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Balanced scorecard usage and organizational effectiveness: evidence from manufacturing sector

Balanced scorecard usage and organizational effectiveness: evidence from manufacturing sector
Balanced scorecard usage and organizational effectiveness: evidence from manufacturing sector

Purpose: this study aims to investigate the drivers and impact of balanced scorecard (BSC) usage on organizational effectiveness in manufacturing companies. The objectives of the paper were to assess the organizational factors affecting the usage intensity of the BSC; the relative benefits of BSC determining its adoption speed; and the extent to which BSC usage enhances organizational effectiveness. 

Design/methodology/approach: the study adopted a survey research design. Data collection was through a structured questionnaire administered on senior accounting/ finance personnel of 300 manufacturing companies that are members of the Manufacturers Association of Nigeria. Binary logistic regression analysis, discriminant analysis and structural equation modeling (maximum likelihood estimation method) were used to analyze survey data obtained from 104 BSC adopters. Findings: Result shows that the three organizational factors affecting BSC usage intensity are affiliation to a foreign entity, availability of specialist skills and business strategy (strategic pattern). The strongest predictor is, however, the availability of specialist skills. The strongest determinants of the BSC adoption speed are the need for financial stability and the importance of customer feedbacks. The impact of BSC usage on organizational effectiveness is positive, statistically significant but weak. The inability of BSC usage to contribute appreciably to organizational effectiveness is attributable to the lack of integration among the performance measures in the BSC framework and the shallow usage rate of BSC. 

Practical implications: although it is commendable that financial stability and customer satisfaction strongly drive BSC adoption speed, the low rating recorded by other factors related to product development, employee development and process improvement suggests that the performance measures in the BSC framework are not used in an integrative manner. This also confirms that the BSC, like other innovative management accounting techniques, is applied at a rudimentary level by organizations in Nigeria. 

Originality/value: the current study contributes to knowledge by exposing the organizational factors and relative benefits driving BSC adoption. It provides empirical evidence on why the BSC may not deliver the optimal benefit of improving organizational effectiveness despite its popularity and potential as an integrated performance measurement (IPM) apparatus that can add value to organizations. The paper adds to the scarce literature on IPM in developing countries. Drawing from the result that availability of specialist skills is the strongest predictor of BSC usage intensity, the practice of enmeshing the management accounting function with general accounting/finance should be discouraged.

Balanced scorecard, Competitive advantage, Integrated performance measurement, Management accounting innovation, Organizational effectiveness, Performance evaluation, Strategic management accounting
1368-3047
Oyewo, Babajide
36c93e4d-3041-4cef-8a0d-9f72f417e249
Moses, Olayinka
016017c1-6e05-45bf-a051-e10c8c9b8c8d
Erin, Olayinka
e11b7d80-ee4a-4b57-9ff0-9696407ba7b8
Oyewo, Babajide
36c93e4d-3041-4cef-8a0d-9f72f417e249
Moses, Olayinka
016017c1-6e05-45bf-a051-e10c8c9b8c8d
Erin, Olayinka
e11b7d80-ee4a-4b57-9ff0-9696407ba7b8

Oyewo, Babajide, Moses, Olayinka and Erin, Olayinka (2021) Balanced scorecard usage and organizational effectiveness: evidence from manufacturing sector. Measuring Business Excellence, (ahead-of-print). (doi:10.1108/MBE-01-2021-0005).

Record type: Article

Abstract

Purpose: this study aims to investigate the drivers and impact of balanced scorecard (BSC) usage on organizational effectiveness in manufacturing companies. The objectives of the paper were to assess the organizational factors affecting the usage intensity of the BSC; the relative benefits of BSC determining its adoption speed; and the extent to which BSC usage enhances organizational effectiveness. 

Design/methodology/approach: the study adopted a survey research design. Data collection was through a structured questionnaire administered on senior accounting/ finance personnel of 300 manufacturing companies that are members of the Manufacturers Association of Nigeria. Binary logistic regression analysis, discriminant analysis and structural equation modeling (maximum likelihood estimation method) were used to analyze survey data obtained from 104 BSC adopters. Findings: Result shows that the three organizational factors affecting BSC usage intensity are affiliation to a foreign entity, availability of specialist skills and business strategy (strategic pattern). The strongest predictor is, however, the availability of specialist skills. The strongest determinants of the BSC adoption speed are the need for financial stability and the importance of customer feedbacks. The impact of BSC usage on organizational effectiveness is positive, statistically significant but weak. The inability of BSC usage to contribute appreciably to organizational effectiveness is attributable to the lack of integration among the performance measures in the BSC framework and the shallow usage rate of BSC. 

Practical implications: although it is commendable that financial stability and customer satisfaction strongly drive BSC adoption speed, the low rating recorded by other factors related to product development, employee development and process improvement suggests that the performance measures in the BSC framework are not used in an integrative manner. This also confirms that the BSC, like other innovative management accounting techniques, is applied at a rudimentary level by organizations in Nigeria. 

Originality/value: the current study contributes to knowledge by exposing the organizational factors and relative benefits driving BSC adoption. It provides empirical evidence on why the BSC may not deliver the optimal benefit of improving organizational effectiveness despite its popularity and potential as an integrated performance measurement (IPM) apparatus that can add value to organizations. The paper adds to the scarce literature on IPM in developing countries. Drawing from the result that availability of specialist skills is the strongest predictor of BSC usage intensity, the practice of enmeshing the management accounting function with general accounting/finance should be discouraged.

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BSC AND ORGANISATIONAL EFFECTIVENESS Accepted Paper - Accepted Manuscript
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More information

Accepted/In Press date: 29 October 2021
e-pub ahead of print date: 3 December 2021
Keywords: Balanced scorecard, Competitive advantage, Integrated performance measurement, Management accounting innovation, Organizational effectiveness, Performance evaluation, Strategic management accounting

Identifiers

Local EPrints ID: 455600
URI: http://eprints.soton.ac.uk/id/eprint/455600
ISSN: 1368-3047
PURE UUID: 0b265d75-dd7b-43bb-a328-61ac2b4000f8
ORCID for Babajide Oyewo: ORCID iD orcid.org/0000-0002-4499-601X

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Date deposited: 28 Mar 2022 16:48
Last modified: 17 Mar 2024 04:08

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Contributors

Author: Babajide Oyewo ORCID iD
Author: Olayinka Moses
Author: Olayinka Erin

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