12

CHAPTER 2

LITERATURE SURVEY

With the intensified pace of globalization and increasing customer

expectations, the higher education sector, like other economy sectors, faces

increasing competition in terms of serving customers better (Voon 2008).

Earlier, the adoption of quality control in education was considerably more

superficial compared to that in industry (Srikanthan and Dalrymple 2003).

Later, there was a strong preference for the adoption of quality management

due to the deteriorating managerialism in institutions. To meet these demands

of the customer, Kanji et al (1999) adopted the TQM process for achieving

excellence in higher educational institutions. Later Hides et al (2004) and

Davies (2008) applied the European Foundation for Quality Management

(EFQM), a model for self assessment in higher education. Schwantz (1996),

Prajapati and Kachwala (2006), Roland (2008) and Singh and Khanduja

(2010) have worked with the SERVQUAL instrument for assessing

institutions.

Apart from the above, the other traditional performance

measurement systems have been criticized as being too narrowly focused on

financial figures and functional level performance, such that they often fail to

capture long term organizational success. In contrast, the balanced scorecard

calls on managers to first make a commitment to introduce an array of

measures or scorecards that will guide their decisions away from the narrowly

focused financial measures. Though many tools and techniques have been

applied in educational institutions like the TQM, EFQM model, SERVMO

13

model, SERVQUAL, the BSC seems to be more versatile and covers all

possible dimensions to be assessed and proposes a framework and strategy

map as well.

Balanced Scorecard (BSC) is a strategic planning and management

system used to align business activities to the vision statement of an

organization. In some instances, BSC attempts to translate the sometimes

vague, pious hopes of a company's vision/mission statement into the

practicalities of managing the business better at every level. Hence it is a

strategic performance management tool - a structured report, supported by

proven design methods that can be used by managers to keep track of the

execution of activities by the staff within their control and to monitor the

consequences arising from these actions.

A detailed review on BSC, its significance over other performance

management tools, its process and application in various sectors are

presented.

2.1 SIGNIFICANCE OF BALANCED SCORECARD – AS A

STRATEGIC PERFORMANCE MANAGEMENT TOOL

In an economy dominated by tangible assets, financial

measurements were adequate to record investments on companies’ balance

sheets. By the end of 20th century intangible assets became the major source

for competitive advantage (Kaplan and Norton, 2001a). Clearly, strategies for

creating value shifted from managing tangible assets to knowledge-based

strategies that create and deploy an organization’s intangible assets. But

companies were unable to adequately measure their intangible assets. To

make this measurement possible Kaplan and Norton devised a framework

based on four perspectives – financial, customer, internal business process,

and learning and growth. The organization should select critical measures for

14

each of these perspectives. It provides the user with a set of information

which addresses all relevant areas of performance in an objective and

unbiased fashion. A set of qualitative and quantitative measures are given to

top management which helps them to have a comprehensive view of the

business. It provides a balanced picture of overall performance highlighting

areas that need to be improved. It assists business in clarifying their vision

and formulating strategies.

Performance is assessed based on the strategy chosen by an

institution. It provides a means to translate these strategies into action.

Kaplan and Norton (1992) began with the premise that an exclusive

reliance on financial measures in a management system is insufficient

(http://www. jaxworks.com). The exclusive reliance on financial indicators

sacrifices long-term value creation for short-term performance. The balanced

scorecard approach suggested by Kaplan and Norton introduces other

perspectives in addition to financial perspective. It is called “balanced”

because it takes in to account human resource issues as well as financial

considerations. It is called “scorecard” because it provides a variety of criteria

by which organization may evaluate itself and thus improve. It provides

feedback around both the internal business processes and external outcomes

in order to continuously improve strategic performance and results. It is a

system of corporate appraisal which looks at financial and non-financial

elements which is not considered by any other performance measurement

tool. Financial measures alone do not guarantee the firm’s success as they do

not explain the real reasons for the obtained state. It is suggested that

organizations should focus their efforts on a limited number of specific,

critical performance measures which reflect stakeholders’ key success factors.

Over the last few years, it has been realized that financial indicators

that assesses future performance alone are not sufficient. Organizations need

15

additional measures to assess current performance. These measures need to

focus on indicators of future financial performance and relate to items such as

customer satisfaction, product and process quality, innovation and growth.

These four processes introduced by BSC, separately or in combination

contribute to linking long term objectives with short term actions (Kaplan and

Norton 2007). Thus the application of balanced scorecard (Epstein and

Manzoni 1998 and Kaplan and Norton 2004) explains how aligning the

objectives in the four perspectives is the key to value creation and hence, to a

focused and internal consistent strategy. The scorecard also helps

organizations to continuously monitor their performance and set higher

benchmarks, thus paving way for continuous quality improvement. Other

works of Kaplan and Norton (1996, 2001a, 2001b) emphasizes on strategy

map and the cause and effect relationship all of which play an important role

in assessing performance.

Balanced scorecard is used to measure performance and strategy

implementation. It has been applied in several organizations. Although

originally designed for non-profit organizations, the method is flexible

enough for all types of organizations. Review revealed that several fortune

500 companies have applied BSC practices in their organizations while very

few cases were documented with regard to higher education especially

management institutions.

2.2 SIGNIFICANCE OF BALANCED SCORECARD OVER THE

OTHER TOOLS

Review reveals that there are many tools for performance

measurement like Dynamic multidimensional performance model, total

quality management (TQM) Dashboard, Performance efficiency method,

service profit chain, BCG matrix, success dimensions model, results and

determinants model, game theory, Tableau de Bord etc (McPhail et al 2008).

16

Dynamic multidimensional performance model is quite similar to

BSC, but dimensions have been structured from a strong academic foundation

(http://www.fsc.yorku.ca). Performance measurement is a fundamental

building block of TQM and a total quality organization

(www.businessballs.com). Historically, organizations have been measuring

success or failure, in terms of their financial performance. However,

traditional performance measures, based on cost accounting information,

provide little to support organizations on their quality journey, because they

do not map process performance and improvements seen by the customer.

TQM is a tool used to measure process performance for continuous quality

improvement, but it lacks a unified framework (Hoque 2003). A similar tool

called Tableau de Bord (TDB) was developed by French accounting scholars

and practitioners (Bessire and Baker 2005). TDB tend to over-emphasize

financial measures and restrain non-financial measures. Epstein and Manzoni

(1998) state TDB does not rely on any specific strategic model and it has no

cause and effect relationships.

Since BSC has both these features (specific template and cause and

effect relationships as well) it is considered as a better tool for assessing

organizations (Bourguignon et al 2004). Most of the other tools, measure

performance in monetary terms and only a few measure processes. Of all

these tools only BSC has a strict framework of four dimensions. More

dimensions could be added depending on the characteristics of the

organization. BSC gives equal importance to financial and non-financial

measures which could better assess the performance of an organization. Lau

and Sholihin (2005) state that the application of BSC is not for an individual

benefit but for the overall growth of organizations and hence financial and

non financial measures are important dimensions for an organization. Hence it

could be concluded that BSC incorporates both qualitative and quantitative

measures in its assessment.

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2.3 ADVANTAGES OF BALANCED SCORECARD

The Balanced Scorecard has emerged in recent years as a strategic

control tool. Although there is much hype about this tool, Mooraj et al (1999)

state that it is a necessary strategic tool. Stewart and Hubin (2001) highlight

that translating the balanced scorecard from an organizational perspective to

the complex world of academia is a challenge. Malmi (2001) in their research

in Finland state that for some companies, BSC is only a new information

system that compiles a set of strategically relevant information and presents it

in a form that helps managers to have focus. Some researchers have used BSC

in diverse disciplines. Bach et al (2001) have used balanced scorecard to

capture and visualize the benefits of grid-connected photovoltaic systems

(GCPV). Forret and Sullivan (2002) have found that social networking

improves the likelihood of finding new jobs and have applied BSC in social

networking.

There is considerable interest in the role of strategic performance

measurement systems (SPMS), (such as balanced scorecards), in assisting

managers develop competitive strategies. Key dimensions were identified and

a model was framed by Chenhall (2005) and it was analyzed using Partial

Least Squares (PLS). Literature emphasizes that scorecards should be driven

by the strategy and vision of the organization. It also reveals that most

applications of BSC depend on the board and their contributions for strategy

implementation (Drew and Kaye 2007) to align the focus towards future

opportunities and risks. To implement this, strategic scorecard was created at

Chartered Institute of Management Accountants (CIMA) which is a

professional institute that provides a framework for improving the quality of

strategic decision making and engaging the board more actively in partnership

with top management team. Ukko et al (2007) have studied the impact of

18

performance measurement on management and leadership and concluded that

BSC helps in increased interactivity thus leading to higher performance.

2.4 LIMITATIONS IN BALANCED SCORECARD TECHNIQUE

BSC is a preferred strategic tool among organizations that follows a

systematic planning process to achieve long term results. However

organizations that are short sighted and look for immediate results find BSC

methodology impracticable. Also it is stated that organizations that are under

pressure because of changes or competition look out for survival and

immediate (short term) results. In such instances Ahn, (2001) and Kasurinen

(2002) state that BSC is not an appropriate tool. Norreklit (2003) and

Laitinen (2003) state that Kaplan’s description of BSC does not give the

details about the development of meta theory that is the transition from case

studies to theory.

2.5 IMPLEMENTATION ISSUES

Norreklit (2000) recommends that the process should be more

interactive during the formulation of strategy, building of the scorecard and

during the implementation of the same. An integrated methodological

approach was developed for BSC synthesis and implementation by

Papalexandris et al (2005). Recent studies (Wong-On-Wing et al 2007)

provide evidence of the companies’ tendency to overlook the validity of the

causal links between driver (non financial and long term) and outcome

(financial and short term) measures of the balanced scorecard (BSC). In many

applications of BSC, performance measures have some links to strategy, but

not necessarily through the logical process as envisaged by Kaplan and

Norton. Where cause and effect relationships are recognized, they are often

seen only within the individual perspectives, and not always between the

19

different perspectives (Jazayeri and Scapens 2008). The directions of

causality are not always clear.

Speckbacher et al (2003) gathered data on the implementation of

BSC in German speaking countries and have derived three main types of

BSCs which are

A. Type I BSC: a specific multidimensional framework for

strategic performance measurement that combines financial

and non-financial strategic measures.

B. Type II BSC: In addition to A, it also describes strategy by

using cause-and-effect relationships.

C. Type III BSC: In addition to B it also implements strategy by

defining objectives, action plans, results and connecting

incentives with BSC.

It was perceived from the findings that higher benefits and

satisfaction was shown from the companies using Type III BSC.

Huang et al (2009) have studied BSC from a different perspective.

They have explored the descriptive validity of the BSC as a causal model for

leading and lagging measurements of non-financial and financial performance

in relation to time lag effects where causal relationships were examined using

SEM with LISREL statistical package. It is found from the review that a

generic framework can be formulated across firms, industries and sectors

since most of the organizations share a common vision. The frameworks /

models have been derived either through review of literature or through

primary data collection. The common objective chosen when generic

frameworks were framed was performance improvement in the organizations.

20

The SWOT analysis was implemented to develop the key

performance indicators (KPI) with the four main perspectives of the balanced

scorecard (Lee and Ko 2000). Then QFD methodology was used with the

BSC's KPIs. The KPIs were identified as the “What” and the major strategies

of the organization as the “Hows” within QFD. This helps to identify the most

important strategic plan with respect to the customer, so that the organizations

could bring in customer delight. Though BSC has some criticisms, the

advantages outweigh the limitation and implementation issues. It is also clear

that BSC is very much compatible with tools like QFD, SEM etc. This helped

researchers and practitioners to explore its utility in various sectors. A review

on sector wise applications were classified and presented in detail.

2.6 APPLICATIONS OF BALANCED SCORECARD AS A

PERFORMANCE MEASURE IN VARIOUS SECTORS

The applications of BSC in manufacturing, service, educational and

all other sectors are reviewed. It is being established by almost all researchers

that BSC is a versatile tool to effectively assess the performance to tide over

the growing competitions. Several researchers have worked specific to

educational sector where it has found significant commendations. It is being

established that BSC can help institutions in upgrading the quality since it is

able to assess the institution from all dimensions. Detailed review was done

on the applications of BSC in various sectors and they are presented in

Table 2.1.

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Table 2.1 Applications of BSC across organizations

Sector Authors

Application in Manufacturing sector

Ahn (2001), Asrilhant et al (2004), Ax and Bjornenak (2005), Bach et al (2001), Bhagwat and Sharma (2007), Bobillo et al (2009), Braam and Nijssen (2004), Butler et al (1997), Lau and Sholihin (2005), Chand et al (2005), DeBusk et al (2003), Eilat et al (2008), Fernandes et al (2006), Huang (2009), Huang et al (2009), Kaplan and Norton (1992), Kaplan and Norton (1993), Kasurinen (2002), Lee et al (2008), Letza (1996), Lipe and Salterio (2002), Michalska (2005), Mooraj et al (1999), Papalexandris et al (2005), Ravi et al (2005), Sandstrom and Toivanen (2002), Speckbacher et al (2003), Tsamenyi et al (2010) Sandstrom and Toivanen (2002), Speckbacher et al (2003), Tsamenyi et al (2010),Wong-On-Wing et al (2007), Yuan and Chiu (2009)

Application in Service Sector

Banker et al (2004), Carmona and Gronlund (2003), Davis and Albright (2004), Fleisher and Mahaffy (1997), Kloot and Martin (2000), Kuo and Chen (2008), Papalexandris et al (2004), Patel et al (2008), Protti (2002), McPhail et al (2008)

Application in Educational Sector

Bailey et al (1999), Bennis and O’ Toole (2005), Branes (2007), Chang and Chow (1999), Conway et al (1994), Dorweiler and Yakhou (2005), Gill and Lashine (2003), Gumbus (2005), Hafner (1998), Karanthanos and Karanthanos (2005), Lawrence andSharma (2002), Nayeri et al (2008), Papenhausen and Einstein (2006), Pfeffer and Fong (2002), Rompho (2004), Ruben (1999), Stewart and Hubin (2001), Sutherland (2000), Umashankar and Dutta (2007)

Application in all sectors

Bremser and White (2000), Bremser and Chung (2005), Laitinen (2003), Malmi (2001), Martinsons et al (1999), Olson and Slater (2002), Sohn et al (2003), Southern (2002), Ukko et al (2007), Wagner and Kaufmann (2004)

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The review of literature is broadly categorized as follows:

i. Conceptual versus Validated models

ii. Classification based on Dimensions (as against the traditional

four perspectives as proposed by Kaplan and Norton)

iii. Categorization based on techniques used in BSC

measurements

iv. Applications in functional areas

v. Organization wide research

Generic research – all sectors

Sector wise research : manufacturing and service

vi. Education sector

2.6.1 Conceptual versus Validated Models of BSC

The research work done using BSC was classified depending on the

type of research undertaken –conceptual or validated models. The conceptual

work may be specific to the organization or it may be generic. It is found that

if BSC is being developed specific to the firm, then the data collected is

mostly from within the firm. This is through a structured questionnaire or

interview. Opinions from experts are drawn when it is developed on a generic

basis and the data collection becomes exploratory in nature. Also when data

collection is at the firm level, validation is found to be easy. The following is

the classification of research works based on models with respect to various

sectors. Table 2.2 presents the classification of literature based on formulation

of conceptual framework or validated framework.

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Table 2.2 Conceptual versus Validated models of BSC

Sector Type of study Author(s)

Manufacturing Conceptual study Ax and Bjornenak (2005), Bach et al (2001), Bobillo et al (2009), Kaplan and Norton (1992), Kaplan and Norton (1993), Mooraj et al (1999), Papalexandris et al (2005), Sandstrom and Toivanen (2002), Speckbacher et al (2003), Yuan and Chiu (2009)

Models validated using data

Asrilhantet al (2004), Bhagwat and Sharma(2007), Braam and Nijssen (2004), Butler et al (1997), DeBusk et al (2003), Huang et al (2009), Lau and Sholihin (2005), Lipe and Salterio (2002), Michalska (2005), Tsamenyi et al (2010), Wong-On-Wing et al (2007)

Service Conceptual study Carmona and Gronlund (2003), Fleisher and Mahaffy (1997), Papalexandris et al (2004), Protti (2002)

Data based validation

Banker et al (2004), Davis and Albright (2004), Kloot and Martin (2000), Kuo and Chen (2008), McPhail et al (2008) Patel et al (2008)

Educationalsector

Conceptual study Bailey et al (1999), Branes (2007), Dorweiler and Yakhou (2005), Gumbus (2005), Karanthanos and Karanthanos (2005), Lawrence and Sharma (2002), Papenhausen and Einstein (2006), Ruben (1999), Stewart and Hubin (2001), Umashankar and Dutta (2007)

Data based validation

Chang and Chow (1999), Nayeri et al (2008), Rompho (2004)

All sectors Conceptual study Martinson et al (1999), Bremser and Chung (2005)

Models validated using data

Bremser and White (2000), Malmi (2001), Olson and Slater (2002), Sohn et al (2003)

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Papalexandris et al (2005), proposed a procedure with six phases.

They have stressed the importance of correlation between the measures and

the corresponding strategic objective. Ax and Bjornenak (2005) proposed

conceptual model was developed based on an exploratory study. In few of the

research works, frame works had been conceptually developed to suit the

respective organization needs (Sandstrom and Toivanen (2002), Kaplan and

Norton (1992), Kaplan and Norton (1993), Fernandes et al (2006) Bach et al

(2001)). Mooraj et al (1999) has developed a strategy map conceptually.

Fuzzy expert system has been developed using fuzzy IF-THEN rules (Bobillo

et al (2009). The output helps in appropriate decision making and improves

the achievement of strategic objectives of the company. Genetic Algorithm –

Case based reasoning approach was used by Yuan and Chiu (2009) to

generate weights that can be used in BSC.

In the case of validated models, structured and semi structured

interviews were used to validate their models (Butler et al (1997), Asrilhant et

al (2004), Tsamenyi et al (2010), Bhagwat and Sharma (2007)). Interviews

were held with a diverse group of managers holding top or medium positions

in their respective organization. Wong-On-Wing et al (2007) made

comparison across two stores with the same strategy, measures and targets to

validate their model. Measures were compared against the company’s actual

performance by DeBusk et al (2003) and Lipe and Salterio (2002). Lau and

Sholihin (2005) and Braam and Nijssen (2004) carried out survey based

validation. Huang et al (2009) used data from a firm to create a model to

study the influence of strategic relationships among strategic perspectives of

BSC. Michalska (2005) formulated an equation for calculating the enterprise

effectiveness with the help of quality costs. All the above were carried out in

manufacturing sector.

25

Research carried out by Papalexandris et al (2004), Fleisher and

Mahaffy (1997), Protti (2002), Carmona and Gronlund (2003) contributed

conceptual models in service sector.

Patel et al (2008), developed causal loop diagram. Modification

Index (MI) Analysis of Moment Structure (AMOS) was used to validate the

model. Data envelopment analysis has been used by Banker et al (2004), to

determine relationship between one financial measure and three non financial

measures. McPhail et al (2008) developed five measures under the learning

and growth perspective with the help of two tailed tests. Davis and Albright

(2004) used quasi experimental design to investigate whether BSC is

significant in explaining the changes in financial performance of a bank.

Descriptive statistics have been used to validate the models. Kuo and Chen

(2008) applied fuzzy Delphi method to construct the key indicators. All the

above were carried out in service industry.

In educational sector very little work has been done using BSC

when compared to other sectors and also validation of the same was very few.

Though conceptual study gives an insight to the application of BSC, the

frameworks have to be validated to extract the real benefits of the tool.

2.6.2 Classification based on Perspectives in Manufacturing and

Service Sector

Table 2.3 presents the classification based on the application of

traditional perspectives and additional perspectives.

26

Table 2.3 Perspectives – Traditional versus Additional

Perspective Author(s) Perspectives used

Manufacturing Sector

Traditional Perspectives

Ahn (2001), Asrilhant et al (2004), Bach et al (2001), Bhagwat and Sharma (2007), Chand et al (2005), Eilat et al (2008) , Fernandes et al (2006), Huang et al (2009), Kaplan and Norton (1992), Kaplan and Norton (1993), Lau and Sholihin (2005), Lee et al (2008), Letza (1996), Lipe and Salterio (2002),Michalska (2005),Papalexandris et al(2005), Ravi et al (2005), Sandstrom and Toivanen (2002), Wong-On- Wing et al (2007)

All these work are based on the traditional perspectives of BSC. Though the extent of application of BSC and methods of data collection and data analysis differ the basic frame work is based on the four perspectives of BSC

Additional Perspectives

Butler et al (1997) Traditional template was not suitable for this organization (contracting business – precision coater, laminator and convertor of flexible material to customers’ special orders). Hence they adopted three similar perspectives namelyshareholders’perspective, extraordinary growth perspective and continuous improvement perspective.

DeBusk et al (2003) Measures were identified and were clustered into eight different perspectives to suit a Brewery. They are performance to schedule, growth, volume, face to the outside world, safety, productivity, employee skills and quality.

27

Table 2.3 (Continued)

Perspective Author(s) Perspectives used

Tsamenyi et al (2010) An additional perspective named as community was included apart from traditional four perspectives. Here, the authors measure the outcome of privatization of firms, for which they feel that the community perspective is crucial.

Bobillo et al (2009) Apart from the four perspectives additional four perspectives namely environmental, quality, vendor and staff have been included. This is a generic framework that could be modified according to the needs of the organization.

Yuan and Chiu (2009) Different perspectives namely operational benefits, technology/system, strategic competitiveness and user orientation have been derived to suit the needs of a construction company. This is based on case based reasoning approach (three level weight design) grouping performance measures to performance indicators and then to performance perspectives.

Service Sector

Traditional Perspectives

Banker et al (2004), Fleisher and Mahaffy (1997), Kloot and Martin (2000), Kuo and Chen (2008), Papalexandris et al (2004), Protti (2002)

All these work were based on the traditional perspectives of BSC though their research area is diversified. These authors have applied BSC model in software development, public relations and communications, infrastructure investment at healthcare, telecommunication industry and mobility of service industries.

28

Table 2.3 (Continued)

Perspective Author(s) Perspectives used

Additional Perspectives

Patel et al (2008) A BSC model is framed with three different perspectives to suit the healthcare industry requirements. They are patient focus, clinical focus and capacity and capability focus. Causal loop diagram is provided to understand the cause and effect relationship.

Carmona and Gronlund (2003) A framework was designed to assess Swedish law enforcement. To cater to the needs new perspectives such as road traffic, public order, drug crime and crime investigation have been identified

Educational Institutions

Traditional Perspectives

Bailey et al (1999), Chang and Chow (1999), Dorweiler and Yakhou (2005), Gumbus (2005), Hafner (1998), Karanthanos and Karanthanos, (2005), Lawrence and Sharma (2002), Papenhausen and Einstein (2006), Rompho (2004), Stewart and Hubin (2001), Umashankar and Dutta (2007)

Though the focus of these works was quite different, these were based on the traditional perspectives of BSC.

Additional Perspectives

Branes (2007), Ruben (1999) Five clusters such as teaching and learning, public service/outreach, research, workplace satisfaction and finance has been proposed

29

Table 2.3 classifies the research work based on perspectives whether

traditional ones as per the theory of BSC or additional ones. There were a

good number of BSC frameworks which uses their own perspectives to meet

their requirements. Researchers have worked on traditional perspectives as

suggested by Kaplan and Norton as well as on additional perspectives ((Butler

et al 1997), (DeBusk et al 2003), (Tsamenyi et al 2010), (Bobillo et al 2009),

(Yuan and Chiu 2009), (Patel et al 2008), (Carmona and Gronlund 2003)).

Construction company, brewery, post privatization assessments under

manufacturing sector, healthcare industry and law enforcement under service

sector have devised their own perspectives to obtain more accuracy in their

performance measurements. In some research work, like in the case of hotel

industry (McPhail et al 2008) one perspective alone was focused upon.

In telecommunication industry (Banker et al 2004) variables under

performance assessment were considered without classifying them into the

different dimensions. Additional perspectives such as operational benefits,

technology/system, strategic competitiveness, user orientation, environmental,

quality, vendor, and staff have been included in specific instances to suit their

nature of business. According to the Table 2.3, in educational sector,

predominantly only traditional perspectives are being used to assess

performance.

Branes (2007) and Ruben (1999) have proposed five clusters such

as teaching and learning, public service/outreach, research, workplace

satisfaction and finance to capture the objectives of a higher educational

institution. As an exception, Sutherland (2000) have framed academic

scorecard only with customer perspective. All these studies reveal that in

addition to the traditional perspectives, other perspectives could be added

depending on the organizational needs.

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2.6.3 Techniques used to determine Measures in Balanced Scorecard

Several techniques such as AHP, ANP, fuzzy logic, fuzzy expert

system, fuzzy AHP, group AHP, case based reasoning and data envelopment

analysis have been used in the development of BSC. It is found that a

majority of these techniques have been used to prioritize the parameters of

BSC. This is presented in Table 2.4.

Table 2.4 Decision making techniques used across organizations

Technique Sector Author(s) Applications

AHP Manufacturing Huang (2009) AHP is integrated with BSC and KBS (knowledge based system)

Educational sector Nayeri et al (2008) GAHP

All sectors excluding education

Sohn et al (2003) AHP

Fuzzy Manufacturing Lee et al (2008)

Bobillo et al (2009)

Cebeci (2009)

Yuksel and Dagdeviren (2010)

Fuzzy AHP

Fuzzy expert system

Fuzzy AHP

Fuzzy ANP

Service Kuo and Chen (2008)

Wu et al (2009)

Fuzzy Delphi method

Fuzzy AHP (MCDM approach)

Education sector Tseng M (2010)

Wu et al (2010)

ANP, DEMATEL, Fuzzy set theory

Fuzzy AHP and VIKOR methods

Generic work comprising all sectors

Ekel et al (2009)

Parreiras et al (2010)

Fuzzy set theory (Consensus scheme)

Fuzzy preference relation modeling ( Consensus scheme)

Case based reasoning(CBR)

Manufacturing Yuan and Chiu (2009) GA-CBR approach

Data Envelopment Analysis(DEA)

Manufacturing Eilat et al (2008) BSC-DEA model

Analytical Network Process (ANP)

Manufacturing Ravi et al (2005) ANP

31

Balanced scorecard technique has been integrated with analytical

hierarchy process (AHP) by Huang (2009) for designing an intelligent BSC

knowledge-based system (BSC-KBS). AHP was also used to study the

relationship between balanced scorecard performance measures, corporate

strategies and environmental forces (Sohn et al 2003). A BSC model for

reverse logistics is created for determining the end of life of computers (EOL)

using ANP (Ravi et al 2005). Using the four perspectives of BSC, Kuo and

Chen (2008) applied fuzzy delphi method to construct key performance

indicators for introducing mobility for the service industries. To express BSC

values using linguistic labels, fuzzy expert system was integrated with BSC

by Bobillo et al (2009). Lee et al (2008) have developed BSC specifically for

IT department in a manufacturing industry in Taiwan. It is used to measure

intangible parameters using fuzzy AHP (FAHP). Wu et al (2009) have used

fuzzy AHP with MCDM analytical tools for evaluating banking performance,

Cebeci (2009) have presented a fuzzy AHP approach for evaluating enterprise

resource planning (ERP) systems for textile industry and Wu et al (2010)

assesses the innovation capital indicators of Taiwanese Universities using

fuzzy AHP based on BSC methodology.

Research work by Yuksel and Dagdeviren (2010) integrates fuzzy

ANP with BSC to evaluate the performance level of business based where as

Tseng (2010) proposes a hybrid approach of fuzzy ANP with BSC to evaluate

a private University in Taiwan. Fuzzy set theory with consensus scheme has

been applied for group decision making with minimal discrepancy between

the human opinions.

Group analytical hierarchy process (GAHP) was used to prioritize

the parameters in the BSC (Nayeri et al 2008). This process was used to find

the position of Iranian‘s best business schools. In a telecommunication

industry to understand the interrelationships and tradeoffs between the

alternative performance dimensions, Data Envelopment Analysis (DEA) was

used along with BSC for decision making (Banker et al 2004). Case Based

32

Reasoning (CBR) approach was used to generate weights for the parameters

of BSC by Yuan and Chiu (2009). This was used to evaluate the performance

of organizations.

The review indicates AHP can be used to standardize the hierarchy

of measures identified in BSC. AHP can also be used individually or in

combination with fuzzy logic. Fuzzy logic seems to be a versatile tool that can

be combined with BSC across industries. From the review of literature it is

found that several tools have been tested predominantly in the manufacturing

sector and not much work has been done in the service sector. Each researcher

has highlighted how his model is beneficial in a certain situation. It is found

that all the techniques mentioned above are being used to determine the

significance or prioritization of the variables in the BSC and it is not being

used for measuring the variables.

2.6.4 Applications of Balanced Scorecard in Functional Areas

The review of literature reveals that only recently, firms have

started adopting BSCs to manage their strategies better in areas such as

purchasing, logistics and supply chain management. Balanced scorecard holds

a prominent place in public relations and communications department

(Fleisher and Mahaffy 1997). The increasing role of IT in achieving business

goals aroused the interest of managers in measuring and evaluating both IS

processes and outcome using BSC (Martinsons et al 1999). In product design

and development, bridging the gap between the engineers and the strategist

was a challenging task. Sandstrom and Toivanen (2002) have identified 12

ratios with the help of BSC, to quantify the qualities required during product

design and development phases.

The technical and managerial challenges of implementing ERP

systems are widely researched and analyzed. No analytic framework exists to

examine the potential benefits after the ERP system is successfully

implemented. Chand et al (2005) have implemented BSC for evaluating ERP

33

(SAP) after its implementation in an aircraft design organization in US. The

evaluation of R&D projects is a challenging decision-making process. To

overcome this, Eilat et al (2008) developed an analytical model using BSC

and DEA for evaluating research and development (R&D) projects in

different stages of their life cycle. It discriminates the project according to

desired characteristics of the organization and ranks them. Based on the ranks

the projects were chosen.

Review of the BSC applications in the functional areas of

management revealed that Wagner and Kaufmann (2004) have formulated

and implemented purchasing strategies by using BSC (p-BSC), while Ravi et

al (2005) have adopted BSC for reverse logistics to determine the end of life

of computers (EOL). The review is presented in Table 2.5.

Table 2.5 Applications of BSC in various functional areas

Functional area Author(s)

Manufacturing sector ERP Chand et al (2005)

R&D Eilat et al (2008)

Product design and development Sandstrom and Toivanen (2002)

Marketing Bach et al(2001)

Supply chain management Bhagwat and Sharma (2007)

Reverse logistics Ravi et al(2005)

Service sectorPublic relations and communications Fleisher and Mahaffy (1997)

Both Manufacturing Information system Martinsons et al (1999)

and Service Purchasing strategies Wagner and Kaufmann (2004)

E business environment Bremser and Chung (2005)

Education sectorAll applications are at the institutional level only.

34

From the above review and from Table 2.5, it is found that BSC has

been applied in specific functional areas of an enterprise - product design and

development, marketing, purchasing, supply chain management, R&D

projects evaluation, e-business environment, enterprise resource planning and

reverse logistics. The applications are found to be more predominant in

manufacturing sector. In the education sector research has been done only at

the organization level.

2.6.5 Applications of BSC in Organizations

2.6.5.1 Development of generic models across organizations

The review indicates that BSC can be applied across any type of

organizations – manufacturing, service and education. It indicates that a

commonly designed questionnaire could be used generically for any type of

organization (Southern 2002). Another advantage of generic research is that

some results can be applied across organizations. Results such as increased

interaction between the management and employees are necessary, for better

performance (Ukko et al 2007) etc.

2.6.5.2 Manufacturing industries

The review is classified based on its application to a single firm or

across firms. Table 2.6 lists the application of BSC in distinct industries that

shows the compatibility of the tool.

35

Table 2.6 Applications of BSC in manufacturing sector

Type Author

BSC- specific to a single firm

Ahn (2001), Bach et al (2001), Butler et al (1997), Chand et al (2005), DeBusk e al (2003), Eilat et al (2008), Fernandes e al (2006), Kaplan and Norton (1992), Kaplan and Norton (1993), Lipe and Salterio (2002), Michalska (2005), Mooraj et al (1999), Ravi et al (2005), Sandstrom and Toivanen (2002), Tsamenyi et al (2010), Wong-On-Wing et al (2007)

Generic frameworks proposed across manufacturing industries

Asrilhant et al (2004), Bhagwat and Sharma (2007), Bobillo et al (2009), Braam and Nijssen (2004), Huang (2009), Huang et al (2009), Lau and Sholihin (2005), Lee et al (2008), Papalexandris et al (2005), Yuan and Chiu (2009)

Letza(1996) developed and implemented a balanced business

scorecard to deliver strategies for three different industries namely

MC-Auchemie Muller GmbH & Co (construction supply industry), Rexam

custom Europe (specialist coating industry) and AT & T (the world‘s leading

communications services company) and all these three share a common

feature of having a manufacturing base in Europe. The distinguished feature

was that even though they used different methodologies to arrive at key

performance indicators, scorecard design and implementation was almost

similar. The paper highlights the possible errors creeping in the design of

BSC which could be avoided in future. In the following year, a similar study

was conducted by Butler et al (1997) who framed a BSC for Rexam custom

Europe alone. Braam and Nijssen (2004) made an attempt to explore the ways

in which the use of BSC can affect the performance. This research has

identified that, multidisciplinary teams are required to implement BSC and

advised that top management should be alert to the dynamic environment to

ensure the fit between strategy and BSC. UK manufacturing sector adopted

BSC to overcome these challenges. The company mainly relied on traditional

financial accounting measures. To supplement these financial measures with

36

non- financial measures and to facilitate alignment of business operations

with the overall strategy (Fernandes et al 2006) BSC was implemented.

One of the Polish enterprises belonging to metallurgic industry

implemented BSC to estimate the enterprise‘s effectiveness (Michalska

2005). Rockwater a worldwide leader in underwater engineering and

construction realized the importance of BSC for competitive advantage. With

the assistance from Kaplan and Norton (1993) Rockwater‘s senior

management team transformed its vision and objectives into the balanced

scorecard‘s four sets of measures. Strategic business unit of the ABB

Industries AG at Germany outlines the experiences, the firm gained during its

introduction of the Balanced Scorecard (Ahn 2001). The scorecard was

developed for all six strategic business units which were led by a BSC team.

Lipe and Salterio (2002) examined whether the scorecard’s

organization results in managerial performance is consistent with the

measures within a category for a clothing apparel industry. The limitations

were, the participants did not have relevant experience and it was not possible

to check the accuracy of the participants’ evaluations. To explore the elements

of the strategic project management and the appropriateness of techniques,

Asrilhant et al (2004) made an attempt with balanced scorecard and

investigated the extent to which the techniques addressed the proposed set of

elements in oil and gas sector. At the evaluation stage, the elements suggested

were in the financial, external and internal perspectives, but there was little

scope for the introduction of learning and innovation perspective.

A detailed review is done based on the extent of application of BSC

in manufacturing sector and presented in Table 2.7.

37

Table 2.7 Extent of application of BSC in Manufacturing Sector

Type Author

Type I – Goals and Measures Bach et al (2001), Butler et al(1997),Chand et al (2005), Huang et al (2009) Kaplan and Norton (1992), Kaplan and Norton (1993), Letza (1996)

Type II – Upto Measures and metrics

Asrilhant et al (2004), Bhagwat and Sharma (2007), Eilat et al (2008), Lau and Sholihin (2005), Lee et al (2008), Papalexandris et al (2005), Ravi et al (2005), Sandstrom and Toivanen (2002), Tsamenyi et al (2010), Wong-On-Wing et al (2007), Yuan and Chiu (2009)

Type III – Upto actuals and targets

DeBusk et al (2003), Fernandes et al (2006), Lipe and Salterio (2002), Michalska (2005)

Type IV - Upto strategy map Ahn (2001), Mooraj et al (1999)

Type I – researchers who have presented only the goals and measures

((Butler et al (1997), Chand et al (2005), Huang et al (2009),

Kaplan and Norton (1992), Kaplan and Norton (1993), Bach et

al (2001), Letza (1996))

Type II – researchers who have presented goals, measures and metrics

((Papalexandris et al (2005), Lee et al (2008),Wong-On-Wing et

al (2007), Lau and Sholihin (2005),Sandstrom and Toivanen

(2002), Bhagwat and Sharma (2007), Ravi et al (2005),

Asrilhant et al (2004), Yuan and Chiu (2009), Eilat et al (2008),

Tsamenyi et al (2010))

Type III – researchers who have presented the goals, measures, metrics,

actual and targets (Fernandes et al (2006), Lipe and Salterio

(2002), Michalska (2005), DeBusk et al (2003))

Type IV – researchers who have presented upto the strategy map (Ahn

(2001), Mooraj et al (1999))

38

A majority of research on BSC stops with goals and measures.

After this stage, only few proceed till measuring the actuals and comparing it

against the target. Out of all these, only few start with vision and mission

statement and proceed to framework with goals and measures. Hence for a

detailed application and validation of BSC, the framework should start from

associating vision to goals, then to measures, metrics, actuals and targets. The

performance should be reviewed periodically based on the targets set since

this validates the framework.

2.6.5.3 Service industries

BSC is applied in specific firms like software firm, health care firm,

local government, hotel industry, Swedish law enforcement etc. It also finds

very significant applications in banks, public sector and telecommunication

industry. This presented in Table 2.8.

Table 2.8 Application of BSC in service sector

BSC - specific to a single firm

Carmona and Gronlund (2003), Kloot and Martin (2000), Papalexandris et al (2004), Patel et al (2008), Protti (2002)

Generic frameworks

proposed across service

sector

Banker et al (2004), Davis and Albright (2004), Fleisher and Mahaffy (1997), Kuo and Chen (2008), McPhail et al (2008)

The performance measurement in public sector organizations

especially in the local government at Victoria in Australia, shows how the

government can improve by focusing on council work (Kloot and Martin

2000). The major contribution was that this research has been conducted using

a qualitative BSC methodology. Though the past several decades witnessed

increasing interest in the efficiency and effectiveness of performance among

the public sector and several performance metrics were deployed, these

39

performance measurements had not gained importance in police work. This

inspired the researchers Carmona and Gronlund (2003), to develop a

scorecard to assess Swedish law enforcement. To cater to the needs of

problem areas they formulated four new perspectives namely success, staff,

citizen and resources. The perspectives formulated in the scorecard which was

used for Swedish law enforcement “balanced” the measures of internal

success as well as internal performance. The limitation was that the scorecard

did not incorporate any measure that facilitated police work at the lower

levels of the chain of command and also some crucial areas in the new

concept of policing (such as community policing) was neglected.

In US over emphasis on financial measures for assessing corporate

performance has been criticized. Banker et al (2004), have investigated the

best practice between a financial performance metric namely return on assets

(ROA) and three non-financial performance metrics in US telecommunication

industry. The integration of wireless communication and mobile internet

services has been considered as one of the most promising investments, and

mobile commerce is the focus of various industries (Kuo and Chen 2008).

The scope of balanced scorecard was explored in this sector. Key indicators

have been identified through fuzzy Delphi method based on BSC. Significant

parameters were also identified for each perspective.

Papalexandris et al (2004), in their work have illustrated the

implementation of BSC in Greece where the economy is in transition. The

work constituted of seven detailed phases and the implementation included

the strategy maps and the KPI which were thoroughly evaluated in a software

firm. Implementation of this scorecard, established that “BSC is a necessary

good” for companies.

40

Davis and Albright (2004) carried out an empirical analysis to

investigate the impact of BSC on a banking institution’s financial

performance. The findings of the study indicate that branches adopted BSC

outperformed those branches that did not. The major limitation of the study

was the inability to test the causal chains within their limited period.

As more firms have ventured into e-business, new metrics were

required to provide a structure and content for firms to implement e-business

strategies and tactics. Bremser and Chung (2005) have presented a framework

that is based on Balanced Scorecard methodology and the taxonomies and

theories behind the e-business models. The model is equipped with eleven

areas (based on perspectives) and the important questions have been

suggested from which metrics need to be identified. The limitation was that,

only perspectives were identified. Measures were not developed. Also the

framework was not validated. In the hotel industry McPhail et al (2008), have

studied the extent to which performance measures align with the learning and

growth dimension of the BSC. It was found that most hotels were using only a

single measure to represent the learning and growth perspective. Five

measures were suggested under this perspective with the help of two tailed

tests. The significant parameters were motivation of employees and employee

capabilities. Though additional measures were suggested for this single

perspective, assessing an industry based on a single perspective is a

limitation.

In UK, considering the views of both the opposition and supporters

of the National Health Service Performance Ratings System (NHSPRS) a

BSC was framed (Patel et al 2008). Structural Equation Modeling was used to

construct a causal-loop diagram showing the cause and effect relationships

between the common performance indicators. Scenario testing suggests that

indicators of delayed transfer of care and data quality are compromised if

41

emergency readmission performance is improved. The model was framed

based on forward and backward iterations, and for each iteration they

included parameters suggested by the Modification Index (MI) and unselected

the non-significant parameters. Their contribution to the research community

was that an effective model was created based on all possible indicators and

the limitation was that, only linear relationships have been established.

Another study by Protti (2002), was carried out at NHS Canada to evaluate

information management and technology, for the department Information

for Health. It was inferred from the study that the management of both

Information Management and Technology people and projects is likely to

benefit from a systematic framework based on goals and measures suggested

in BSC.

In service sector, it is found that both type of researches like

working on specific firms and generic frameworks are undertaken. Since both

these type of work has its own merits and demerits, it is adopted based on the

requirement in the market and the demand that particular industry has.

Research could be focused on creating generic frameworks, since it will help

in creating templates.

2.6.6 Education Sector

Identification of specific roles and responsibilities within academic

teams provides one way of successfully establishing the link between quality

control, assurance and assessment and the process of continuous quality

improvement in the provision of higher education (Colling and Harvey 1995).

A framework was presented based on some guiding principles (Williams

1995) for the exploration of academic standards at institutional level which

has identified five areas for special attention. Prajapati and Kachwala (2006),

have identified eight dimensions to present service quality. The analysis was

done using SERVQUAL (Service quality) tool. Though quality could be

42

measured using this tool, BSC seems to be a better tool (Asubonteng et al

1996) from the literature.

King (1995) discusses the major elements of change in higher

education and concludes that the twenty-first century university will be

unlikely to succeed unless it can manage change effectively. Higher education

institutions are in the knowledge business, since they are involved in

knowledge creation and dissemination, and learning (Rowley 2000). As the

environment changes, and learning takes place, institutions should refine and

adapt their strategies. The evolution leads the institution to a new strategy,

which needs to be tested in real time. Strategic management is a matter of

bridge building between the perceived present situation and the desired future

situation (Kettunen 2005).

Strategy implies the movement of an institution from its present

position, described by the mission, to a desirable future position, described by

the vision based on the definitions. The cardinal purpose of BSC is to replace

traditional performance system focusing on assessing one single financial

index to obtain more adequate and holistic performance evaluation model

(Wu et al 2011). The development of the balanced scorecard is an iterative

process that enables continuous improvement and enhancement. It is better to

start to improve than wait for a perfect solution before the implementation of

the strategy.

2.6.6.1 Applications of BSC in educational sector

In the educational sector, almost equal number of research papers is

found for BSC applications in a particular institution as against generic BSC

across institutions. In both the cases, it has resulted in significant

contributions - for cost cutting (Hafner 1998), for developing frameworks

(Nayeri et al 2008), for arriving at performance measures (Dorweiler and

Yakhou 2005) etc. This is presented in Table 2.9.

43

Table 2.9 Application of BSC in educational institutions

BSC - specific to a

particular institution

Branes (2007), Gumbus (2005), Hafner (1998), Lawrence and Sharma (2002), Papenhausen and Einstein (2006), Rompho (2004), Sutherland (2000)

Generic framework proposed across educational institutions

Bailey et al (1999), Chang and Chow (1999), Conway et al (1994), Dorweiler and Yakhou (2005), Nayeri et al (2008), Ruben (1999), Stewart and Hubin (2001), Umashankar and Dutta (2007)

Tohidi et al (2010) focuses on strategic planning in Iranian

educational organizations. In addition, this research has proved the BSC

abilities and flexibility – in comparison with other strategic planning models –

to solve educational organization problems and increasing its effectiveness

and efficiency. Strategic planning was focused in higher education athletic

departments to develop and recommend a generic strategic planning model

(Kriemadis 1997). Hafner (1998) developed a BSC for educational

institutions keeping University of California with 9 campuses as the case. The

vice chancellors of administration, the senior and finance executives in the

office of the president contributed to align the vision and goals for the

university administration in a phased manner. In only two campus (out of

nine) BSC was adopted as a strategic business planning tool for business

administration Similarly Rompho (2004) explored the application of balanced

scorecard at various universities. He has identified twenty-two universities

across the globe using the Balanced Scorecard for their various functions. A

BSC model was framed by Umashankar and Dutta (2007) for assessing Indian

higher education institutions. Both strategy map and the model were

presented.

44

Chang and Chow (1999) framed a balanced scorecard based on the

responses collected from 69 accounting department heads. The limitation was

that the goals and measures were validated based on the feedback from only

four to five people. This does not ensure complete validity of the model.

Ruben (1999) has identified cluster measures like peer assessments and public

services for higher education dashboard which are quite similar to what other

authors have discussed. The contribution was that various measures were

identified from diversified areas and it has been claimed as possible cluster

measures.

Sutherland (2000) suggest from the perspective of central

administration that, an instrument like balanced scorecard should make it

easier for the university to accomplish its strategic goals. In the research

undertaken by Southern (2002), the respondents were working professional

undergoing an elective course on BSC as part of the MBA programme at the

University of Glasgow. As part of their curriculum, the students opted to do

their project in BSC in their respective work place. This consequently helped

in applying BSC simultaneously in various industries since the respondents

were from diverse fields but the limitation is the results are so generalized that

the response of a particular firm could not be measured. However the

importance of BSC as a performance measurement tool was getting

established. In another study which was conducted by Bremser and White

(2000) they offer guidelines for implementing experiential approach to

learning BSC through the study of real-world organizations. Due to the

significance of this application, balanced scorecard was integrated as a course

in their curriculum of management education.

Financial position was assessed by Lawrence and Sharma (2002) at

DXL University in Figi. The balanced scorecard tracks key strategic elements

through a balanced set of performance indicators to ensure that, action is

45

meeting strategic objectives, Dorweiler and Yakhou (2005). Karanthanos and

Karanthanos (2005) have discussed similarities and differences between BSC

in business and BSC in education and also describe how the Baldrige

education criteria for performance excellence have adopted the concept of

BSC. The set of measures of Baldrige education criteria are congruent with

the concept of BSC. Gumbus (2005) has specifically aimed to compare the

student generated measures with actual university metrics so that students

gain an understanding of the BSC. Chen et al (2006), examined how, in this

scenario of significant challenges with regard to supply and demand in the

market, the balanced scorecard (BSC) can be used for performance evaluation

as a strategic management tool.

Branes (2007) says that as higher education move in the direction

of performance management, BSC aims to provide a concise solution to

manage a complex process of assessment, evaluation and review at various

levels within the institution. The following researchers have used BSC to

improve the quality of higher education. Lack of development of a shared

vision and lack of a match between quality management techniques and

educational processes made Srikanthan and Dalrymple (2003) derive a model

called a holistic model for higher education. Kanji et el (1999) adopted the

TQM process for achieving excellence in higher educational institutions.

There were numerous causal factors for introducing quality management in

institutions which require them to improve quality. Conway et al (1994)

conducted an exploratory research to assess the degree to which higher

education institutions are aware of the complexity of the student‘s role and

whether this complexity is considered in the development of an institution‘s

mission statement.

46

Strategic planning was focused in Cyprus Educational System.

Tsiakkiros and Pashiardis (2002) analyzed the internal and external

environment through PEST (political, economic, sociological and

technological) analysis and SWOT (strength, weakness, opportunities and

threat) analysis and suggested that strategic planning should be adopted

without any further delay to meet the demanding challenges of the new

millennium and survival in the long term. . Amaratunga and Baldry (2000)

have studied the characteristics of important aspects of a performance

assessment approach related to higher education and have discussed the

development of a framework based on the balanced scorecard to measure

performance relating to higher education establishments. The adoption of

BSC has forced the library at the University of Virginia to focus its

assessment and statistical activities, since it was framed and implemented at

the library in the campus (Self 2003). It identifies and develops those

measures that make a difference. Chen et al (2009) proposes an approach of

measuring a technology university’s knowledge management (KM)

performance using balanced scorecard and suggested possible measures for

various perspectives. The review indicates that significant results can be

achieved in higher education. Rimar and Garstka (1999) have developed a

BSC and adapted it at Yale University of Medicine. They have discussed the

implementation of framed goals and the measures for the first year. All the

above authors have work with BSC on diversified programmes.

Gill and Lashine (2003) have also suggested some useful staffing to

enhance the market oriented focus especially for a business school. Apart

from this other researchers like, Bennis and O’Toole (2005) and Pfeffer and

Fong (2002) focuses on business school performance.

47

The BSC was used in many campuses, where only opinions were

gathered from higher officials (Hafner (1998), Bailey et al (1999) and Chang

and Chow (1999)). Rompho (2004) assessed the institutions with the help of a

survey. Karanthos and Karanthos (2005) describe how the Baldrige education

criteria for performance excellence, have adapted the concept of the BSC to

education. Exhaustive and conceptual models were framed by Papenhausen

and Einstein (2006) & Umasankar and Dutta (2007).

2.7 IMPORTANCE OF BUSINESS EDUCATION

Universities and colleges increasingly face demands to be

accountable to their stakeholder. According to Pfeffer and Fong (2002) data

suggest that business schools were not very effective. Both possessing an

MBA neither degree nor grades earned in the courses correlate with career

success and there is little evidence that business school research is influential

on management practice. Internal Studies conducted by the firms found that

non-MBAs did no worse and, in some cases, better than their business school

counterparts. Boyatzis et al (2002), comment that a major challenge to MBA

education is to develop the ability to use management knowledge. His

research substantiates that, cognitive and emotional intelligence competencies

need to be developed in MBA students in addition to their curriculum.

Recent articles authored by business academics and administrators

have strongly criticized the content of business education being offered. This

problem is magnified by the inability of B-school to adequately measure how

much, if any, value is added by their programs to the business needs

(Papenhausen and Einstein 2006). Nowadays strategic thought and strategy-

based actions enable organization to cope with and adapt to the future

environment. Strategic plans depict the route from the present position to

future environment (Nayeri et al 2008). There are many challenges that every

nation faces these days. ‘Are our potential graduates from the educational

48

system capable enough of facing these challenges?’, ‘Is business education

capable of preparing future managers to face these challenges?’ are the

questions posted by the authors Gill and Lashine (2003, pg 188). Main

objective for any educational institution is to increase the knowledge base.

Hence this should be assessed. So far, variant models with different

approaches to strategic positioning are deployed in defining the strategic

positioning within the various industries. Out of all the approaches, balanced

scorecard is one of the powerful models for strategic positioning which

analyses all aspects of the organization evenly.

2.7.1 Market Oriented Focus on Business Education

Different nations have different levels of success in meeting global

challenges facing the national educational system. According to Gill and

Lashine (2003), Business education could be judged on four categories.

1. Knowledge, which allows students to understand.

2. Know-how, which enables students to put their knowledge to

work.

3. Wisdom, which enables them to decide whether, where or

when to do it.

4. Character, which makes them decent human beings, fit to live

nearby.

With the increase in globalization trends, it becomes necessary for a

business graduate to survive in an international environment. Technology has

become unavoidable so that selecting equipment and tools, applying

technology to specific tasks, maintaining and troubleshooting technological

devices are necessary for an average employee. These significant skills are

classified as technical skills, analytical skills, communication skills, multi

49

disciplinary and inter disciplinary skills, all of which should be developed to

acquire knowledge about global issues and enhance personal qualities.

Authors Gill and Lashine (2003) also suggest that to enhance the

market oriented focus, a useful staffing strategy for a business school would be

1. To encourage the faculty and business community work in a

team environment for curriculum design.

2. To draw the faculty from businesses or industry to provide

full-time or part time instructional help.

3. Encourage the current faculty to work on industrial

assignments during sabbatical or educational leave so as to

update their skills on current market trends.

4. Encourage applied research.

5. Increase the effectiveness of internships, creating and

standardizing the basics for students, faculty and industrial

participants.

2.7.2 International Accreditation

In an increasingly competitive, global market for leading business

school students and business programs that deliver management education,

differentiation is critical. To establish this differentiation among the B

schools, Trapnel (2007) says that earning international accreditation can

provide an important external validation and statement that can be an

important factor in identifying high-quality business schools by prospective

students, faculty, and employers. The growth in the global presence of

AACSB International reflects the international landscape of business

education. Though AACSB International is the largest and has the longest

history in accrediting business schools, the European Quality Improvement

50

System (EQUIS) entered the global, institutional-level business school

accreditation and has been successful in attracting business schools into its

accreditation processes. AACSB and EQUIS have unique areas of focus, and

each business school must decide which of these best fits its needs and

competitive market, and it may be that both are important. There are some

significant AACSB International accreditation differences in the accreditation

philosophy of AACSB and EQUIS. Understanding these differences will

assist a student in using the accreditation status as a decision point in selecting

a business school.

Since the universities need to remain competitive to meet the

demand for accrediting bodies, administrators face increasing demands for

quality and accountability from internal and external forces and constituents

(McDevitt et al 2008). To meet these demands, authors used the experiences

of the faculty at a School of Business to describe the process and benefits of

developing a custom BSC. This process consisted of six phases, which

developed a model for strategic revitalization. This strategic management

process contributed to the successful extension of its undergraduate and

graduate business programs by AACSB. The benefit of this study was, it lists

the key deliverables after using the BSC. The university and faculty could use

this model as a basis of a change program that helps to design improvement

programs, facilitate strategy development and support funding requests.

2.7.3 Application of BSC in Management Education

Since the B schools are facing increasing demands, it is necessary

for schools to develop and measure process that lead to successful outcomes

especially schools seeking international accreditation. To support this view,

Pineno (2007) framed a balanced scorecard for attaining and maintaining of

accreditation. Parameters discussed were human capital investment, financial

management-budgeting under financial perspective, teaching facilities and

51

innovations under innovation and learning perspective, curriculum efficiency

and effectiveness of services under internal business perspective, students,

employee, alumni and faculty satisfaction under customer perspective and

also other few measures similar to what other have discussed. A successful

BSC can provide feedback to the administration and faculty that can lead to a

long-term process that will foster individual and collective growth resulting in

improved organizational performance.

Bailey et al (1999) reports that 38 business school deans have

identified nearly five hundred measures. Some of them are yield, market

share, focus group comments and worthiness under customer perspective,

teaching excellence, facilities available and curriculum innovations under

internal business perspective, innovations and pedagogy enhancement under

learning and growth perspective, grants, endowments, increased fees and fund

raising under financial perspective. The contribution was that the research

provides a huge number of measures and associated goals under all

perspective. The limitation was that the model could be used to pick out the

relevant information to fine tune the framework and it could not be applied as

such.

Chang and Chow (1999) say that apart from business education in

general, particularly accounting education also have faced intensive pressures

for change. Hence they framed a balanced scorecard based on the responses

from 69 accounting department heads which could be of some benefit to

accounting department programs. Suggestions from these people were to

measure students placed, alumni evaluation and external rankings under

customer perspective, grades awarded, internships available and number of

other schools offering the same program under internal business perspective,

conferences and publications under learning and growth perspective,

endowments, grants and level of student enrollment under financial

52

perspective. The limitation was that the goals and measures were validated

based on the feedback from limited number of people. This does not ensure

complete validity of the model.

Bailey et al (1999) have presented an exhaustive list of objectives

and measures that can be adopted under each perspective. Papenhausen and

Einstein (2006) tailored these, according to the needs of their institution to

show how the Balanced Scorecard approach, a performance management

system, could be implemented at a college of business. This was examined at

University of Massachusetts-Dartmouth, USA. This study points out that the

Balanced Scorecard approach is a versatile tool for education sector.

Identification and alignment of measures to the suit an organization

vision and mission of the organization is an important task while applying

BSC. Suggestion of a comprehensive guide for implementation of the

Balanced Scorecard approach in institutions including objectives and

measures is required. Also metrics has to be quantified to determine the

performance of institutions since what cannot be measured cannot be

controlled.

2.8 TECHNIQUES INTEGRATED WITH BSC

The balanced scorecard (BSC) is a multi-criteria evaluation concept

that highlights the importance of performance measurement. The literature

indicated that there a few decision making techniques are used with BSC like

fuzzy, ANP, AHP, CBR, DEA etc.

Bobillo et al (2009) present semantic fuzzy expert system for BSC

and the inference system using fuzzy if-then rules. The output of this system

is used to take appropriate decisions which improve the achievement of

strategic objectives of a company. Approach presented by Lee et al (2008) uses

fuzzy AHP with BSC for evaluating an information technology department in a

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manufacturing sector. The results of these will guide for improving strategies

for improving department performance. Authors Wu et al (2009) have used

fuzzy AHP with three MCDM (Multiple criteria for decision making)

analytical tools for evaluating banking performance based on BSC

methodology. This work highlights the critical aspects of evaluation criteria and

as well as the gaps to improve banking performance. Cebeci (2009) have

presented a fuzzy AHP approach with BSC for evaluating enterprise resource

planning (ERP) systems for a textile industry. The proposed MCDM fuzzy

AHP compares the ERP systems and chooses the best.

Using the four perspectives of BSC, Kuo and Chen (2008) applied

fuzzy delphi method to construct key performance indicators for introducing

mobility for service industries. Authors Ekel et al (2009) and Parreiras et al

(2010) have presented fuzzy relation modeling with based on consensus

scheme for group decision making and minimizing the discrepancy between

individual opinions. Research work by Yuksel and Dagdeviren (2010)

integrates fuzzy ANP with BSC to evaluate the performance level of business

based on its vision and strategies.

In education sector, Authors Wu et al (2010) assess the innovation

capital indicators of Taiwanese Universities using fuzzy AHP based on BSC

methodology. Fuzzy AHP was used to determine the weights of innovative

capital indicators and VIKOR method was used to rank the type of

Universities. Study by Tseng (2010) proposes a hybrid approach of fuzzy

ANP with BSC to evaluate performance of a private University in Taiwan.

From the above literature it is evident that fuzzy, ANP, AHP etc are

being integrated with BSC to find the performance of organizations. It is

being used to quantify some of the intangible measures. The review reveals

that in education sector fuzzy ANP has been used by one researcher. Also in

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all these cases, models were created to assess only a particular measure in a

certain perspective.

2.9 RESEARCH GAP

Many institutions measure success in terms of the salary package

drawn by their business graduates. This cannot be a measure since several

criteria needs to be assessed for grading the performance of an institution. The

real value of a business education is, on its impact over the years like training

future leaders, how to unlock one set of problems after another. The present

challenge for the top business school is to inspire researchers to be in even

closer contact with business leaders, to answer real-world needs. Due to these

demands in the market, it is becoming increasingly difficult to satisfy the

stakeholder’s of higher education. A balanced measure of all criteria (under

the four perspectives) affecting performance of institutions will help in

arriving at a realistic estimate. The measures will help in benchmarking and

motivate for continuous improvements.

From the literature it is evident; BSC has been applied in higher

educational institutions. However, data based validation of BSC in education

sector is less as seen in Table 2.2. With respect to this table only Chang and

Chow (1999), Nayeri et al (2008), Rompho (2004) have done data based

validation but there was no such framework for assessing the performance of

management institutions. A few researchers have worked on management

institutions (Bailey et al (1999), Chang and Chow (1999), Papenhausen and

Einstein (2006), Pineno (2007), Dorweiler and Yakhou (2005)).

Predominantly all the above researchers have only listed the objectives and

measures. Hence this study focuses on the establishing a framework for

performance assessment of management institutions. A refined framework for

assessing the performance of management institutions, using these objectives

and measures and arriving at metrics needs to be established. The variables

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influencing the performance in management institution also need to be

identified. The framework will help in quantifying the intangible parameters.

Using the metrics in the BSC framework, the institution can evaluate itself;

determine its performance level, set benchmarks and aim for continuous

quality improvement.

The review also indicates that there are several intangible measures

present, influences the performance. Very little research has been done to

quantify the same especially in education sector. Crisp values are obtained

only in ideal perfect conditions. In real time, the situation is always hazy

resulting in fuzziness. Hence fuzzy logic is found to be a versatile tool in

quantifying such fuzziness. However the review indicates a unified scoring

BSC is also not available in educational sector for assessing the performance

of institutions. A unified score will not only help in assessing the performance

of institutions but also would help to benchmark against itself better

performing institutions. This will aid the institute to continuously improve

itself on various fronts.