The Critical Barriers to the Balanced Scorecard Successful Implementation: Airlines Perspective

Abstract

Both prior literature and reported managerial practices have claimed that the Balanced Scorecard (BSC) is a management tool that can help organizations to effectively implement strategies. Despite its worldwide popularity and its recognition as a powerful management tool, the BSC is not always used successfully. Although many organizations have adopted the BSC, a great number of them have encountered problems when trying to introduce the concept in their business. The purpose of this paper is to explore the critical barriers and threats which may cause the BSC initiatives to fail in the airline industry. Moreover, the research aims at identifying the areas with the critical measures which are difficult to be applied and need more attention during implementing the BSC. In order to achieve this, a questionnaire form is designed and distributed, 312 questionnaires in 104 airlines companies, through e-mail, 205 valid forms have been returned back with a response rate of 65.7%. Based on the study results, the usage of common measures among the performance measures perspectives during the BSC implementation indicates that the most common measures found are in the financial perspective, then with less common usage are the measures in the customer perspective and learning and growth, while quite far away are the measures used in the internal business processes perspective. In addition, the results reveal that the most critical barriers associated to implementing the BSC are "common measure bias" and "obese and static nature". Furthermore, the results show that-ambiguous validity of the cause and effect relationship barriers‖ and-general requirements barriers‖ have achieved a moderated negative effect. On the contrary, the barriers "strategic control", "cultural barriers", and-matching barriers‖ are ranked as the least critical barriers. In today's world, businesses are in search for alternative management systems in order to have an effective performance system. One of the strategic management tools used in the name of an effective performance management is called the Balanced Scorecard (BSC). The BSC method was proposed by Kaplan and Norton in 1992. (1) The BSC developed by (Kaplan and Norton, 1992) is the most popular framework in the area of performance measurement. The introduction of the BSC has been mainly based on a transition from the traditional financial performance measurement systems towards a more balanced approach (financial and non-financial measures) that includes several measures in a multi-dimensional structure. (2) Furthermore, many researchers argue that the BSC is a major performance measurement system for many industries because it provides a broad performance measurement of both financial and non-financial perspectives. (3,4, 5) Also, the study of Frigo and Krumwiede has concluded that the BSC method has experienced an increase in popularity as a performance measurement system for translating an organization's mission into goals, aligning individual and organizational goals and actions and performance measures, and measuring processes related to goal achievement. (6) In addition, the BSC is one of the most highly rated management tools today. (7,8) The BSC, which refers to the measurement method driving future performance, is a set of performance evaluation tools developed to accomplish the corporate vision and strategy. Through its four dimensions, i.e., financial, customer, internal business processes, and learning and growth, the BSC assesses the organizational operational performance, integrates the internal physical and intangible assets of the enterprise, and expects to establish a strategic performance evaluation system in accordance with cost efficiency. (9)