Article review of “The balance of balanced scorecard”: for Advanced management accounting study

Article review of “The balance of balanced scorecard”

 

How to present this article in Harvard reference format?

Nørreklit, H., 2000. The balance on the balanced scorecard – a critical analysis of some of its assumptions. Management Accounting Research, 11(1), pp.65–88. https://doi.org/10.1006/mare.1999.0121

 

What are the key research issues the article wants to address?

The article aims to address the following key research issues:

1.    Validity of the Balanced Scorecard (BSC) Model: The paper examines whether the balanced scorecard is a valid model for achieving the results it promises, considering it is widely used as both a performance measurement and strategic management control system. It critically investigates some of the key assumptions underlying the BSC, especially those related to causal relationships among measures and its ability to function as a feed-forward control system.

2.    Alignment of Strategy and Actions: The study explores whether the balanced scorecard can effectively align the strategy as planned with the strategy as actually executed through organizational actions, including whether it can handle the problem of strategy implementation.

3.    Causality Among Measures: It questions the assumption of causal linkages among the balanced scorecard’s perspectives (organizational learning and growth, internal business processes, customer perspective, and financial measures), suggesting that these linkages may be more logical than causal, which has implications for performance anticipation and management control.

4.    Organizational and Environmental Rooting: The paper investigates whether the balanced scorecard ensures sufficient rooting both within the organization (employee and managerial buy-in) and in relation to the external environment. It highlights concerns about the top-down, hierarchical nature of BSC implementation and the resulting gap between planned strategy and actual strategic behavior within firms.

5.    Improving and Developing the BSC Model: The research also looks to contribute to enhancing the clarity and conceptual foundations of the balanced scorecard and to suggest theoretical directions for developing the model to reduce existing problems and increase its validity as a strategic management control tool.

In summary, the article focuses on critically analyzing the assumptions underpinning the balanced scorecard, especially regarding causality, strategic implementation, organizational acceptance, and overall validity as a strategic control and measurement system.

 

Describe two main theories employed in this article.

The article primarily employs the following two main theories:

1.    Balanced Scorecard Theory (Kaplan and Norton, 1996): The balanced scorecard (BSC) is a strategic performance measurement and management control system that translates an organization's vision and strategy into a coherent set of performance measures. It integrates financial and non-financial measures across four perspectives — financial, customer, internal business processes, and learning and growth. The BSC aims to link outcome measures and their performance drivers in a causal chain, thus functioning as a feed-forward control system. It also seeks to align departmental and individual goals to overall organizational strategy, providing both strategic measurement and control.

2.    Porter's Competitive Strategy Theory (Porter, 1980, 1985): The article relies on Michael Porter's concept of strategy, which emphasizes that competitive strategy formulation involves relating a company to the competitive forces in its industry environment. According to this theory, strategy should be based on competitive market segments to be served, followed by identification of the internal business processes the firm must excel at to deliver value to customers. Thus, competitive strategy is seen as environment-driven rather than driven by core competencies or internal resources, which should be adapted to fit the environment.

These two theories underpin the article’s critical analysis of the balanced scorecard. The article evaluates whether the BSC's assumptions about causal linkages among perspectives and its strategic control effectiveness hold true when strategy is understood as environment-driven, competitive positioning à la Porter.

 

Describe 3 main claims of the article in terms of Toulmin's model of argument.

Applying Toulmin's model of argument, the article presents the following three main claims, along with their supporting grounds, warrants, and qualifiers:

1.    Claim 1: The cause-and-effect relationships among the four perspectives of the balanced scorecard are problematic and may not validly exist in practice.

• Grounds: Kaplan and Norton’s balanced scorecard is based on the assumption of causal chains linking financial, customer, internal business process, and learning and growth measures, but these cause-and-effect relationships are difficult to empirically prove at the firm level and may be ambiguous or based on concepts like finality rather than clear causality.
• Warrant: A feed-forward control system like BSC requires valid causal assumptions to anticipate performance accurately; invalid causal assumptions lead to faulty performance indicators and dysfunctional organizational behavior.
• Qualifier: This claim is made with the qualification that causality is difficult to firmly establish and the model’s ambiguity weakens its predictive and control power.

2.    Claim 2: The balanced scorecard is not a fully valid strategic management control tool because it does not ensure organizational or environmental rooting, leading to a gap between planned strategy and actual strategic actions.

• Grounds: The BSC’s hierarchical top-down implementation approach struggles to engage lower-level managers and employees effectively, risking poor internal acceptance and implementation. Moreover, it inadequately addresses environmental dynamics like external shocks or strategic leaps requiring interactive and adaptive control.
• Warrant: Effective strategic control requires both internal commitment and environmental responsiveness; tools lacking these will fail to align strategy with realized actions.
• Qualifier: The claim acknowledges that while BSC takes some strategic momentum control into account, it does not sufficiently handle dynamic or unexpected environmental changes.

3.    Claim 3: The balanced scorecard needs theoretical and methodological adjustments to improve its validity and usefulness as a strategic control tool.

• Grounds: The invalid assumptions about causality and the hierarchical control approach in the BSC result in suboptimal performance and limited impact; suggestions include adopting more interactive control processes, improving environmental and organizational rooting, and refining concepts used in the model.
• Warrant: Refining the control methods and conceptual clarity will make the BSC more realistic and effective in managing strategy and performance.
• Qualifier: These are proposed theoretical directions rather than fully empirically tested solutions.

These claims clarify the article’s critical evaluation of the balanced scorecard’s assumptions and practices, proposing directions for improvements grounded in theory and analytical reasoning.

** reference:  a collection of management accounting notes