International Journal of Business and Management
Vol. 5, No. 7; July 2010
Balanced Scorecard Implementation at Rang Dong Plastic Joint-Stock Company (RDP) Luu Trong Tuan National University of Ho Chi Minh City, Vietnam E-mail: firstname.lastname@example.org Sundar Venkatesh Asian Institute of Technology (AIT), Thailand Abstract From the balanced scorecard (BSC) framework, which encourages the use of both financial and non-financial measures of performance, allowing the firm to pinpoint its strategic objectives via balancing four perspectives – financial, customers, internal business processes, and learning and growth – to measure firm performance (Kaplan and Norton, 1992; Kaplan and Norton, 1996b), the paper sought to explore how balanced business scorecards were designed and to what extent of success they were implemented at Rang Dong Plastic Joint-Stock Company (RDP) in terms of its organizational structure and company philosophy. Keywords: Balanced scorecard, Performance measurement 1. Introduction Performance measurement systems aim to "integrate organizational activities across various managerial levels and functions" (McNair et al., 1989). The need for integration is supported by Hronec, who defines a performance measurement system as a "tool for balancing multiple measures (cost, quality, and time) across multiple levels (organization, processes and people)" (Hronec, 1993). Edson (1988) and Talley (1991) highlight the need for performance measurement systems to focus attention on continuous improvement. Green et al. (1991) suggest that performance measurement systems should "target the value-added activities of the company". Kaplan (1991) states that an effective performance measurement system “should provide timely, accurate feedback on the efficiency and effectiveness of operations”. Recent research has demonstrated that conspicuous links between a firm’s approach to strategic planning and its business performance exist in small as well as in large organizations (Lyles et. al, 1993; Jennings & Beaver, 1997; Juul Andersen, 2000; Ernst & Young, 2000). A common tool utilized to support strategic management activity in large firms is the Balanced Scorecard. 2. The Balanced Scorecard (BSC) Framework The BSC provides a framework, which encourages the use of both financial and non-financial measures of performance, allowing the firm to pinpoint its strategic objectives via balancing four perspectives – financial, customers, internal business processes, and learning and growth – to measure firm performance (Kaplan and Norton, 1992; Kaplan and Norton, 1996b). The effectiveness of the balanced scorecard is based on its capability to translate a firm’s mission and strategy into a comprehensive set of performance measures (Kaplan and Norton, 2001). The balanced scorecard approach involves identifying the key components of operations, setting goals for them, and then exploring ways to measure progress toward achieving those goals. Taken together, the measures provide a holistic view of what is happening both inside and outside the firm or operational level, thus allowing each constituent of the firm to see how their activities contribute to attainment of the firm’s overall mission. The framework is based on the premise that those properties of the financial accounting system such as conservatism, transaction emphasis, and dollar base unit of measurement, hinder it from measuring the key activities of the company adequately. Rather, Kaplan and Norton (1992) suggest supplementing the traditional financial measurement system with non-financial measures of customer relations, internal business processes, and firm learning growth in order to specify what the firm expects to receive from and give to the various stakeholder groups in exchange for those groups’ continued contribution toward the firm’s pursuit of its objectives. Figure 1 illustrated by Kaplan and Norton (1996b) identifies relationships and...
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