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The Link between Perception of BSC Implementation and Corporate Strategy andIts Impact on Performance: A Contingency Approach

Majidul Islam, Ph.D., CGA*Associate Professor

Department of AccountancyJohn Molson School of Business

Concordia UniversityMontreal, Canada H3G 1M8

514-848-2424/Ext: 2235

Email: [email protected]

I acknowledge gratefully the funding from the SAP-CAAA Research Grant program I appreciate very much the comments by Emilio Boulianne of Concordia University and

Zahirul Hoque of La Trobe University on an earlier draft of the paper.

This is a preliminary version of the paper.Please do not quote or reproduce without

permission of the author.

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The Link between Perception of BSC Implementation and Corporate Strategy andIts Impact on Performance: A Contingency Approach

ABSTRACT: Behavioral aspects and positive attitudes toward the balanced scorecard (BSC)

could be a determinant factor in the success of BSC implementation. In the study we use the

contingency theory framework to examine whether adopting a planned strategy improves

employees buying into the BSC and helps to maximize the benefits of BSC implementation by

enhancing corporate performance. We hypothesize that employees attitudes and perceptions

towards the implementation of the BSC is contingent upon the type of strategy the firm is

employing and the suitability of deploying the BSC with this strategy in place. We use a path

model that draws an association between the firms strategy and employee attitudes towards BSC

implementation and employs OLS regression to test the association between the variables. We also

examine whether employees positive attitudes help to improve a firms performance as proxied by

the customer, internal processes, learning and innovation, and financial perspectives of the BSC.

We sent a mail survey to Canadian and US firms to collect the necessary data in order to conduct

this study.

Conforming to our expectations, we found that firms that carefully planned their strategic

objectives were more likely to have a positive impact on their employees perception of the BSC.

A deliberate strategyor planned strategyas defined by is associated with higher levels of BSC

awareness, perceptions of BSC ease of use, perceptions of BSC usefulness, and intentions to use

the BSC. We also found that higher perceptions of BSC ease of use were positively associated with

aspects of a firms performance, such as from the customer, internal processes, and learning and

innovation perspectives. Hence, we conclude that firms implementing the BSC need to take into

consideration that the successful implementation of the BSC requires careful planning to ensure

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that the firms strategic objectives are well formulated, in agreement with BSC measures, and

effectively communicated to BSC users.

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1. INTRODUCTION

Since Kaplan and Norton (1992) developed the balanced scorecard (BSC) for performance

and strategic management, the tool has gained prominence in industry and academic research. The

BSC relies on the interaction and the complementarities between four aspects of the firm

financial, customer, internal business, and innovation and learning perspectivesin order to drive

the firms future financial success in a sustainable manner. There is some empirical evidence that

firms who have implemented the BSC have achieved some form of success and enhanced financial

performance . Nevertheless, the difficulty in implementing the BSC has impeded companies, on

numerous occasions, from achieving the desired results . Also, it has been claimed that the

widespread adoption of nonfinancial measures is generally based on the idea that financial

measures are characterized by being narrow in focus and historical is nature and may be

aggregated and too unidimensional to be useful (e.g., Ittner et al., 2003; Lau and Sholihin, 2005;

DeBusk et al., Budde, 2007). Van der Stede et al. (2006) emphasized that performance measures

play a very important role in translating an organizations strategy into desired organizational

behaviours and consequent results, as well as in helping to communicate expectations, monitor

progress, provide feedback, and on the other hand, motivate employees who would be under the

BSC control system through performance-based rewards. The normative approach advocates that a

blend of measures drawn from the four scorecard perspectives would contribute towards

organizational performance (Kaplan and Norton, 1992, 1996). The technology acceptance model

(TAM) (Davis, 1989; Davis et al., 1989) examines employees behavioural issues and shows that

positive perceptions of the technologys ease of use and usefulness increases employees liking of

the technology and the likelihood that employees would use that technology. However, there is a

lack of evidence that shows that overcoming these behavioural issues would have a positive impact

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on performance (Chenhall, 2003). This study aims at filling that gap in the literature by examining

the link between employee acceptance of the BSC and firm performance.

emphasized the linkage between the different measurements of the BSC and the firms

strategy to promote the non-financial measures from a strategic operational point of view. In other

words, the mapping between the BSC and the firms strategy is fundamental for a successful

implementation. This means that a planned strategy that incorporates BSC measurescustomer,

internal business, and learning and innovation perspectivesis fundamental, since it ensures that

BSC objectives are well communicated to employees and guarantees their buy into the system.

Therefore, we believe that the success of deploying the BSC relies on the firms ability to

positively affect employees attitudes towards the BSC, which is contingent upon the type of

strategy the firm is employing and the suitability of deploying the BSC while this type of strategy

is in place.

However, the mapping between the BSC and strategy does not guarantee enhanced

performance, since other variables might also affect the usage of the BSC, such as competition or

cost structure . Therefore, in order to ensure a successful implementation, the firm also needs to

manage a fit between BSC usage and other internal and external variables. A critical issue is

whether score-based measures linked to the four perspectives can contribute to performance when

there is a corporate strategy that acclimatizes organizational performance. To the best of our

knowledge, this has not been examined in the management accounting literature. This study would

like to contribute to the literature by examining the link between BSC implementation and

corporate strategy and its impact on performance.

In this study, we first examine the effect of mapping between the firms strategy and the

balanced scorecard on employees acceptance of the BSC as a management control system. We

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hypothesize that firms that employ a planned strategy are more suitable to deploy the BSC, since a

planned strategy insures that BSC objectives are well communicated to employees, which

positively affects their attitudes towards the BSC. We also examine whether employee acceptance

of the BSC would lead to improved performance; a model is presented in Figure 1. We study a

sample of firms who implemented the BSC and assess the impact of having a deliberate strategy

on employee attitudes and behaviours towards the implementation of the BSC. We hypothesize

that a deliberate strategy that ensures proper implementation of the BSC will positively influence

employees attitudes towards BSC implementation, which will consequently have a positive

impact on firm performance.

The findings of this study would help explain and predict the likelihood that BSC

implementation would lead to improved performance. We also believe that this study provides a

validation to the TAM, as it shows that the behavioural aspect is an important factor in BSC

implementation, since it has an impact on performance. Further, it could also provide guidance to

firms on how they could make the most of BSC usage and maximize its expected benefits.

Section 2 provides a review of the literature and hypothesis development. Section 3

includes the sample description and the methodology used for our analysis. Section 4 is a

discussion of the research findings. Finally, the conclusion and research limitation are presented in

section 5.

2. THEORY AND HYPOHESES

The use of the BSC as a management control system is not a blueprint for success, since

different firms operate under different levels of uncertainty. The ability of the BSC to respond to

the firms level of uncertainty determines the success of the BSC as a management control system.

In order to respond to uncertainty, the contingency theory framework predicts that control systems

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would lead to improved performance if they acted in concurrence with other factors of the firms

internal and external environment (Hayes, 1977; Hirst, 1983; Govindarajan, 1984; Govindarajan,

1988). For one thing, Govindarajan (1988) found that firms that employed a differentiation

strategy achieved more success when they put less emphasis on meeting budgetary conditions in

comparison with firms that employed a low-cost strategy. In brief, mapping between the firms

strategyas well as other internal and external factorsand the control system used by the firm is

essential for a successful deployment of the control system.

Further, human resources factors have been cited as a major factor in the failure to deploy

management control systems (Chen and Jones, 2009; Johanson et al., 2006). The disengagement

between the firms strategy and the BSC might lead to lower levels of acceptance of the control

system, which harms rather than benefits performance. In this paper, we study this relationship

between the firms strategy, employee attitudes towards BSC implementation, and performance,

using a sample of firms who implemented the BSC as a tool for management control.

Employees attitudes towards balanced scorecard implementation and the firms performance

There have been many cases where firms have failed to put the BSC into operation, and

academic research has attempted to explore the factors behind failures . In a survey of 96 MBA

students, highlighted the importance of employee buy-into the BSC in order for the firm to

derive the expected benefits from implementation. They have found that the disengagement

between employees goals and those of the BSCin other words, goals set by their managersis

the reason for employee dissatisfaction. Further, they also found that BSC measures and benefits

are not well communicated to employees. criticize companies for employing a top-down approach

in BSC implementation that does not allow employee participation in the process. Therefore,

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employee involvement and attitude towards the BSC are major success factors of BSC

implementation.

Islam and Kellermanns (2006) examined an individual-level model similar to the TAM

developed by Davies (1989) that embraced behavioural issues that could enhance or impede BSC

usage inside the firm. They examined the association between four different factors and found that

employee awareness of the BSC capabilities led to a better perception of the BSCs ease of use and

usefulness. Further, perception about the BSCs ease of use was also associated with positive

perception of the BSCs usefulness. Finally, perception of the BSCs usefulness among employees

led to greater intention to use the BSC as a management control tool. Whether the findings of have

an impact on firm performance remains unknown.

Based on contingency theory framework, Chenhall (2003) predicted that positive

perceptions about the ease of use and usefulness of a management control system would lead to

better usage of the system, which would accordingly improve performance. Hence, we hypothesize

that the four behavioural issues examined by would influence firm performance following the

implementation of the BSC.

H1: Awareness of BSC capabilities is positively associated with firm performance.

H1a: Perception of BSC ease of use is positively associated with firm performance.

H1b: Perception of BSC usefulness is positively associated with firm performance.

H1c: Intention to use the BSC is positively associated with firm performance.

Strategy and employees attitudes towards balanced scorecard implementation

The association of management control systems with the companys strategy is well

documented in literature . In this reciprocal relationship, the firms strategy helps to define the type

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of control system required by the firm . In return, the control system provides the companys

management team with the necessary support for strategy realization.

Strategy is quite an abstruse term that many scholars have attempted to define. According

to , strategy goes through two phases: formulation and realization. He suggested that not every

formulated strategy ends up being implemented. On the other hand, a firm might realize a strategy

that results from regular daily operating decisions that end up building the firms strategy, which

he called emergent strategy. defined three types of firm strategies: a firm could use a defender,

prospector, or analyzer strategy. A defender strategy is based on maintaining stability through

continuous improvement of current products or services. Meanwhile, a prospector strategy is built

around a dynamic environment that favours innovation. The analyzer strategy falls halfway on the

defender-prospector spectrum. Similarly, has also defined three types of strategies: cost

leadership, differentiation, and focus.

Despite the differences, there is common ground between these definitions. According to ,

a defender strategy and a cost leadership strategy require a high level of planning with structured

and detailed control systems in order to achieve results. This draws a parallel with Mintzbergs

(1978) definition of deliberate strategy, a strategy that goes from a careful phase of formulation

into the implementation phase. Alternatively, claimed that prospector and differentiation adopter

firms prefer more flexibility and less formal control systems, as mandated by the dynamic

environment in which they operate. These types of firms may adopt an emergent strategy as

defined by , where the realized strategy is a result of the decisions made in response the changes in

the environment rather than a pre-planned process.

We suggest that firms adopting a deliberate strategy are more inclined to adopt a structured

management control system, including one such as the BSC. These firms would carefully plan the

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implementation of the balanced scorecard and ensure that the four elementscustomer, financial,

internal business, learning and innovationwere well embedded into the firms strategy. Further,

they would ensure that objectives were carefully communicated to employees. Hence, we

hypothesize that a deliberate strategy is positively associated with the four factors of BSC

implementation.

H2: A deliberate strategy is positively associated with awareness of BSC capabilities.

H2a: A deliberate strategy is positively associated with perception of BSC ease of use.

H2b: A deliberate strategy is positively associated with perception of BSC usefulness.

H2c: A deliberate strategy is positively associated with the intention to use the BSC.

Alternatively, firms following emergent strategies might have their objectives changing

constantly. If these firms adopted the BSC, they would find that they had difficulty in embedding

the four perspectives of the BSC into their strategy, since the strategy is continuously evolving.

Therefore, firms would not be able to rely on pre-defined measures of financial, customer, learning

and innovation, and internal processes, since their emergent strategies would require these

measures to evolve continually. Consequently, confusion could be created among the users of the

BSC and negatively affect their perception about the tool. Therefore, we hypothesize that an

emergent strategy is negatively associated with the four factors of BSC implementation.

H3: An emergent strategy is negatively associated with awareness of BSC capabilities.

H3a: An emergent strategy is negatively associated with perception of BSC ease of use.

H3b: An emergent strategy is negatively associated with perception of BSC usefulness.

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H3c: An emergent strategy is negatively associated with the intention to use the BSC.

Control variables

Govindarajan and Gupta (1985) suggested that a good mapping between the elements of

the firms external environment, the firms strategy, and its choice of control system would result

in better corporate performance. It is well documented that external variables are determinants of

the firms strategy; furthermore, there is also evidence that external variables would affect the

choice of the management control system. found that operating in a market characterized by

strong competition increased the need for formal control systems. Therefore, we believe that

external variables would affect the firms strategy as well as the choice and implementation of the

management control system.

Some internal characteristics of firms play a significant role in BSC implementation. For

example, found that differences existed between BSC adopters and non-adopters in terms of

information capital. They claimed that BSC adopters had more developed information systems that

enabled firms to process information in real time; thus, the adoption process was facilitated.

Further, information capital is part of the learning and growth perspective as defined by Kaplan

and Norton (1992), and an association between BSC objectives and strategy means that the firms

information system could be also a determinant of the firms strategy. Therefore, it is necessary to

control for some of the firms internal characteristics, since they might play a role in determining

the firms strategic choices and BSC implementation factors.

3. METHOD

Sample selection

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We collected data for this study by surveying individuals in management teams in

American and Canadian companies. The list of companies was obtained using the Dunn and

Bradstreet database. We sent the survey questionnaires to 800 companies by mail in November

2008. We followed up with phone calls two weeks after the mailing date. The survey consisted of

questions about the firms internal processes, external environment, strategy, balanced scorecard

perceptions, and corporate performance. In most of the questions, the respondent showed his level

of agreement with the subject by using a seven-point Likert-scale. See Table 1 for details. The

survey ensured that all respondents were kept anonymous.

We received 91 responses, representing an 11.4% response rate. Of the responses, 63

indicated that they had used the balanced scorecard. The main reason for the low response rate was

that the firms management was busy managing the economic depression at the end of 2008. Other

reasons for not answering the survey included company policy on not responding to surveys and

the unavailability of the contact person.

Definition of variables

Table 1 shows the measures that we used to proxy for the different variables employed in

this study.

Corporate performance: We used a large number of indicators to proxy for firm performance.

Since these indicators could be linked together, we employed factor analysis to reduce the number

of indicators for performance. The study examined the four dimensions of performance as

described by : financial, customer, internal business, and innovation and learning. Measures of

firm performance are presented in Table 1.

BSC implementation factors: As was previously mentioned, we adopted the four measures

developed by to proxy for the different behavioural factors affecting the implementation of the

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BSC. These factors were awareness of BSC capabilities, perceptions of BSC ease of use,

perceptions of BSC usefulness, and intentions to use the BSC. Measures of BSC implementation

factors are presented in Table 1.

Firm strategy: We examined one characteristic of firm strategy as defined by Mintzberg (1978):

whether the firms realized strategy was a result of a pre-formulated strategy (i.e., deliberate

strategy) or whether it was an outcome of a management decision-making process in response to a

changing environment (emergent strategy). The survey asked the respondents to describe whether

the firms strategy was planned in advance or whether it was formulated over time. Measures of

the firms strategy are presented in Table 1.

Internal factors: We examined the firms capabilities and characteristics such as the extent of use

of information systems, productivity, employee retention, product development, and market

performance.

External factors: In terms of external factors, we examined the level of competition in the firms

market, legal environment, changes in consumer demands, and product life cycle.

Tests

We performed OLS regression to test the relation between the variables, as indicated in

Figure 1.

4. RESULTS

Table 2 summarizes the results of the factor analysis that was performed to define the

different constructs of BSC awareness, perception of BSC ease of use, perception of BSC

usefulness, intention to use BSC, strategy, financial perspective, customer perspective, internal

business perspective, and innovation and learning perspective. Table 1 shows the definition we

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employed for the internal and external characteristics of the firm. For the internal characteristics

we asked the respondents to report on the emphasis placed by their firm on the introduction of new

products, gain of market share, productivity, and employee retention. We also assessed the firms

information system capabilities and controlled for firm size. As for the external environment in

which the firm was operating, we asked the respondents to assess changes in product,

manufacturing, and information technologies and product life cycle. We also asked them to assess

the threats made by changes in customer preferences and the legal, political, and social

environment. Table 3 presents the Pearson Correlation between the different variables.

It should be mentioned that the customer perspective reported in Table 2 had two

components. The first component was associated with the introduction of new products; hence, it

is called New Products. The second factor, called Customer Satisfaction, was related to

customer satisfaction measures and product quality. The strategy construct also had two

components. The first component reported in Table 2 loads positively on measures of Deliberate

Strategy and loads negatively on measures of Emergent Strategy. The second component

loaded on one measure of Emergent Strategy. We retained the first component, since it provides

an explanation for 43% of the variation in strategy measures and since the interpretation of that

component is in agreement with our expectations. The second component is not reported on in this

study. The higher the values of the strategy construct, the more the firm was inclined towards the

adoption of a Deliberate Strategy, and the lower value of that construct meant that the firm

tended to adopt an emergent strategy.

Discussion of the correlation matrix

Regarding the correlation between the different variables, Table 3 shows that there is a

positive correlation between a firms strategy and the four factors affecting BSC implementation.

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This suggests that a deliberate strategy is associated with higher levels of BSC awareness,

perception of BSC ease of use, perception of BSC usefulness, and intention to use the BSC. The

high levels of correlation between the four BSC implementation factors may raise questions about

the co-linearity between the measurements. It might be possible that the users overall experience

with the BSC biases their assessment of the level of awareness of BSC capabilities, perceptions

about the BSC, and intention to use it. In other words, users who have a positive BSC experience

might be willing to provide a high evaluation regarding their level of BSC awareness, perception

of BSC ease of use, perception of BSC usefulness, and intention to use the BSC and vice versa. A

positive correlation between BSC ease of use and internal processes and innovation and learning

shows that BSC ease of use is essential to engage employees in using the BSC and improving

some aspects of a firms performance. However, it is the higher awareness of the BSC capabilities

that results in higher financial performance, as shown by the positive correlation between the two

variables.

Regression Analysis

Results show that the firms internal characteristics do tie in with our definition of firm

strategy; refer to Table 8. On the other hand, an examination of the firms outside environment

shows that firms that face increased market competition, higher changes in manufacturing

technology, and higher legal and political threats are more likely to adopt a deliberate strategy,

meaning that these firms plan their strategic actions more carefully and ensure that their plans are

implemented accordingly.

As predicted in H2 and H3, there is a positive association between the type of strategy used

and the BSC implementation factorsawareness, perception of ease of use, perception of

usefulness, and intention to use (refer to Table 5). This means that firms that adopt a deliberate

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strategy will likely positively influence the BSC implementation, and firms that adopt an emergent

strategy will be less likely to do so. A possible explanation for this finding is that the

implementation of the BSC requires a lot of preparation on behalf of the firm; therefore,

anticipation and early resolve on objectives facilitate the communication of the BSC capabilities to

the employees and ensure their buy-in.

Table 7 shows the association between the BSC implementation factors and the external

variables of the firms environment. The models for BSC Awareness, Perception of BSC

Usefulness, and BSC Intention to Use are all significant, meaning that, overall, these variables help

explain the variation in BSC implementation factors. The results show that firms that experience

large changes in their social environment are more likely to be associated with higher awareness of

BSC capabilities. Further, firms that experience continuous changes in consumer demands will be

more likely to see the BSC as a useful management control tool. Finally, changes in the legal and

political environment will likely promote employees intentions to use the BSC.

Table 6 shows the association between the internal characteristics of the firm and the BSC

implementation factors. Intuitively, firms that focus on the development of their information

systems are associated with higher levels of BSC Awareness. A probable explanation is that the

development of information systems helps communicate the BSC capabilities effectively to

employees. However, a developed information system does not ensure that the employees would

perceive the BSC as being easy to use or useful. Neither will it ensure that employees will use the

balanced scorecard. Firms with a focus on revenue-side activities, such as increase in market share,

would find the BSC more useful and would be much more willing to use it. A focus on market

share is also associated with higher BSC awareness but is not associated with BSC perception of

ease of use. Interestingly, firms associated with cost reduction activities, such as increasing

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productivity, are not in favour of implementing the BSC. A possible explanation is that the

implementation of formal control systems requires a lot of time and could be seen as being

counterproductive. A focus on increasing productivity means that employees are less aware of

BSC capabilities. They are less likely to perceive of it as a useful tool and less likely to use it.

Similar to the results of the study by (results are not reported), BSC perception of ease of

use and BSC perception of usefulness are associated with BSC awareness. BSC perception of ease

of use positively affects BSC perception of usefulness. Finally, BSC perception of ease of use and

BSC perception of usefulness positively affect BSC intention to use.

As shown in Table 4, the behavioural aspect of the employees towards BSC

implementation is associated with improved levels of performance, as predicted by H1. It seems

that ease of use is the most important factor that leads to improved performance. It is positively

associated with improved performance in the learning and innovation, customer, and internal

processes perspectives. Furthermore, awareness of the BSC capabilities is associated with higher

levels of financial performance. Inexplicably, awareness of BSC capabilities is negatively

associated with the internal processes perspective. Figure 2 summarizes our findings.

5. CONCLUSION

In this study we examined whether mapping between the firms strategy and management

control using the BSC had a positive impact on corporate performance. We focused on behavioural

issues affecting the implementation of the BSC in companies. We hypothesized that a fit between

strategy and the BSC would have an impact on the behaviour of BSC users, which could lead to

better results. We also controlled for the firms internal characteristics and external environment

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that could affect the choice of the firms strategy and the implementation of the balanced scorecard

as a management control tool.

We examined four behavioural factors that affect BSC implementation, which are BSC

awareness, perception of ease of use, perception of usefulness, and intention to use. Islam and

Kellermanns (2006) showed that these factors were interrelated and that awareness about BSC

capabilities was the first step that drove employees perception of ease of use and usefulness,

which in return increased the likelihood that employees would buy into the BSC and become more

willing to use it. Our study has confirmed these findings. We argue that the link between these

factors and the firms strategy would enhance employees understanding of BSC capabilities and

strengthen their view that the BSC could help the firm to improve; thus, it could lead to advancing

a firms performance. BSC implementation is a complex task that requires careful planning,

preparation, and thorough understanding. Hence, we expect those firms with clear and planned

strategiesdeliberate strategies, as defined by to be more successful in communicating BSC

capabilities and selling the BSC to their employees. Alternatively, firms with emergent strategies

do not have a clear strategic vision, and BSC implementation might cause confusion among the

users if they experienced continuously changing objectives.

In agreement with our expectations, we found that a planned strategy facilitated BSC

implementation, as it fostered employee buy-in of the control system. Employees of firms with

deliberate strategies were more likely to be aware of BSC capabilities, have better perceptions

about its ease of use and usefulness, and were more willing to use the tool. We also found that the

perception of BSC ease of use was the most important factor from which different performance

measures were derived. Our explanation is that employees awareness of BSC capabilities and

usefulness is essential but not enough to drive performance. It is employees perception that the

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BSC is easy to use that drives effectiveness, which leads to improvement in performance. Finally,

we found that the development of strong communication and information systems was vital for

BSC implementation, as it helped to increase awareness of BSC capabilities.

These findings could be interesting to firms implementing, or planning to implement, the

BSC, as it provides them with a perspective on how to maximize their benefits from using the BSC

as a management control system. We propose that firms provide employees with planned

objectives that embrace the different BSC measures and clear guidelines on handling the BSC in

order to eliminate possible frustrations that could occur during implementation and ensure

employee buy-in.

Limitation of the study

This is one of the studies exploring the survey data of the manufacturing companies who

are using the BSC. This study has tested some hypotheses, and the results are encouraging.

However, the results cannot be generalized, because there are some limitations of the study, and

further investigation is needed. We recognize that, during the period when the survey was

conducted, in 2008, the world economy, including that of the USA and Canada, was undergoing an

economic depression. Understandably, it may be argued that the survey period was not a normal

one, which could have caused the sample size to be small. The current study mailed out the survey

questionnaires to all types of companies at random, based on sales and industry description

criteria. The study result shows aggregate inferences for industries in general rather than for a

particular type of industry. The result of the use and implementation of the BSC could be different

depending on a type of industry, which requires further investigation. Future study for BSC

implementation and its implications on performance is required based on the industry-specific data

of the companies.

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Figure 1: Balanced scorecard implementation model

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InternalFactors

Strategy

ExternalFactors

BSCImplementationFactors

Performance

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Figure 2: Summary of Results

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Internal

CharacteristicsSizeSales from New ProductsMarketShare*Productivity*Information SystemsEmployee Retention

Strategy

Internal

CharacteristicsCompetition*Pr

oduct

TechnologyManufacturing

Technology*Information

TechnologyLegal

Environment*Customer

PreferencesProduct Life

CycleSocial Environment*

Awareness

PerceptionEase of Use

PerceptionUsefulness

Intention toUse

BSC Implementation Factors

Performance

Financial

Customer

InternalProcesses

Learning andInnovation

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Table 1: Measures of strategy, BSC implementation factors, performance, internal

and external factors

Strategy:

Please indicate your opinion about the following statements. StronglyStrongly

Disagree

Agree

1. We typically don't know what the strategic priorities of our business strategy should beuntil we engage in some trial and error actions.

1 2 3 4 5 6 7

2. My Organisation's strategic priorities is carefully planned and well understood before anysignificant competitive actions are taken.

1 2 3 4 5 6 7

3. Formal strategic plans serve as the basis for our competitive actions. 1 2 3 4 5 6 7

4. My Organisation's strategic priorities are typically not planned in advance but, rather,emerge over time as the best means for achieving our objectives become clearer.

1 2 3 4 5 6 7

5. Competitive strategy for my Organisation typically results from a formal business planningprocess (i.e., the formal plan precedes the action).

1 2 3 4 5 6 7

BSC implementation factors:

Measures of BSC Awareness

I know the feature of the balanced scorecard approach 1 2 3 4 5 6 7

I am aware of the cost of deploying balanced scorecard 1 2 3 4 5 6 7

I know the extent of benefits that can be derived by deploying the balanced scorecard 1 2 3 4 5 6 7

I dont know the type of business activities in which balanced scorecard information can bedeployed

1 2 3 4 5 6 7

Perceptions of BSC Ease of Use

The balanced scorecard approach is easy to learn 1 2 3 4 5 6 7

The balanced scorecard approach is clear and understandable 1 2 3 4 5 6 7

The balanced scorecard approach is easy to use 1 2 3 4 5 6 7

The balanced scorecard approach is flexible 1 2 3 4 5 6 7

The balanced scorecard approach is hard to follow 1 2 3 4 5 6 7

Perceptions of BSC Usefulness

Using balanced scorecard would improve company performance 1 2 3 4 5 6 7

Using balanced scorecard in the company would increase productivity 1 2 3 4 5 6 7

Using balanced scorecard would enhance effectiveness in the company 1 2 3 4 5 6 7

I find balanced scorecard would be useful in my company. 1 2 3 4 5 6 7

Intentions to use BSC

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Assuming I had access to BSC, I intend to use it 1 2 3 4 5 6 7

Given that I had access to BSC, I predict that I would use it 1 2 3 4 5 6 7

Performance:

With four (4) representing the industry average, please indicate your Organizations overallperformanceover the past 3 years in the following areas by rating it on a scale below ranging from one (significantlybelow average) to seven (significantly above average). If any of the following performance indicators isNOT currently used in evaluating your Organizations performance, please indicate by selecting zero (0)beside those specific performance indicators.

Significantly Significantly

Below Above

Notused

Average Average

Financial PerspectiveRate of return on investment (ROI) 0 1 2 3 4 5 6 7

Percentage of market share 0 1 2 3 4 5 6 7

Sales growth 0 1 2 3 4 5 6 7

Cash flow from operations 0 1 2 3 4 5 6 7

Customer Perspective

Product (or service) quality 0 1 2 3 4 5 6 7

Customer satisfaction with product/service delivery process 0 1 2 3 4 5 6 7

Percentage of sales from new products 0 1 2 3 4 5 6 7

Development of markets for new or existing products 0 1 2 3 4 5 6 7

Internal Processes Perspective

Comparative costs with similar unit of competitors (or service provider) 0 1 2 3 4 5 6 7

Decrease in percentage of waste and rework (or error correction) 0 1 2 3 4 5 6 7

Decrease in percentage of total cost to net sales (services or products) 0 1 2 3 4 5 6 7

Decrease in percentage of sales returns 0 1 2 3 4 5 6 7

Your companys budget for waste management 0 1 2 3 4 5 6 7

Learning and Innovation Perspective

Employee satisfaction 0 1 2 3 4 5 6 7

Investment in information technology/E-commerce 0 1 2 3 4 5 6 7

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Workplace relations 0 1 2 3 4 5 6 7

Employee health and safety 0 1 2 3 4 5 6 7

Employee training and development 0 1 2 3 4 5 6 7

Internal Variables:

1. Firm size:Annual Sales (Please check the relevant box)

Less than $ 100,000 $ 100,000 to $ 499,999

$ 500,000 to $ 999,999 $ 1 million or more

$ 100 million or more $ 500 million or more

2. Other factors:

Notused

Lowusage

Highusage

2. Percentage of sales from new products or services 0 1 2 3 4 5 6 73. Increase/change in market share 0 1 2 3 4 5 6 7

4. Employee productivity 0 1 2 3 4 5 6 7

5. Information systems capabilities 0 1 2 3 4 5 6 7

6. Employee retention 0 1 2 3 4 5 6 7

External Variables:

Negligibly intense Extremely intense

1. How intense is competition for market share 1 2 3 4 5 6 7

How stable is the technological environment facing your organisation?

Very stable (changing slowly) Very dynamic (changingrapidly)

2. Product technology (made or used) 1 2 3 4 5 6 7

3. Manufacturing technology (to make products orto provide services)

1 2 3 4 5 6 7

4. Information processing technology 1 2 3 4 5 6 7

During the past 5 years, the legal and/ or political compliance requirements for product or

service provision by your organisation have:

5. Remained about thesame

1 2 3 4 5 6 7 Have proliferatedgreatly

During the past 5 years, the tastes and preferences of your customers have become:

6. Much easier to predict 1 2 3 4 5 6 7 Much harder to predict

The expected life cycle of the products in your industry is:

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7. Very stable (changingslowly)

1 2 3 4 5 6 7 Very dynamic (changingrapidly)

How stable is the social environment (such as conservation, green movement) facing your firm?

8. Very stable (changing

slowly)

1 2 3 4 5 6 7 Very dynamic (changing

rapidly)

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Table 2: Results of Factor Analysis

Factor Analysis for the Attributes of Strategy Component Loading

Variance

Explained

(%)

We typically don't know what the strategic priorities of ourbusiness strategy should be until we engage in some trialand error actions.

-.480

42.9

My Organisation's strategic priorities is carefully plannedand well understood before any significant competitiveactions are taken.

.606

Formal strategic plans serve as the basis for our competitiveactions.

.841

My Organisation's strategic priorities are typically notplanned in advance but, rather, emerge over time as the bestmeans for achieving our objectives become clearer.

-.622

Competitive strategy for my Organization typically resultsfrom a formal business planning process (i.e., the formalplan precedes the action).

.672

Factor Analysis for the Attributes of BSC Awareness Component Loading

Variance

Explained

(%)

I know the feature of the balanced scorecard approach .931

74.1

I am aware of the cost of deploying balanced scorecard .893

I know the extent of benefits that can be derived bydeploying the balanced scorecard

.931

I dont know the type of business activities in whichbalanced scorecard information can be deployed

-.658

Factor Analysis for the Attributes of Perception of

BSC Ease of UseComponent Loading

Variance

Explained

(%)

The balanced scorecard approach is easy to learn .903

75.1

The balanced scorecard approach is clear andunderstandable

.919

The balanced scorecard approach is easy to use .863

The balanced scorecard approach is flexible .878

The balanced scorecard approach is hard to follow -.760

Factor Analysis for the Attributes of Perception of

BSC UsefulnessComponent Loading

Variance

Explained

(%)

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Using balanced scorecard would improve companyperformance

.949

86.3

Using balanced scorecard in the company would increaseproductivity

.896

Using balanced scorecard would enhance effectiveness inthe company

.926

I find balanced scorecard would be useful in my company..944

Factor Analysis for the Attributes of BSC Intention to

UseComponent Loading

Variance

Explained

(%)

Assuming I had access to BSC, I intend to use it .9590.2

Given that I had access to BSC, I predict that I would use it .95

Factor Analysis for the Attributes Financial

Perspective Component Loading

Variance

Explained(%)

Rate of return on investment (ROI) .823

48.9Percentage of market share .648

Sales growth .561

Cash flow from operations .737

Factor Analysis for the Attributes Customer

PerspectiveComponent Loading

Variance

Explained

(%)

NewProducts

CustomerSatisfaction

57.8Product (or service) quality .138 .838

Customer satisfaction with product/service delivery process -.232 .553

Percentage of sales from new products .632 -.329

Development of markets for new or existing products .838 .137

Factor Analysis for the Attributes of Internal Processes

PerspectiveComponent Loading

Variance

Explained

(%)Comparative costs with similar unit of competitors (orservice provider)

.57441.4

Decrease in percentage of waste and rework (or errorcorrection)

.770

Decrease in percentage of total cost to net sales (servicesor products)

.737

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Decrease in percentage of sales returns .593

Time to market (make available to public) new products .560

Your companys budget for waste management .593

Factor Analysis for the Attributes of Learning andInnovation Perspective Component Loading

Variance

Explained(%)

Employee satisfaction .568

54.2

Investment in information technology/E-commerce .786

Workplace relations .617

Employee health and safety .810

Employee training and development .857

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Table 3: Pearson Correlation

Strategy

BSC_Awarness

BSC_Ease_of_Use

BSC_Usefulness

BSC_Intention_to_Use

Financial

Customer_New_Produc

t

Customer_Satisfaction

Internal_Processes

Learning_Innovation

Strategy 1

BSC_Awarness.562**

1

BSC_Ease_of_Use.465**

.610**

1

BSC_Usefulness.466**

.895**

.680**

1

BSC_Intention_to_Use.477**

.777**

.698**

.827**

1

Financial .309* .334* 0.275 0.252 0.223 1

Customer_New_Product -0.182 -0.023 0.295 0.006 -0.047 0.013 1

Customer_Satisfaction 0.155 0.116 0.148 0.157 0.209 0.182 0 1

Internal_Processes 0.078 -0.041.404**

0.012 0.037 0.235.599**

0.166 1

Learning_Innovation 0.123 -0.073.451**

-0.105 0.027 0.267.605**

-0.05.693**

1

Size 0.129 0.266.

399**0.183 .340*

.

414**-0.125 -0.071 -0.04 0.203

Sales from New Products 0.022 -0.021 0.232 0.098 0.039 -0.013 0.064 -0.181 0.274 0.252

Market Share 0.143 0.241 -0.107 0.303 0.097 .338* 0.036 0.05 -0.026 0.064

Productivity -0.02 -0.181 -0.106 -0.06 -0.276 -0.043 0.117 0.083 0.094 0.185

Information Systems 0.176 .392* 0.107.418**

0.153.477**

0.068 0.036 0.24 0.204

Employee Retention 0.141 -0.016 -0.101 0.066 0.095 0.237 -0.135 0.207 0.092 0.141

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Competition.471**

.422**

0.11.413**

.366* 0.005 0.096 0.047 0.167 0.201

Product Technology 0.21.471**

0.106.448**

0.27 0.257 -0.065 -0.046 0.007 0.015

Manufacturing Technology .313*.480**

0.205.488**

.477**

.310* 0.107 0.063 0.106 0.148

Information Technology 0.238 .291* 0.285 .332* 0.281 0.152 0.206 -0.138.455**

.480**

Legal Environment 0.219 0.084 0.066 -0.031 0.082 0.021 -.314* 0.046 -0.039 -0.122

Customer Preferences .274*.509**

0.138.536**

.283* -0.108 0.032 -0.043 -0.199 -0.144

Product Life Cycle 0.213.

413**-0.024

.

408**0.198 0.193 0.056 -0.008 -0.043 0.036

Social Environment 0.119.396**

0.181.393**

.300* 0.178 .299* 0.127 0.097 0.1

Size

SalesfromNewProducts

MarketShare

Productivity

InformationSystems

EmployeeRetention

Competition

ProductTechnology

ManufacturingTechnolog

y

InformationTechnology

LegalEnvironment

CustomerPreferences

ProductLifeCycle

SocialEnvironment

Size 1

Sales from New Products -0.082 1

Market Share -0.068 -0.11 1

Productivity -0.233 .318* .637** 1

Information Systems -0.153 0.042 .483** 0.12 1

Employee Retention -0.077 .292* .411** .459** 0.231 1

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Competition -0.009 0.158 .394** 0.26 0.293 0.12 1

Product Technology 0.135 0.044 .311* -0.034 .351* 0.279 .314* 1

Manufacturing Technology 0.169 0.037 .307* -0.011 0.241 0.16 .395** .677** 1

Information Technology 0.199 0.257 0.122 0.044 .309* 0.248 .415** .466** .471** 1

Legal Environment 0.036 0.084 .344* 0.021 .357* 0.165 0.158 0.004 -0.23 -0.063 1

Customer Preferences -0.056 0.068 0.19 0.027 0.204-0.119

.348** .415** .421** 0.146 -0.159 1

Product Life Cycle -0.043 0.019 .433** 0.103 .414** 0.288 .395** .700** .614** .331* -0.047.420**

1

Social Environment -0.081 0.015 .379* 0.118 .391* 0.293 0.257 .414** .463** .330* -0.004.358**

.385** 1

***p < .01 (2-tailed), **p < .05 level (2-tailed), *p < .1 level (2-tailed)

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Table 4: Results of Performance regression on factors affecting BSC implementation

Financial Perspective Customer Perspective Internal Processes

Perspective

Learning and

Innovation

PerspectiveNew Products Customer Satisfaction

R2 F R2 F R2 F R2 F R2 FBSC Awareness .731*

.180 2.147*

-.231

.096 .983

-.296 .044 .430 -.808*

.275 3.225**

-.380

.312 3.848**

Perception of BSC

Ease of Use.081 .406* .153 .697*** .719**

Perception of BSC

Usefulness-.327 .173 .140 .375 -.278

BSC Intention to Use -.030 .032 .269 .282 .529


Table 5: Results factors affecting BSC implementation on Strategy

BSC Awareness Perception of BSC Ease of Use Perception of BSC Usefulness BSC Intention to Use

R2 F R2 F R2 F R2 FStrategy .526*** .316 22.6*** .338*** .216 12.12**

*.39*** .218 12.79**

*.394*** .228 13.845***


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Table 6: Results factors affecting BSC implementation regression on Internal Factors


R2 F R2 F R2 F R2 FSize .032

.3752.897*

*

.096

.124 .638

-.099

.375 2.695**

.025

.275 1.775

Sales fromNew Products

.063 .107 .153 .099

Market Share .407** .002 .405** .297**

Productivity -.466** -.036 -.398** -.462*

InformationSystems

.282* .031 .226 .018

EmployeeRetention

-.148 -.087 -.164 .127


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Table 7: Results factors affecting BSC implementation regression on External Factors


R2 F R2 F R2 F R2 FCompetition .198 .433 3.434*** -.042 .189 .901 .116 .39 2.71** .276 .197 2.321**

ProductTechnology

.108 -.063 .050 -.023

ManufacturingTechnology

.202 .207 .147 .39**

InformationTechnology

-.009 .238 .054 -.054

LegalEnvironment

.127 .137 .048 .116

CustomerPreferences

.266 .129 .288* .001

Product LifeCycle

-.043 -.198 -.019 -.151

SocialEnvironment

.074* .039 .049 .081


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Table 8: Results of Strategy regression on Internal Factors

Strategy

R2 FSize .001

.088 .548

Sales fromNew Products

.027

Market Share .101

Productivity -.140

InformationSystems

.204

EmployeeRetention

.012


Table9: Results ofStrategy regression on External Factors

Strategy

R2 FCompetition .356*

.386 3.064***

ProductTechnology

-.175

ManufacturingTechnology

.306*

Information

Technology

.076

LegalEnvironment

.301*

CustomerPreferences

.220

Product LifeCycle

-.026

SocialEnvironment

-.119


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