Academic journal article Asian Social Science

An Exploration of Inclusion of Spirituality into the Balanced Scorecard (BSC) to Support Financial Performance: A Review

Academic journal article Asian Social Science

An Exploration of Inclusion of Spirituality into the Balanced Scorecard (BSC) to Support Financial Performance: A Review

Article excerpt


The BSC has been well accepted as a suitable tool for assessing and monitoring financial performance of organisations. Subsequently it has been embraced by organisations as financial and nonfinancial performance indicators that help organizations align their initiatives with the organization's strategy. However, the question of how the BSC can be enhanced to incorporate non-financial performance is still being raised. One of the important non-financial prospectives is the Spirituality. The goal of this paper is to review the recent research on Spirituality as nonfinancial performance indicator for the BSC. In this paper an overview of the BSC and its perspectives is given, providing a justification for the importance of non financial performance measures to overall organizational performance. The novelty of this paper is that through an elaborate discussion, Spirituality is proposed as a potential additional dimension that can enhance the BSC. Subsequently, the enhanced BSC would incorporate spirituality as an important dimension that affects employees as well employers, who are the key drivers of financial performance. Overall, the proposed dimension would strengthens the tool's efficiency and effectiveness.

Keywords: balanced scorecard, spirituality, non-financial perspective, financial performance

1. Introduction

Among the many performance management systems, the BSC is identified as one of those that require further research based on its previous record. It has a proven potential to influence enhancement of organisational performance and growth (Al-Zwyalif, 2012; Chen, Lee, & Mo, 2012; Li, 2011). In line with this, Kaplan (2012) makes important and insightful comments on BSC and strategy implementation while arguing against the usual academic commentaries of some experts on BSC; who often ignore its role in strategy execution.

The BSC was introduced in 1990 by Kaplan and Norton as a systematic tool for performance improvement of organisations, away from the classical methods through the use of measurements and indicators. In contrast to other tools, BSC links strategy of the organisations with their performance and this is usually done beyond determining the traditional financial measurement in the success of organisations. The BSC is based on four perspectives of performance measures, which are financial, customer, internal business processes, and learning and growth (Kaplan & Norton, 1996a; Kaplan & Norton, 1992; Niven, 2005).

It highlights the business processes, determinants of business success, as well as cause and effect relationships in relation to business strategy. It is primarily utilized as a tool to bring about formulation of strategy, its realization as well as its communication. Additionally, it also helps in keeping track of performance and in providing assessment feedback. The BSC system facilitates sustained focus and attention towards strategic initiatives and continuous review.

Besides the above, BSC's researchers have investigated various factors that drive organisational performance. One area that has not been given as much attention is the contribution of non-financial factors to overall organizational performance (Karun & Pilaipan, 2011).

Other studies suggested that spirituality can also play a vital role if it is incorporated in BSC (Fry, Matherly, & Ouimet, 2010; Pratoom & Cheangphaisarn, 2011; Ramli, 2006). Among them, Ramli (2006) developed BSC concepts from Islamic perspective tagged as the Hadhari scorecard. He considers Hadhari scorecard as a civilisation that promotes both material and the non-material (humane and spiritual) aspects of improvement to the classical Kaplan and Norton (1992) BSC. The author argues that the traditional BSC developed by Kaplan and Norton (1992) failed to execute the desired objectives it was designed for as documented by Kaplan and Norton (1996a). In the latter improvements in the BSC in 2004, Kaplan and Norton still mentioned that what was missing was the ability to communicate the strategy formulated to a larger workforce in organizations and addressing non-financial performance measures. …

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