includes research articles that focus on the analysis and resolution of managerial and academic issues based on analytical and empirical or case research
Balanced Scorecard in Indian Companies
Manoj Anand, B S Sahay, and Subhashish Saha
KEY WORDS Performance Evaluation KEY WORDS Balanced Scorecard Privatization Performance Measures Indian Banking Standard Costing Efficiency Management Accounting Performance
There has been growing criticism of financial measures in performance evaluation system in postreform India as they are historic in nature and lack futuristic outlook. Their relevance in the information age, when the companies are building internal assets and capabilities, is questioned. The situation may worsen when the firm is compelled to pursue short-term goals at the cost of the organization’s long-term objectives. Kaplan and Norton developed an innovative and multi-dimensional corporate performance scorecard known as the Balanced Scorecard. It compels the firm to align its performance measurement and controls from the customers’ perspective, internal business processes, and learning and growth perspectives and investigate their impact on the financial indicators. There are arguments that the Balanced Scorecard should be ‘unbalanced’ based on the strategy followed by the firm. The corporate experiences with the implementation of the Balanced Scorecard suggest mixed results. In this article, the authors a) identify the extent of the usage of the Balanced Scorecard by corporate India; b) explore whether Indian firms use all the four perspectives, namely, customer, financial, internal business, and learning and growth in their performance scorecard; c) capture the management motivations for implementation of the Balanced Scorecard; d) identify the key performance indicators in different perspectives of the performance scorecard; and e) evaluate the performance of the Balanced Scorecard as a management tool. The major findings of this study are as follows: The Balanced Scorecard adoption rate is 45.28 per cent in corporate India which compares favourably with 43.90 per cent in the US. The financial perspective has been found to be the most important perspective followed by customers’ perspective, shareholders’ perspective, internal business perspective, and learning and growth perspective. The environmental, social, and employees’ perspectives also figure in it. The expense centre budgets, brand revenue/market share monitoring, profit centre, and transfer pricing mechanism are the other performance management tools used by the Indian companies. Corporate India monitors the indicators as per ISO 14000 norms in the environmental and social perspectives of the performance scorecard. The difficulty in assigning ‘weightage’ to the different perspectives and in ‘establishing cause and effect relationship among these perspectives’ has been found to be the most critical issue in the implementation of the Balanced Scorecard in corporate India. Most companies claimed that the implementation of the Balanced Scorecard has led to the identification of cost reduction opportunities in their organizations which, in turn, has resulted in improvement in the bottom line. Insights from such an analysis can be useful to both management practitioners and management accounting academics.
VIKALPA • VOLUME 30 • NO 2 • APRIL - JUNE 2005
he liberalization and globalization of the Indian economy in 1991 brought substantial changes in the levels of competition, production environment, and cost structure of firms and led to rapid development of advanced technologies. Corporate India was compelled to adopt contemporary management accounting techniques in order to ensure survival and maintain competitive advantage (Joshi, 2001). Performance evaluation is an integral part of management accounting (Emmanuel and Otley, 1995). While financial measures of industrial age environment...