Critical analysis of articles: The case of implementing balanced scorecard in the University of Pretoria, South Africa - Iloka Benneth Chiemelie

0.1 INTRODUCTION

     They have been clear recognition of the limitations imposed by financial data as the basis for decision making in organizations (Dearden, 1969), and same is applicable to non-financial data in providing improved decision (Committee on Non-Financial Measures of Effectiveness, 1971). The issue is how to identify appropriate sub-set for all possible non-financial measure. During the 1980s, it was argued that choice of non –financial measure can be informed and justified by an organization’s policies (Gupta and Govindarajan, 1984; Johnson and Kaplan, 1987; Dixon et al., 1990). This observation was visible with an emerging awareness of the existence of formal control measures in organisations – associated particularly with the control of strategic activity (Green and Welsh, 1988).

      In response to those various factors was the balanced scorecard: a simple but initially rather vague concept (Kaplan and Norton, 1992) that has become well known and adopted in various forms (Rigby, 2001, 2003). Balanced scorecard was presented as an integrative device that encourages and facilitates the use of non-financial information by organization’s managements, with the choice of non-financial information being driven by “strategic” consideration in accordance to a review by Kaplan and Norton. Both writers argued that when equipped with this information, organizations would be able to deliver a better strategic performance (Kaplan and Norton, 1992, 1993). The importance and focus of balanced scorecard was also presented as valuable with respect to effective and efficient communication priorities within an organization (Kaplan and Norton, 1992). It was expected to improve performance of workers within the organization. It has been found that balanced scorecard offers significant merits from recent testing of the above observation (Malina and Selto, 2001; Lipe and Salterio, 2000).

     Surprisingly, Kaplan and Norton did not provide a clear definition for balanced scorecard, instead focusing on their uses and how it can be applied with attribution to an organization. Balanced scorecard can be defined as a measure of financial and non-financial measure, related to specific strategic goals – usually documented in tabular form with one or more measures associated with each goal (Kaplan and Norton, 1992, 1993, 1996). The figure one below illustrates an example of Kaplan and Norton’s original balanced scorecard design.

   Thus, the main objective of this paper is to identify how the balanced scorecard can be used to implement strategic plans within an organisation, in particular references to the academic information services in the University of Pretoria, South Africa. This paper is divided into four parts, the first being the introduction shades light on the objectives of the paper with relevant definition. Summary of the article is the second part, it summarizes the articles to be critiqued and the part is the critique. The critique section has been identified as the main body of this paper, it includes relevant citation and provisional evidence to all point highlighted for or against the points contained in the article. Person evaluation and conclusion bring the paper to its end point with relevant suggestion for future research related to the same topic, and summary of all the discussed contexts.

1.0 SUMMARY OF ARTICLE

     This article is based on implementation of Balanced Scorecard model for facilitating strategic management at the Academic Information Service (academic library) of the University of Pretoria, South Africa.

     In the introduction, the writers highlighted the need for a different management approach as a necessity for the Academic Information Service. To re-position themselves within the University of Pretoria and the profession as a whole, a new strategic management approach was needed. Meanwhile, the Academic Information Service has been undergoing transformation for the last couple of years, and to be appreciated this transformation has to be viewed from the “new science” management philosophy as proposed by Margaret Wheatley (1994). Contrasting with the older view, which regarded information as a product generated by activities of the organization itself, the new science philosophy regarded information a dynamic force proving order, growth and definition to the organization and not a reaction to happenings within the organization. For a clear understanding by the reader, the advantages of this new science approach was stated to include: continuous generation of information within the organization, unrestricted flow of information within parts of the organization, and responsive and open system – which form the focal point of the new information management strategies implemented in the Academic Information Service, of which the Balanced Scorecard is one (Pienaar et al., 1999). In concluding the introduction, it was stated that the Academic Information Service of the University of Pretoria, South Africa is using the Balanced Scorecard to facilitate strategic management in two complementary ways, which includes:

• To identify and implement a strategic vision and strategic and operational objectives;
• To facilitate the strategic management process.

     The body of the article provides a theoretical explanation on how the Balanced Scorecard was developed by Kaplan and Norton in 1990 followed by outline of the implementation of the Scorecard on both the strategic and operational levels. From the literature, Kaplan and Norton are of the opinion that Balanced Scorecard has its greatest impact when deployed to facilitate organizational change. The writer offers a definition of Balanced Scorecard as a management system that bridges the gap between strategic objectives set at the senior level within an organization, and their operational execution.

     One prerequisite for implementing the Balanced Scorecard is that it must be changed, or adapted to suit a specific organization (Campbell, 1997). On the strategic level, the Balanced Scorecard transforms organizations goals and strategies into a comprehensive performances measure that provides steps for strategic measurement and management system. The Academic Information Service embarked on the implementation of the Balanced Scorecard in 1997 and has a project leader in the person of the internal consultant who facilitates the process of developing and implementing the project. The use of virtual information service as a short medium term to identify and describe a strategic vision that would focus the information service’s staff and resources was the first step taken by the Academic Information Service. Balanced Scorecard was seen as one of the mechanism for the transformation to a virtual information service. 

Figure 1

     In 1998, as part of the University of Pretoria’s overall renewal strategy, the academic information Service was evaluated by a high level committee consisting of stakeholders from the profession and University. A business consultant acted as facilitator. After the evaluation, the report was submitted to the University Rector who suggested that a business renewal-plan be drawn up. As the Academic Information Service has by then started using the Balanced Scorecard by then, and as the idea has been welcomed by the staff members. The director and senior staff decided to use the Balanced Scorecard in drawing up the renewal-plan. The renewal plan was done in a three year format, and revised, updated and expanded at the end of each year. A special focus-area was identified for every individual year, for instances 1999 focused on World Wide Web this is to ensure that certain strategies would be achievable within given dates. Four questions asked by the Balanced scorecard where use to ensure that each strategies are meet as required. Some examples of how the four perspectives for formulating and aligning strategic objectives to the strategic vision in the Academic Information Service are as follows:

• The customer perspective asks the question: How should the Academic Information Service appear to their customers in other to achieve their vision?
• The internal perspective asks: To satisfy their customers and stakeholders, what business processes must be perfected?
• The learning and growth perspective asks the question: How will the Academic Information Service sustain their ability to change and improve in other to achieve their set vision?
• Finally, the financial perspective asks the question: How should Academic and information Service appear to their stakeholders, in other to succeed financially?

     On the other hand, operational implementation of the Scorecard in the Academic Information Service suggests that successful strategic management implies effective implementation of strategic objectives on the operational level. The transformation process at the Academic Information Service involved a major structural change which consists of a flexible project-based network organisation comprising groups and team, namely: service team, support team, strategic management team, and supply team all of which form essential components of this network. Series of workshops where held in order to create awareness of the overall organisational strategy to all members of the organization. The workshops operated as follows:

• As an introduction to the concept and practical implications possessed by the implementation of the Scorecard.
• As a new step in establishing a firm’s theoretical knowledge of the Balanced Scorecard.
• Member of the unit where divided into groups of four and asked to create their own prototype of the Balanced Scorecard representing each unit. Each group were asked to explain their view of the designed prototype.

     As recommended by Kaplan and Norton, the new version of the Renaissance Balanced Scorecard software that enables user to transform strategies into action by comparison and detailed definition was suggested to be used by the Academic Information Service. Due to the success of the workshop the Academic Information Service developed their own Balanced Scorecard within a year, but the implementation was said to be limited due to the financial requirements involved.

     In conclusion, the writer pointed out the four steps involved in using Balanced Scorecard as a support to strategic management process as follows:

• Clarify and translate vision and strategies.
• Communicate to employees the critical objectives to be achieved is the organization’s strategy is to succeed.
• Plan and target strategies to the organization’s vision.
• Set a feedback program that reviews the stages undertaken and the outcome from each stage.

2.0 CRITIQUE OF SUMMARIZED ARTICLE

     The transformation from industrial to information age has signalled increase in sophisticated customers and management practice, escalating globalisation, making differentiation more prevalent and enhanced employee empowerment as well as intellectual emphasis (Johnson and Kaplan, 1987; Eccles, 1991; Kaplan and Norton, 1992; Hope and Hope, 1997; Huckstein and Dudoff, 1999; Brander and Atkinson, 2001). New multidimensional performance measures have replaced the conventional financial oriented metrics with non-financial metrics that focus more on new managerial imperatives. The balanced scorecard performance management tool, although low in empirical testing of its merits (Bourne et al., 2002, 2003; Norreklit, 2000; Speckbacher et al., 2003) has been argued to be a dominant framework in performance management (Marr and Schiuma, 2003; Smith, 2005).

     Thus, based on the theoretical evidence above, it is logical to concur with the idea that balanced scorecard can enhance both strategic and operational management in academic information service as highlighted in the summarized article with particular reference to the University of Pretoria, South Africa.

     It is still the case that over two and half decade since Alexander (1985) bemoaned the lip services paid to research into strategy implementation, there is still an imbalance between the importance and formulation of apparent strategic measurements (Al Ghandi, 1998; Okumus and Roper, 1999; Okumus, 2001). Yet the main weakness of strategic management practices has shown significant association with the implementation stage. Mintzberg (1994) revealed that more than half of the strategies developed by organizations are not actually implemented. Recent articles has confirmed barriers to successful implementation of strategies to comprise: laissez-faire senior management style; unclear objectives and conflicting priorities; an ineffective senior management team; poor communication; weak function co-ordination; and inadequate development of goal oriented management skills (Beer and Eisenstat, 2000). Shared vision and consensus has been recognised as a requirement for such changes (Beer et al., 1990).

     The main role of strategic control is to ensure that the effort put into preparing lengthy and detailed strategic plans is actually actionable (Bungay and Goold, 1991, p.32). Strategic systems provide short-term targets and delivers long-term goals. Strategic control systems are required to provide equity between long-term organisational goal and short-term operational demands (Bungay and Goold, 1991). However, it has to incorporate both pre- and pos-task information, thus enabling mangers to know the degree of their progress, while providing adoption opportunities and revise strategies when necessary (Goold and Quinn, 1990; Goold, 1991; Otley, 1999; Tavakoli and Perks, 2001). This makes successful strategy implementation dependent on strategic, as well as control systems.

     It can be seen that there is a need to establish co-ordinated strategic and management control system that incorporates both financial and non-financial performance indicators. Furthermore, this system should be flexible enough to deal with increasingly competitive and dynamic environments. It has been argued that strategic implementation will not be possible without such system. The balanced scorecard has been suggested as the new performance management framework, because it forms the basis of strategic control system and providing vital link between strategy and action, and assisting organisations in achieving effective strategic implementation.

     Taking into consideration, the time (1998 as contained in the article) that the balanced scorecard was implemented as a renewal strategy, in the academic information service, University of Pretoria, South Africa. There is no doubt that it is the only model that can handle the task with the use of the four perspectives of the balanced scorecard as shown in figure (2) above, for both strategic and operational purposes.

     The balanced scorecard (Kaplan and Norton, 1992) has been widely recognised and used (Marr and Schiuma, 2003). Many years ago, it was reported as being used by 60 percent of Fortune 1000 companies (Silk, 1998). The balanced scorecard views and organisation from four perspectives, which organisation should articulate their main vision, strategy, and objective goals before they are translated into specific measure, targets and initiatives. Examples observed in other companies that have implemented the use of balanced scorecard include:

• Financial – it this generally involves profitability, return on investment, residual revenues, value added economies, increased sales, marketing position and shares as well as cash flows and other financial satisfactions.
• Customer – key objectives here, normally stresses on common customer concerns such as deliver time, service quality, cost, guarantee etc and the main focus is on customer satisfaction.
• Internal business – main goals and measure here includes critical competencies, processes and technologies that aid in current and future organisational success.
• Learning / growth – incorporating the other three perspectives, enhanced flexibility and investment for future development and new opportunities are highlighted ad the key goals (Atkinson, 2006, pp. 53-54).

Figure 2

     The figure (2) above, illustrates the four perspectives of the balanced scorecard and the way it is implemented in organisations. Thus, comparing the above for perspectives to the method used for implementing the balanced scorecard in the University of Pretoria for both strategic and operational purposes, it is noticeable that they were designed based on the four perspectives of the balanced card. Therefore, making the article, the arguments it presents and the task it was used to perform logically acceptable based on theoretical evidences provided above.

     Furthermore, the balanced scorecard specialises in management attention on performance drivers by explicitly encouraging both lead and lag indicators (Eccles, 1991; Fitzgerald et al., 1991; Atkinson and Brander, 2001). Through identifying pros and cons, important trade-offs between key goals and measures are highlighted, which is considered vital for recognising organisational priorities (Butler et al., 1997; Epstein and Manzoni, 19917; Moraj et al., 1991). Significantly enough, the balanced scored card is also capable of acting as a link between strategy and operation in organisations (Kaplan and Norton, 1996a, b; Atkinson and Brander, 2001).  

3.0 PERSONAL EVALUATION / CONCLUSION

     From the theories and evidences provides above, it is noticeable that the balanced scorecard enhance strategic management process, through designing a well-coordinated implementation procedures to meet business objectives. Though they are noticeable benefits of the balanced scorecard with references to the academic information services in University of Pretoria, South Africa, it is noteworthy to know that implementing the strategies with the balanced scorecard is expensive as the article highlighted. This is a weakness on the balanced scorecard because it would generally means that only firms that can afford the expenses can adopt the balanced scorecard, thus limiting the reliability of the benefits it can offer  because not all firms are examined as not all firms can afford to adopt the balanced scorecard.

     In conclusion, this study was designed to examine the usage and quality of academic information service in the University of Pretoria, South Africa, applying the balanced scorecard in strategic and operational implementation. The framework as developed by the academic information service serves as an exploratory case study through which the analysis was developed. The finding was that the University of Pretoria implemented the balanced scorecard following the four standards implementation perspectives.

The balanced scorecard was found to enhance the business issues including: organisational performance and successful strategy implementation. The study contributed to the theory of balanced scorecard as it provided theoretical evidence to support the idea that balanced scorecard can serve as a link between strategic and operational management in an organisation. Further it contributes to practitioners as they will have a system that will prove to be timely, cost effective, measurable, reliable, and manageable on their strategic performance. The balanced scorecard presents a holistic view of the firms by simultaneously examining its performance in a four perspectives view point, namely:  learning and growth, inter business process, financial and customer perspectives.

     Future research should apply these four perspectives to test the impact of balanced scorecard in their organisation, as well as developing a new method or approach towards the implementation of the balanced scorecard in business activities. 

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