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Balanced Scorecard practices amongst Thai companies: performance effects October 14, 2009

Posted by Bima Hermastho in Balanced Scorecard.
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Kittiya Yongvanich, Ramkhamhaeng University, Bangkok, Thailand
James Guthrie, Discipline of Accounting, The University of Sydney, Sydney, Australia
Acknowledgements

The authors appreciate the comments of the University of Sydney research team, including Fiona Crawford and Sara Haddad, and acknowledge two referees for their helpful comments. This research was funded by the Commission on Higher Education and the Thailand Research Fund, whose support is gratefully acknowledged.

Abstract

Purpose – The purpose of this paper is to provide a descriptive analysis of Balanced Scorecard (BSC) usage among companies on the Thai stock exchange; and to assess the performance effects of this BSC use.
Design/methodology/approach – Sample organisations were surveyed through a questionnaire and the results used to examine whether the extent and manner of BSC use are significantly associated with satisfaction with financial performance and whether higher types of BSC usage result in higher satisfaction with financial performance.
Findings – Around 33 per cent of companies that had implemented the BSC did not employ cause-and-effect relationships. The study found no significant association between types of BSC usage and company size. There were no significant differences in satisfaction and perceived benefits gained from using different types of BSC. Also, the extent of BSC use is not significantly different between different types of BSC usage. Further, the extent and manner of BSC use are not significantly associated with all performance variables.
Research limitations/implications – Owing to the small sample size, the results from the study make generalisation difficult. Future research may replicate the study using a larger sample size, testing financial performance implications with stock returns.
Originality/value – The paper examines whether BSC use actually results in the claimed benefits and positive performance effects.


Journal: Pacific Accounting Review, Volume: 21, Number: 2, Year: 2009, pp: 132-149
1. Introduction

Since its introduction in 1992, the Balanced Scorecard (BSC) has increasingly attracted interest among practitioners and academics. A variety of benefits, both non-financial and financial, are claimed to result from BSC use. For example, Kaplan and Norton (1996a) stated that the BSC can be used to: clarify and gain consensus about strategy; communicate strategy throughout the organisation; align departmental and personal goals to the strategy; link strategic objectives to long-term targets and annual budgets; identify and align strategic initiatives; perform periodic and systematic strategic reviews; and obtain feedback to learn about and improve strategy. Furthermore, these benefits are expected to ultimately result in improved financial outcomes. Several surveys report that the BSC is widely used in large companies in the USA and throughout Europe (Speckbacher et al., 2003; Marr, 2001; Silk, 1998; Williams, 2001). Despite widespread adoption of the BSC, little research has been done on the implementation and performance effects of the BSC concept (Davis and Albright, 2004, p. 136; Ittner and Larcker, 1998, pp. 205, 221; Malmi, 2001, p. 208; Neely et al., 2004).

Generally, implementation of new management technologies does not always achieve the claimed benefits. For example, Ittner et al.‘s (1997) study of a BSC compensation system in retail branch banks found no evidence that the scorecard approach enhanced branch managers’ understanding of business goals, plans for meeting these goals, or connections between the managers’ job and business objectives. Ittner et al. (2000) did not find evidence that a large bank’s BSC promoted increased strategic awareness. Malina and Selto (2001) indicated that more empirical evidence would be useful as most of the BSC literature is either normative prescription or uncritical reports of BSC “successes”. Further, those examining performance effects reported mixed results. Therefore, it is important to investigate whether BSC use actually results in the claimed benefits and positive performance effects.

The performance effects examined in this study include both self-reported satisfaction and actual financial performance. The BSC effect on satisfaction was examined in this study in order to compare results with prior studies that examined the BSC effect on satisfaction. However, self-reported satisfaction may not represent actual impacts of the BSC on financial performance. Therefore, this paper also investigates the BSC effect on actual financial performance. Findings in prior research have suggested that the extent and manner of BSC use may have different effects on company performance (see Hoque and James, 2000; Ittner et al., 2003; Malmi, 2001; Speckbacher et al., 2003). Most of the prior research examined is only one of two dimensions of BSC use; an exception is Braam and Nijssen (2004).

This study, therefore, examined the extent and manner of BSC usage among companies listed on the Stock Exchange of Thailand (SET) and the performance effects of this usage. Specifically, the objectives of the study were twofold:

  1. to provide a descriptive analysis of the extent and manner of BSC usage among SET-listed companies; and
  2. to assess the performance effects of the BSC use.

In order to achieve the first objective, the study developed a framework for classifying BSC usage into three different types, and this was used to examine the spread, implementation, extent and manner of BSC use in the sample companies, as well as expected benefits, perceived benefits gained, and satisfaction using a larger sample. To achieve the second objective, the study examined whether the extent and manner of BSC use are significantly associated with satisfaction or financial performance and whether higher types of BSC usage (the BSC usage that is consistent with Kaplan and Norton (1996a, 2001a) results in higher satisfaction or financial performance. Investigating BSC usage in Thailand is interesting because, so far, there is little published evidence on BSC usage in Thailand or in developing countries internationally. Additionally, even though the sample was comprised of listed companies, the sizes of the companies are relatively small compared to listed companies in developed nations. Therefore, this study provides evidence on BSC usage and performance implications among companies that are relatively smaller than those examined in prior research.

This study makes the following four contributions:

  1. it proposes a framework for examination of different types of BSC usage in practice;
  2. it provides a descriptive analysis of BSC implementation among SET-listed companies;
  3. it assesses relationships between different types of BSC usage and performance variables, that is, satisfaction and financial performance; and
  4. it adds to the body of knowledge in this area by improving the BSC instrument used in prior studies (e.g. Hoque and James, 2000; Speckbacher et al., 2003).

This paper proceeds as follows. Section two reviews related prior research and develops a classification of BSC uses and hypotheses. Section three describes the methodology of this study discussing data collection and measurements of variables. Section four provides a discussion of the results. The final section offers some concluding remarks and ideas for possible future research directions.

2. Literature review and hypotheses development

The initial development of the BSC simply comprised key performance indicators (KPI), i.e. a set of financial and non-financial measures for tracking short-term and long-term performance (Kaplan and Norton, 1992; Kaplan and Norton, 1996a). In 1996, the BSC was developed beyond the early “KPI version” to a strategy communication and implementation tool with an emphasis on linking strategy to operations via cause-and-effect relationships between “perspectives” and “measures” (Kaplan and Norton, 1996b). More recently it has been described as a management strategy, with an emphasis on its roles in driving change (Kaplan and Norton, 2001a). The focus of the earlier BSC literature was on how to implement the BSC and lessons learnt. Specifically, those studies looked to implementation processes with primary focuses on the architecture of BSC design and implementation guidelines (e.g. Ahn, 2001; Butler et al., 1997; Letza, 1996; Lohman et al., 2004; Papalexandris et al., 2004; Papalexandris et al., 2005) and the experience of implementation (e.g. Ahn, 2001; Kaplan and Norton, 2001b, 2001c; Malmi, 2001; Mooraj et al., 1999; Papalexandris et al., 2004). The conceptual development has led to various interpretations and uses of BSCs (Braam and Nijssen, 2004). The methodological approaches in these case studies of BSC implementation vary significantly in the sequence, content and number of implementation steps and phases (Papalexandris et al., 2005). Furthermore, Chenhall (2005) indicated that evidence on the adoption of strategic performance measurement, particularly the BSC, has been mainly anecdotal with little survey work to confirm the adoption and effects on desired organizational outcomes. Prior studies have called for more research on the implementation and performance effects of the BSC (Braam and Nijssen, 2004; Ittner and Larcker, 1998; 2001; Ittner et al., 2003; Malina and Selto, 2001).

Recently, the focus of the literature has moved away from implementation processes (as there is now evidence that the BSC has been adopted widely), to the benefits resulting from BSC implementation, particularly impacts on financial performance. However, prior studies examining the financial performance effects of the BSC reported mixed findings, which may be the result of different measurements of performance and the type of BSC usage employed (Braam and Nijssen, 2004). Self-reported satisfaction with the BSC, perceived organisational performance, and actual accounting and stock market performance are performance variables used variously in prior research examining performance effects of the BSC.

Hoque and James (2000) and Ittner et al. (2003) examined the association between the type of BSC usage and performance. Hoque and James (2000) measured BSC usage by the extent to which measures in the four perspectives of the BSC were used to assess the organisation’s performance. Ittner et al. (2003) coded BSC usage as yes or no, using a six-point scale, where 1=not considered, 2=implemented and abandoned, 3=considering, 4=implementing now, 5=used, 6=used extensively. Further work also shows that there is variation in the way the BSC is interpreted and used (Braam and Nijssen, 2004; Speckbacher et al., 2003). Notably, different implementation and usages of the BSC may have different effects on company performance (Malmi, 2001; Speckbacher et al., 2003). Further, Sandt et al. (2001) have suggested that future research should analyse different forms the BSC may take and examine their impact on managers’ satisfaction and performance. Some other studies (e.g. Davis and Albright, 2004; Malina and Selto, 2001; Malmi, 2001; Speckbacher et al., 2003) have considered the ways in which the BSC was used in their examination of BSC usage and its effect. Speckbacher et al. (2003) are notable for their proposed typology to analyse BSC usage and their analysis of spread, implementation, and benefits of the different types of BSC usage in German-speaking countries using a mail survey. However, they did not examine performance implications of each type of BSC used.

Based on the review above, we argue that it would be insufficient to consider either the extent or the manner of BSC use in assessing performance effects of the BSC, as both may affect performance. BSC usage should be measured along two dimensions – the extent and the manner of BSC use. Most prior research has examined only one of the two dimensions of BSC use, with the exception of Braam and Nijssen (2004). This study, therefore, investigates impacts of both the extent and manner of BSC use when examining performance effects of BSC usage. This study develops a classification of BSC usage and employs it in examining spread, implementation, the extent and manner of BSC use, expected benefits, user’s experiences, and satisfaction. In addition to providing a descriptive analysis of the implementation of the BSC in Thailand, this study also analyses the performance effects of the extent and manner of the BSC use. Additionally, and consistent with Ittner et al. (2003), performance was measured by both self-reported measurement satisfaction and actual financial outcomes (accounting returns).

Traditional financial measures and performance measurement practices have been seen to be inadequate for guiding decision making and evaluating firm performance for decades (e.g. General Electric in 1950 and the French Tableaux de Bord) (Banker et al., 2004; Canibano et al., 1999; DISR, 2001, p. 11; Ittner and Larcker, 1998; Kaplan and Norton, 2001b, 2001c; Leadbeater, 1999, p. 17; Malina and Selto, 2001). Since the early 1980s, various authors have called for greater reliance on non-financial measures for both decision making and performance evaluation (e.g. Dixon et al., 1990; Edvinsson and Malone, 1997; Johnson and Kaplan, 1987; Kaplan and Norton, 1992). To date, findings of research on economic benefits from the use of a diverse set of performance measures remain mixed (Ittner et al., 2003). Lingle and Schiemann (1996) and Hoque and James (2000) are studies that examined the relationship between the use of a diverse set of performance measures and their organisational performance implications. Both studies found positive organisational performance implications from the use of a diverse set of performance measures. However, others argue that the use of a diverse set of performance measures can have a negative effect on performance (e.g. Heneman et al., 1999; Schick et al., 1990). Choosing, analysing, and acting on the wrong non-financial measures can misdirect investment and worsen financial performance (Ittner and Larcker, 2003). The BSC provides managers with a structure for understanding business and its many interrelationships, which leads to improved decision making and problem solving (Kaplan and Norton, 1992, p. 79). The use of BSC should, therefore, help managers analyse more appropriated financial measures. Also, the BSC can provide the basis for setting local initiatives and promoting knowledge and learning and make strategy everyone’s everyday job (Kaplan and Norton, 2001a). Therefore, it is logical that the use of BSC should improve financial performance.

However, some prior research has shown that the BSC may have positive impacts (e.g. Davis and Albright, 2004; Hoque and James, 2000; Malina and Selto, 2001; Malmi, 2001) while Ittner et al. (2003) found that BSC usage was associated with higher measurement system satisfaction, but not with economic performance. Successful BSC use requires the ownership and active involvement of the executive, which would result in emotional commitment to the strategy, to the scorecard as a communications device, and to the management processes (Kaplan and Norton, 2001a). Higher executives’ commitment should lead employees to embrace and use the BSC to a greater extent. This implies that the level of BSC success varies according to the commitment and thereby extent of BSC use. Based on these normative arguments and mixed findings in prior research, a greater extent of BSC use is expected to result in a higher level of satisfaction with the BSC and financial performance. It is hypothesised that:

H1. Organisational performance is positively associated with the extent to which the firm uses the BSC.

This study modifies Speckbacher et al.‘s (2003) classification of three main types of BSC usage to highlight the distinction between single-loop and double-loop feedback processes (Argyris, 1977, 1991, 1993, 1994; Argyris and Schön, 1996). Accordingly the study distinguishes between: Type I BSC: a multi-dimensional framework for strategic performance measurement that combines financial and non-financial measures; Type II BSC: a Type I BSC that additionally describes strategy by using cause-and-effect relationships and also implements strategy by defining objectives, action plans, results and perhaps connecting incentives with BSC; and Type III BSC: a Type II BSC that also provides strategic feedback about whether the planned strategy is still appropriate in light of recent developments.

Hypotheses regarding performance implications of each of the BSC types are developed as follows. Type I BSC is expected to have a positive effect on performance but to a lesser extent than other types of BSC use. To the extent that they can be used as tools for communicating and implementing strategy, BSC Types II and III should have greater positive performance effects than Type I BSC. Type III BSC provides capacity for learning about the viability and validity of strategy (Kaplan and Norton, 1996a), and should result in more effective strategy than other types of BSC. Therefore, Type II BSC should have greater positive performance effects than Type I BSC, while Type III BSC should have greater positive performance effects than Type II BSC. Therefore, it is hypothesised that:

H2. Type II BSC will have a greater positive impact on organisational performance than type I BSC.

H3. Type III BSC will have a greater positive impact on organisational performance than type II BSC.

3. Research methods

This study examines BSC usage in Thailand among SET-listed companies using a mailed survey. This section comprises data collection, which discusses the sample selection, questionnaire development and survey procedure, and measurement of variables used.

Data collection

The sample companies were all SET-listed companies that have traded in the SET over the past three years. A survey package was mailed out to top management in February 2007. The survey package included a questionnaire with a personalised cover letter and a postage-paid, self-addressed envelope. The full questionnaire was developed[1] based on those used in prior research. The questionnaire was pilot tested with 50 Master of Business Administration students. Some changes were made to refine the design and clarify the meaning of some words. The personalised letter requested the addressee to participate in the survey by answering the questionnaire himself/herself or for another competent person to answer the questionnaire. Respondents were assured that their anonymity would be preserved. The procedure was undertaken to increase the response rate and the accuracy of the survey responses. A follow-up package was sent four weeks later.

Measurement of variables

This study assessed the performance implications of BSC usage by examining whether the extent and manner of BSC use were associated with:

  • managers’ satisfaction with the BSC; and
  • publicly available information on the company’s accounting return.

Stock market returns were not used in this study as they are deemed to reflect factors other than intrinsic value of the firms, particularly in such a small market in developing countries.

Extent of BSC use

The extent of BSC use was measured by asking respondents to what extent they agreed with each of the following questions:

  1. Are senior executives actively involved in formulating objectives, measures, and targets on the scorecards and the cause-and-effect linkages on the strategy map?
  2. Were the scorecards disseminated throughout the organization?
  3. How did the scorecards provide the basis for setting local initiatives and promoting knowledge and learning?

Scales on these questions ranged from 1 (disagree strongly) to 5 (agree strongly). It is argued that the greater respondents agreed with those statements, the more the organisation was using the information on the scorecards. The extent of BSC use represents the average response to these three questions.

Types of BSC usage

The type of BSC usage was measured by asking respondents which of the following components existed in their company’s scorecards: strategic objectives or strategic measures; cause-and-effect relationships; targets or action plans; linkage with reward systems; linkage between strategy and the budgeting process, analytic and information systems; and a process for learning and adapting the strategy. The BSC that had only financial and non-financial measures grouped to perspectives was classified as Type I BSC. Prior research (e.g. Atkinson et al., 1997; Hoque and James, 2000; Norreklit, 2000) considered cause-and-effect relationships as a defining characteristic of the BSC (Speckbacher et al., 2003); and the BSC would be subsequently linked to reward systems and budgeting processes (Kaplan and Norton, 1996a, 2001a). Therefore, the Type I BSC that also employed the cause-and-effect relationships were classified as Type II BSC. Type II BSC may also contain strategic objectives and strategic measures, target or action plans or linkage with reward systems and budgeting processes. These are all elements of management processes that constitute a single-loop feedback process. Since analytic and information systems and processes for learning and adapting strategy are structures for double-loop learning, the Type II BSC that also had linkages between strategy and analytic and information systems, or processes for learning and adapting the strategy were classified as Type III BSC. These criteria are summarised in Table I.

Satisfaction

The satisfaction measure was included to allow comparisons of the results to other studies assessing performance implications using satisfaction as a dependent variable (e.g. Sandt et al., 2001; Ittner et al., 2003). Three questions were used to measure a company’s satisfaction with the BSC:

  1. how well the BSC meets expectations (1=has not met expectations to 5=exceeded expectations);
  2. how well the BSC compares to the respondent’s concept of an ‘ideal’ system (1=not at all ideal to 5=very close to ideal); and
  3. overall satisfaction with the BSC (1=not at all satisfied to 5=completely satisfied).

These three questions were derived and modified from three questions used to measure a company’s satisfaction with its measurement system in Ittner et al. (2003). The satisfaction construct represents the average response to these three questions.

Actual financial performance

This study also assessed performance effects using actual financial performance. Actual financial performance was measured by sales growth over a three-year period, return on assets and net profit margin. The data were obtained from SETSMART, the SET database. These variables were consistent with the strategic themes for the financial perspective outlined in Kaplan and Norton (1996a). The accounting performance measures were measured contemporaneously with the date of the survey. They covered the period 2004-2006.

Exogenous factors

Consistent with Ittner et al. (2003), to control for other exogenous factors that affected changes in financial performance, an index representing the median performance of other companies in the same sector was included in the model. Other variables included in the model to control for other potential factors that can affect accounting return were size and growth opportunities. Size was measured by the log of assets (denoted SIZE) and the ratio of the book value of assets to the market value of equity (denoted BTOM), an inverse measure of growth opportunities in the models.

The models used to test the hypotheses in this study are as follows: Equation 1 where:

T0 =a dummy variable used in identifying types of BSC usage;

T1 =a dummy variable used in identifying types of BSC usage;

Extent =extent of BSC use;

SLGrowth3 =annualised sales growth over a three-year period;

SECSLGrowth3 =the median annualized sales growth of other companies in the same sector;

ROA =return on assets;

SECROA =the median return on assets of other companies in the same sector;

NPMargin =net profit margin;

SECNPMargin =the median net profit margin of other companies in the same sector;

SIZE =the log of assets; and

BTOM =the ratio of the book to market value of equity (an inverse measure of growth opportunities)

SATISF =satisfaction.

In total, 80 of the 362 questionnaires sent out in the first mailing were returned. A second mailing resulted in a further 46 returned questionnaires. The response rate, therefore, was 34.8 per cent. Three of the 126 respondents failed to complete the full questionnaire. The adjusted usable response rate, therefore, is 34 per cent.

To test for the existence of a possible non-response bias[2], Mann-Whitney tests for two independent samples were undertaken by assessing first and second mailing returns. No statistically significant differences in the median scores on company size measuring total assets and respondents’ self-rated BSC understanding score between the first and second mailing returns were noted, suggesting the absence of a non-response bias. Around 40 per cent of responding companies had more than 1,000 employees, with three companies leaving the question unanswered and the remaining companies having less than 1,000 employees. The majority of respondents worked in the area of general management, human resources management, and finance or accounting. Most of them had worked with the company for at least two years, with around 9.8 per cent of all respondents working in the company for less than two years.

5. Results
State of implementation

From Table II, approximately 17 per cent of the sample companies decided not to implement the BSC. The three most cited reasons for deciding not to implement were other comparable tools already in use; no essential advantages expected; and expected benefit is too unsure. Around 29 per cent were in the process of studying the BSC and no concrete steps had been taken. A total of 13 percent had already taken the first step to introducing the BSC or had already started a first BSC project. Around 40 per cent had implemented the BSC either in individual business units or for the entire company. Finally, two companies, or less than 2 per cent of the sample companies, had implemented and abandoned the BSC, citing reasons such as other comparable tools were in use; a lack of support from management and foreign parent company; and information systems unable to support the BSC.

Content

Of the 49 companies that had implemented the BSC, either in individual business units or extensively for the entire company, 41 companies started implementing the BSC after 2002. The remaining eight companies implemented the BSC between 1996 and 2001. No companies implemented it before 1996. These 49 companies were asked about their scorecards in detail.

Characteristics

To identify what type of BSC was used by the sample companies, this study also asked about how the most advanced scorecard had been used in each company. From Table III it can be observed that the BSC had been used among the sample companies primarily to identify strategic objectives and measures; to determine targets and action plans; and as a link to the organisation’s reward system.

Five companies did not identify strategic objectives or strategic measures. This differs from Speckbacher et al.‘s (2003) results, in which all BSC analysed contained either strategic measures or strategic objectives. Two of the five companies stated their reasons for this as not having a clear enough strategic plan to derive strategic objectives or strategic measures, and that the BSC is used at employee level for human resources management purposes. Interestingly, although the BSC literature has indicated that cause-and-effect relationships were a defining characteristic of the BSC concept (Hoque and James, 2000; Kaplan and Norton, 1996a; 2001a; Norreklit, 2000; Malmi, 2001), not all companies in the sample which had claimed to use the BSC had established them. In fact, 16 companies had not employed the cause-and-effect relationships. Most of those that had not established cause-and-effect relationships (i.e. Type I BSC) had been using the BSC for more than two years[3]. The reasons for this provided by two companies were: that they were in the initial stages of using the BSC; and that they found it difficult and time-consuming to establish cause-and-effect relationships. This adds to the findings that there is little use of the cause-and-effect relationships in practice (see also, Ittner et al., 2003; Malina and Selto, 2001; Malmi, 2001; Speckbacher et al., 2003).

Only one company did not use targets and action plans, and no reason for this was provided. Two companies provided reasons for not linking the BSC to the organisation’s reward system: there was no statistical data; and the information system could not support it. Reasons for not linking the BSC to the budgeting process and not using the BSC as the bases for evaluating potential investment were: there was no new investment; and they were in the initial stages of using the BSC. For the rest, the reasons provided for not having them were: they were not ready to do it but planned to do so in the future; and they were in the initial stages of using the BSC.

From the characteristics of the BSC used in the sample companies surveyed, their scorecards can be classified using the criteria specified earlier. The results are summarised in Table IV.

As indicated in Table IV, 16 companies or around 33 per cent of those claiming to have used the BSC were classified as Type I BSC. Of the remaining 33 companies, only five companies did not have either an analytic and information system designed to support strategy review or a process for learning and adapting the strategy. That is, the majority of the responding companies had used the BSC in a way consistent with Kaplan and Norton (1996a, 1996b, 2001a).

A test of whether the types of BSC used are associated with company size, measured by total assets, was conducted using the Kruskal-Wallis test. No significant results were found. This is consistent with Speckbacher et al. (2003), who also found no significant support for the hypothesis that size discriminates between different BSC types.

Expected benefits

The BSC literature claims a variety of benefits of BSC implementation (Speckbacher et al., 2003). The questionnaire used in this study contained a list of benefits claimed by Kaplan and Norton (1996a, 2001a). As with Speckbacher et al. (2003), respondents were asked:

  • to select all relevant benefits expected; and
  • to tick the three most important benefits expected.

There was also an option to name additional benefits not contained in the list. The results are shown in Table V.

From Table V, all the benefits of the BSC claimed by Kaplan and Norton (1996a, 2001a) were rated as relevant expected benefits to be gained from the implementation of the BSC by most of the sample companies. Only communicating strategy and focusing resources on strategy were rated as expected benefits to a lesser extent. All the benefits of BSC claimed by Kaplan and Norton (1996a, 2001a) were rated as expected to be gained from the implementation of the BSC by most of the sample companies, with improved alignment of departmental and personal goals to the strategy ranking the highest. Only communicating strategy and focusing resources on strategy were rated to a lesser extent. Other benefits specified were creating a culture for learning; improved relationships between management and employees; and employees became more active and systematically set priorities for their work.

Satisfaction

Satisfaction was measured using the three questions used in Ittner et al. (2003, p. 726). Actual responses to all three questions ranged from 2 to 5. Mean scores and standard deviation are reported in Table VI.

A test of whether the satisfaction scores from different types of BSC were significantly different from one another was carried out using the Kruskal-Wallis test. No significant results were found.

Extent of BSC use within the company

The extent of BSC use within the company was measured by three questions. The means and standard deviation of each question are shown in Table VII. A test of whether the extent of use is significantly different between different types of BSC using the Kruskal-Wallis test was conducted. No significant difference was found.

Performance test

The following sub-section reports on the testing for the three hypotheses and results shown in Tables VIII and IX. The following regression models were run to test the relationship between the dependent and independent variables as stated in H1, H2, and H3. The results are shown in Table VIII: Equation 2 Tests of multicolinearity via tolerance and variance inflation factor (VIF) indicate that multicolinearity does not pose a problem in interpreting these results. The extent and manner of BSC use are not significantly associated with satisfaction and all financial performance variables. Taken as a whole, these results do not support the hypothesis that the use of the BSC, regardless of the manner and extent of BSC used, impacts satisfaction and financial performance.

Performance tests in companies that have used the BSC for at least four years

The preceding tests were conducted on all data received. No distinction was made between those received from companies that had been using the BSC for some time and those who had recently implemented the BSC. If it takes some time before the financial impacts of using the BSC can be observed, inclusion of data received from those that had recently implemented the BSC may have understated the financial impact. Consistently, it is also more interesting to perform the test using satisfaction measures obtained from those companies that had been using the BSC for some time. The preceding performance tests were repeated using 27 companies that had been using the BSC for at least four years. Performance tests on companies that had been using the BSC for at least four years also yielded similar results. The results are shown in Table IX.

From Table IX, the results from performance tests conducted on the sub-sample of companies using the BSC for at least four years were similar to those using the entire sample. The extent and manner of BSC use were not significantly associated with satisfaction and all performance variables, except that a significant association between Type I BSC and sales growth over a three-year period was found. Taken as a whole, these results also do not support the hypothesis that the use of the BSC, regardless of the manner and the extent of BSC use, impacts satisfaction and financial performance.

6. Conclusions and limitations

Examining the manner and extent of BSC use, this study provides evidence on BSC usage and performance effects among listed companies in Thailand. It surveyed top management of all SET-listed companies about the BSC practices in their companies. Completed questionnaires were returned from 123 companies, yielding a response rate of around 34 per cent. Of these companies, 15 and 34 companies respectively had implemented the BSC in individual business units and extensively for entire companies.

The results of this study indicate that most companies in Thailand have used the BSC to obtain the benefits Kaplan and Norton (1996a, 2001a) suggested. Although cause-and-effect relationships were deemed to be a defining characteristic of the BSC concept in the BSC literature (Hoque and James, 2000; Kaplan and Norton, 1996a; 2001a; Norreklit, 2000, Malmi, 2001), around 33 per cent of companies that had implemented the BSC did not employ cause-and-effect relationships. Consistent with Speckbacher et al. (2003), this study found no significant association between types of BSC usage and company size.

All the benefits of BSC claimed by Kaplan and Norton (1996a; 2001a) were rated as benefits expected to be gained from the implementation of the BSC by most of the sample companies. Only communicating strategy and focusing resources on strategy were rated to a lesser extent. When asked about the three most important benefits expected to be gained from the implementation of the BSC, the companies ranked improved alignment of departmental and personal goals to the strategy the highest. Analysis of the relationship between the following variables: perceived benefits gained; satisfaction; and the extent of BSC use and types of BSC usage was conducted. The results show that there are no significant differences in perceived benefits gained and satisfaction from using different types of BSC. Also, the extent of BSC use was not significantly different between different types of BSC usage.

Performance tests conducted on the entire sample and sub-sample of companies that had used the BSC for at least four years showed that the extent and manner of BSC use are not significantly associated with all performance variables. It is therefore likely that superior performance results from a variety of factors. Therefore, implementation of the BSC does not automatically result in superior financial performance. The results of this study highlight the importance of other factors and they can be investigated using field research. The BSC may simply be a tool for organising data for analysis, but its differences lies in, although is not limited to, good management skills that make great use of data provided in the single- and double-loop feedback processes. However, owing to its small sample size, generalising the results in this study must be exercised with care. Future research may replicate this study using a larger sample and test financial performance implications with stock returns.

ImageEquation 1
Equation 1

ImageEquation 2
Equation 2

ImageTable IClassification of BSC
Table IClassification of BSC

ImageTable IIState of BSC implementation
Table IIState of BSC implementation

ImageTable IIICharacteristics
Table IIICharacteristics

ImageTable IVBSC types
Table IVBSC types

ImageTable VBenefits expected to be gained from using the BSC
Table VBenefits expected to be gained from using the BSC

ImageTable VISatisfaction
Table VISatisfaction

ImageTable VIIExtent of BSC use within the company
Table VIIExtent of BSC use within the company

ImageTable VIIIAssociation between performance and the extent and types of BSC use
Table VIIIAssociation between performance and the extent and types of BSC use

ImageTable IXAssociation between performance and the extent and types of BSC use in the sub-sample of companies using the BSC for at least four years
Table IXAssociation between performance and the extent and types of BSC use in the sub-sample of companies using the BSC for at least four years

Notes
  1. Available from the authors.

  2. Non-response bias results from those individuals who chose not to participate in the mail survey having very different profiles from those who responded (

    Malhotra and Peterson, 2006).

  • Speckbacher et al. (2003, p. 372) indicated that those who had not employed cause-and-effect relationships may have only recently started the process of implementation and/or they may have found it difficult to obtain cause-and-effect relationships.

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    Further Reading

    Chenhall, R.H., Langfield-Smith, K. (1998), "The relationship between strategic priorities, management techniques and management accounting: an empirical investigation using a systems approach", Accounting, Organizations and Society, Vol. 23 No.3, pp.243-64.

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    Kaplan, R.S. (1983), "Measuring manufacturing performance: a new challenge for managerial accounting research", The Accounting Review, Vol. 58 pp.686-705.

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    Corresponding author

    James Guthrie can be contacted at: j.guthrie@econ.usyd.edu.au

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