Academic journal article Management Accounting Quarterly

Is a Balanced Scorecard Useful in a Competitive Retail Environment?

Academic journal article Management Accounting Quarterly

Is a Balanced Scorecard Useful in a Competitive Retail Environment?

Article excerpt

To be successful in a competitive environment, organizations must pursue and execute strategies consistent with their mission. Management needs to align its goals and objectives with those of the organization to execute strategies effectively. With this alignment, managers are motivated to attain higher levels of individual performance. Using a balanced scorecard (BSC) system is an integral component in these alignment efforts. It is also necessary for the company's results to improve with the use of the BSC, and, in the case of a profit-seeking firm, the BSC should be associated with improved financial performance. understanding managers' perceptions and attitudes toward the BSC is an important contribution to the literature.

Our study expands and further develops the empirical performance measurement literature by examining managers' attitudes toward the BSC and their perceptions of its usefulness. We also examine the association of the scores with both managerial attitudes and financial performance. Our results are of particular interest because respondents' perceptions and attitudes regarding the BSC differ across management levels, managerial satisfaction is associated with higher scores, and these higher scores are associated with higher levels of financial performance. Our results also indicate that upper-level managers perceive greater improvement in individual, store, and company performance, while unit-level managers perceive higher levels of functionality in areas such as accuracy and reliability.

Since Robert S. Kaplan and David P. Norton's seminal article ("The Balanced Scorecard--Measures that Drive Performance," Harvard Business Review, January/ February 1992), BSCs have been at the forefront of professional management accounting innovations. Two related offshoots of the BSC are strategic performance measurement systems and key performance indicator (KPi) systems that incorporate nonfinancial and financial measures linked to organizational strategy. Therefore, other studies that report the impacts of these systems are referenced as BSCs in this study.

A key innovation of BSCs is multiple, strategically linked measures that improve business performance, as opposed to traditional systems that focus primarily on financial metrics. Combining nonfinancial (nontraditional) and financial (traditional) measures enables a company to evaluate performance and, theoretically, improve employee/manager satisfaction, production efficiency, customer satisfaction, and, ultimately, long-term financial performance.

Prior literature suggests that for a BSC to produce optimal performance, a number of factors must be part of the system. Our study focuses on two factors: information usefulness and managers' support of the system. Employees must feel that the system provides useful information. Theresa Libby, Steven Salterio, and Alan Webb found that improving the perceived quality of performance measures increased managers' reliance on those measures. (1) if managers perceive that measures lack quality, their attitudes toward the system and support for its use is negatively affected, and they will not incorporate the information into their decision making. (2) Consequently, the organization will not obtain the benefits expected from the BSC.

Our study examined whether the characteristics of a BSC do indeed impact managers' attitudes, organizational functioning, and financial performance. We administered an Internet-based survey to store-, district-, and regional-level managers of Wildcat, Inc., a retailer. (3) Wildcat's management was highly supportive of this project, as reflected in the survey's participation rate of more than 72%. Specifically, we used the survey responses to assess managers' attitudes toward the BSC, its benefits, and the impact it has on the organization.

We found that Wildcat's managers perceive that the BSC is generally beneficial, and they report a positive attitude toward it. …

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