment of long term strategies.
� Transparency of Contribution (Bipath, 2007) – the scorecard allows individuals
to clearly see how personal contributions add to the fulfilment of strategies.
� Accountability (Walker and Ainsworth, 2007) – the scorecard concept promotes
ownership and responsibility towards individual set targets.
58

In conclusion, BSC offers a framework for evaluating the effectiveness of
organisational management by measuring the current accomplishments (Ward and
Peppard, 2002).
2.4.6 Automation of the e-BSC
Since the inception of the balanced scorecard, there have been numerous balanced
scorecard software packages available in the market. Among them are Oracle Balanced
Scorecard, SEM Balanced Scorecard, SPImpact Balanced Scorecard, Balanced
Scorecard Analytic Application, IFS Scorecard, Enterprise Scorecard (Marr and Neely,
2003) and so on. The existence of such software packages has shown there is
justification for an automated balanced scorecard to further enhance the benefit of the
PM tool. It is undeniable that automation itself allows better time management and
empowers users to focus on task effectiveness rather than the process of doing the job.
In other words, it is easier to focus ones’ attention on the rationale of doing something.
Similarly, automation is a requirement for effective decision making as timeliness of
crucial information available at the right time is important for top management (de
Waal, 2001 cited Marr and Neely, 2003). Likewise, automating the balanced scorecard
is beneficial. As emphasized by Assiri et al. (2006), the implementation of an
automated balanced scorecard would encourage faster adoption of the PM tool and
enable speedy organisational culture change while expediting organisation-wide
participation.
The result of the collaboration between the University at Albany, State University of
New York and Pepperdine University in 2004, showed that organisations using
customised scorecarding systems experienced exceptionally more benefits compared to
organisations that do not (Lawson et al, 2004). Indeed some may argue that common
59

spreadsheet software such as Microsoft Office’s Excel can fulfil the requirements to
automate a balanced scorecard. However, there are several benefits that standard
spreadsheet software cannot offer unlike specialised scorecard systems can. Specialised
software tends to be developed with better security features besides the fact that it is a
more focused tool. Marr and Neely (2003) highlighted several disadvantages of
adopting a standard spreadsheet software as having little or no scalability, cumbersome
to update as data is manually entered and updated, no support for collaboration and the
difficulty that comes with analysing the spreadsheets that are mostly separated and
stored in disconnected workstations. This especially does not fit well with the purpose
of the balanced scorecard to ensure organisation-wide alignment with the long-term
strategies.
Some organisations may choose to employ the conventional paper-based system.
However it is an unquestionable fact that this method is unreliable and troublesome.
Furthermore, if an organisation intends to use the balanced scorecard as its main PM
system, automation would be a necessity (Classe, 1999 cited by Marr and Neely, 2003).
As mentioned by Classe (1999), paper and pencil may be suitable as the first step to
adopting the scorecard. However, continuous dependence on paper and pencil there
after, would make the communication process of organisation-wide understanding of
top management objectives hard to achieve. Instead, with an automated version of the
scorecard, staff will easily see how individual efforts contribute back up corporate
goals if the system can link top level aspirations to the operational objectives of lower
level employees.
This study will entail the analysis, design and development of an e-BSC customised for
the PM of lecturers in UM. Available balanced scorecard packages were developed to
60

target non-academic organisations and may not be fully suitable for use in higher
education institutions and PM of individuals. Instead, this study will focus on
delivering the purpose of the balanced scorecard as an individual PM tool to aid
performance management at the faculty level which may potentially provide relevant
information for the institution’s reward system.
2.5 Conclusion
This chapter reveals the processes involved in ensuring proper performance
management. For an organisation to continually sustain in the future, a suitable
performance management and PM tool that fulfils its unique needs has to be carefully
selected. Based on numerous study made on the BSC, the tool has proven to be a
successful management instrument adopted worldwide. However, for the adoption of
the BSC to be fully successful, proper education on the scorecard concept has to be
implemented. The full comprehension of the benefits and needs for using the scorecard
has to be properly communicated to all levels of staff to ensure an organisation wide
support for using the BSC as PM tool. In addition to that, the fullest support from top
management has to be obtained by encouraging the employment of the results from PM
using BSC as the main tool used to assist strategic decision making for the future.
Besides that, the fact that the scorecard allows customization makes it suitable for the
educational context which has a distinct focus as compared to profit-oriented
organisations. The literature review will used as a foundation for collecting primary
data and developing the framework for the proposed system.
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