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Abstract

The Balanced Scorecard (BSC) is an instrument used for intervention and strategic management that promotes Organization Development and Change (ODC). The BSC has been implemented across many industries, including business, healthcare, government, and nonprofit organizations. The BSC is used worldwide to focus operations and align goals within organizations to drive the organization’s mission, vision, and strategy. Additionally, the BSC can be helpful to enhance internal and external stakeholder communication. This paper discusses the BSC as a tool for ODC. The purpose of this study is to explore existing uses, recognize organizational needs, and evaluate current and relevant benefits for using a BSC to manage organizational expectations and drive performance. This paper, from the authors’ perspectives, concludes by analyzing the value of using a BSC for intervention and decision making by leaders within organizations and how systems theory and thinking can be used to address the limitations of the BSC. An attempt is made to answer whether the BSC is still relevant in today’s organizations.

Plain Language Summary

The Balanced Scorecard for OD and Change

Purpose: This study explores the limitations, assumptions, and expectations of implementing a BSC within organizations. Methods: In order to address the research questions and contribute new knowledge to existing research, we utilized an integrated literature review approach. This study extends across the fields of organization development, organizational change, human resource development, and organizational behavior. In addition, we also reviewed actual data sources encompassing information on several fortune 500 companies to obtain information on actual organization experience. Conclusions: The Balanced Scorecard is an effective OD &C and strategic planning and management tool that helps organizations reach their goals and objectives by identifying the organization’s needs and aligning them with its most essential assets, that is, the people, customer relationships, and the capacity for innovation. The use of the Balanced Scorecard has steadily increased over the years as it showed organizations the benefit of analyzing intangible assets. Implications: Using systems theory and thinking to improve the BSC can provide organizations with a more comprehensive and nuanced understanding of their performance and the factors that influence it and can help organizations to develop more effective strategies for improving performance and achieving their goals. Limitations of your study. Our study used Integrated Literature Review. One limitation of an integrated literature review approach in addressing our research questions is that it may not be as comprehensive as other types of reviews, such as a systematic review or meta-analysis. However, the use of ILR was necessary as we did not focused on a specific research question but multiple research questions to guide an inquiry to achieve the purpose of the study.

Keywords

Balanced Scorecard decision-making Fortune 500 intervention organization development organizational change strategic management performance management systems theory systems thinking

Introduction

Cummings and Worley (2015) recognize intervention within organizations as a proactive approach that implements key actions with the specific intention of improving or changing an organizations performance. An articulated Organization Development and Change (ODC) intervention addresses critical issues to better align an organization for execution of objectives and maintenance of culture. According to Cummings and Worley (2015), Organization Development (OD) interventions vary from standardized programs that have been created and applied in many organizations to relatively distinctive programs explicitly designed for an organization or a department. The purpose of this paper is to consider the Balanced Scorecard (BSC) as an ODC instrument while reasonably understanding organizational assumptions, limitations, and expectations associated with its usage in practice.

Organizations are usually borne out of the necessity to provide critically needed services or products to their community or the various business markets. In so doing, they develop an identity that must be unique and unmatched compared to all other entities already in existence. Organizations grow and create organizational artifacts such as mission and vision statements, a code of ethics, long and short-term strategic plans, and other essential documents (e.g., by-laws, compliance requirements, etc.) as they mature. While the former elements are easily established as tangible documents, strategic plans tend to have some degree of variation and evolution from inception to implementation. Given that organizations must seek to meet shareholders’ expectations, it is paramount that strategic goals are identifiable and measurable in real-time. It is also essential to recognize that if a strategy is at odds with an organizational process or the organizational culture, leaders and managers will encounter resistance to change. That is, the anticipation of attitudinal factors cannot be underestimated.

Performance Management is an OD function that is crucial to any organization looking to remain viable and realize that to do so, they must continuously assess a multitude of factors affecting their overall processes. In order to successfully utilize performance management within an organization, it is essential that individual and team performance are continuously measured and aligned with the organization’s strategic goals (Aguinis, 2019). One performance management tool that helps to assess operational strategies, introduced by Robert Kaplan and David Norton in 1992, is the Balanced Scorecard (BSC). They shared the BSC as a conceptual framework for translating organizational strategic goals into actionable and measurable attributes (Dodangh et al., 2010). Like the name suggests, a BSC provides perspective across key performance indicators including non-financial or intangible metrics to help decision making within the organization.

There are four key perspectives of the BSC including Financial Perspective , which takes into account the profitability and accounting practices of the organization; the Customer Perspective , which values outcomes related to customer satisfaction and ways to meet customer needs; Internal Perspective , which prioritizes the organization’s processes to meet expectations effectively and efficiently; and the Learning and Growth Perspective , identifying, training, and executing meaningful metrics for perpetual organizational improvement. These perspectives are considered critical to the comprehensive value that BSC provides organizations to ensure their actions and behaviors are aligned with their overall strategic goals.

This conceptual review study specifically looks to address key gaps within existing literature. While the BSC has its use in performance management well documented, the link between the BSC, performance management and the BSC as an organization development tool has not been broadly discussed. The BSC is more than a reflective metric tool and we assert that it can effectively be used as an ODC intervention tool. This paper follows a logical schema. We first present the objectives of the study and the research questions needed to address our objectives, and the method of inquiry we used in answering our research questions. The epistemological framework of the BSC is discussed followed by a general review of the BSC and its various applications. The impact of BSC as an OD Intervention tool is discussed. Traditionally, the BSC is challenged by limitations, however, this paper leverages systems theory and thinking to analyze the value of utilizing the BSC as an ODC intervention and leadership decision making tool.

Objective, Research Questions and Method of Inquiry

Our study will explore the limitations, assumptions, and expectations of implementing a BSC within organizations. We used the following questions to guide our inquiry:

What do we know about the Balanced Scorecard?

What are the applications of the BSC in organizations?

Can the BSC be used as an OD intervention tool?

Is the use of the BSC still relevant in today’s organizations?

In order to address the research questions and contribute new knowledge to existing research, we utilized an integrated literature review approach. This study extends across the fields of organization development, organizational change, human resource development, and organizational behavior. In addition, we also reviewed actual data sources encompassing information on several fortune 500 companies to obtain information on actual organization experience.

The Balanced Scorecard

The BSC is widely used as an OD intervention and/or a strategic management tool used throughout many industries. “BSC was adopted by 64 percent of the top 1,000 American companies in 2000 and 20 percent of OECD members in 2003, and this trend continues” (Park et al., 2017). The BSC is commonly used by organizations around the world as a tool that aligns and focuses business operations, financial performance and organizational strategy in order to improve communication and goal achievement (Jiang & Liu, 2014; Kaplan & Norton, 1996, 2001; Mio et al., 2022; Yawson & Sutherland, 2010).

The Epistemology and History of BSC

The BSC is a well-known performance management tool that helps leaders and managers assess operational strategies, review performance metrics, and evaluate important non-financial objectives (Yawson et al., 2006). This tool was introduced in 1992 by Robert Kaplan and David Norton. However, the concept and phrase “balanced scorecard” is believed to have been coined in 1987 by Arthur M. Schneiderman (Schneiderman, 1998). Although it was formally developed as a management tool by Norton and Kaplan, pioneering work started when several French process engineers developed the “dashboard” (Tableau de Bord) of performance measures in the early 20th century. Additionally, General Electric began a similar performance initiative in the1950s, which also provided a foundation for Norton and Kaplan.

A balanced approach to organizational development is required if an organization is to function effectively and be sustainable. Companies within the private sector have traditionally focused on profitability as the sole indicator of performance. Public sector agencies have focused on achieving stated outputs and/or attracting public support and further funding. A balanced approach assumes that diverse perspectives, including the internal processes and the client or customer demands, sustainability and critically essential stakeholder needs are recognized during an intervention approach (Mio et al., 2022; Norreklit, 2000).

Benefits from using a BSC are traditionally noted in large organizations and Malagueño et al. (2018) were able to extend the fiscal and intangible performance enhancements to middle and small enterprises. Notable financial performance enhancements were seen along with increased organizational capacity, innovation and efficiency (Malagueño et al., 2018).

Public sector organizations adopted the BSC, as a private sector best practice, to integrate and measure traditionally intangible performance like those including customer, stakeholder, and employees while focusing on the organization’s mission (Smith & Sutherland, 2002; Voelpel et al., 2006).

With the recent and growing economic impact of nonprofits, it is also important to note that nonprofits also drive toward measurable performance (Soysa et al., 2019). For nonprofits is it important to directly measure mission and strategy within the BSC process as to be able to respond to trends more quickly (Soysa et al., 2019).

Before the Balanced Scorecard was created and utilized, companies would rely strictly on financial information and reports to ascertain how they were doing. They would use the financial figures to determine whether they were profitable and what changes were needed to add additional value and grow the business. However, it became apparent that relying exclusively on financial data was not sufficient to obtain a well-rounded and accurate view of the company and its performance. Hence, Kaplan and Norton hoped their “Balanced Scorecard” invention would fill the void and discover what additional factors should be assessed when judging the viability and performance of a company, its staff, and daily processes. Kaplan and Norton were able to accomplish something significant in that their discovery allowed businesses to visually measure financial results alongside performance toward intangible objectives (Kaplan & Norton, 2007). Before Kaplan and Norton, businesses focused on reports showing past performance; a reliable view but limited.

Conversely, the BSC connected traditional financial performance data to additional performance criteria like customer satisfaction, processes within the organization, and business development in a way that enhanced competitive advantage (Hegazy et al., 2022; Kaplan & Norton, 2007). Using a balanced scorecard, companies could now link performance data to short-term actions and long-term strategy.

The Balanced Scorecard—A Review

As the conceptualization and explanation of new frameworks and methodologies can often be problematic, we will use a car analogy to help convey the main points. Analogies are often employed as a tools to help communicate complex themes and we can use the idea that the balanced scorecard is to the organization what an instrument panel is to a driver in a car. The instrument panel of a car informs the driver about the level of fuel, water engine oil, and all other indicators that work together for the car to operate efficiently with the goal being the destination (Kamensky, 1999).

Like the instrument panel in the car, the BSC brings together a broad compilation of performance metrics and indicators to help managers translate the organization’s mission and strategy into actions that facilitate data driven decision making. Consequently, this deliberate alignment provides the framework required to serve as a control and strategic measurement system (Kaplan & Norton, 1992, 1996, 2001, 2007). The BSC has four main perspectives divided into internal and external perspectives. The external perspectives consider how the organization is perceived by outside contributors. These are defined as the Client/Stakeholder and Financial perspectives (Kaplan & Norton, 1993). The internal perspectives of Internal Business and Employee Learning & Growth evaluate the execution and continuous improvement within the organization (Kaplan & Norton, 1993). Figure 1 shows a diagrammatic representation of the BSC. All four perspectives work toward the attainment of an organizational goal (Anjomshoae et al., 2019; Bahl et al., 2022). The vision of an organization is more dependent on the external perspectives. The following section, which is drawn substantially from Yawson et al. (2006), defines the main components of the BSC and its relevance and value to OD.

Figure 1.

Diagrammatic representation of the BSC (Adapted from Kaplan & Norton, 1993).

The Elements of a Balanced Scorecard

This Organizational Development positioned model of a balanced scorecard centers around an organizational goal. The organization’s vision or future plans also influences how goals are achieved. Additionally, both internal and external perspectives are essential for creating a diverse organizational picture for performance. Internal perspectives relate mostly to human capital, the biggest asset of many organizations, and internal research processes. This perspective can be further divided into the Learning & Growth of Employees and Internal Business. Learning & Growth of Employees includes those efforts to train, develop, and grow the talent of internal human resources holistically within the organization. While Internal Business evaluates how the organization delivers to client and customer expectations by producing their unique product, service, or expected result. Alternately, external perspectives focus outwardly on the customer and end-users of the product or service. In public organizations specifically, external interests relate to the source of funding. External perspectives can be further divided into Clients/Stakeholders and Financials. Client/Stakeholder perspective reflects on the externally projected perception intended by the organization in consideration with how clients and customers actually view the business. Whereas Financial gives consideration to the financial influences (government policies, economics, social trends, etc.) that impact fiscal strength and development.

By no means is the balanced scorecard a stand-in for financial channels, but a compliment to better grasp and track an organization’s future growth. The BSC breaks down statistics, strategies, facts, and improvements and disseminates them to the employees and shareholders. Employees and shareholders are essential to the success of the company’s future and understanding of its core values. The BSC is a tool that connects results with employees. This connection creates value by allowing employees to see how their work contributes to the while business. This relationship with business performance, as generated by the BSC, helps drive employee interest in the business performance (Molina et al., 2014).

A benefit offered by the BSC, rather than a view of historic data offered by traditional tools, is a future looking perspective of financial performance linking current actions with tomorrow’s goals (Kaplan & Norton, 2007). The four perspectives previously mentioned are the core areas in developing a BSC to monitor an organization’s goals. First, the customer’s perspective is a valuable concept. If a company does not inquire and focus on their needs, they become dissatisfied with poor performance and find other outlets that can give them what they desire. Secondly, an organization must obtain and keep knowledgeable employees. Training in technology and functions is necessary, but the employee’s ability to continue to focus on self-improvement is highly sought. There is nothing better than having an employee acquire additional knowledge to improve one-self and to improve the organization in the long run. Increasing communication of organizational objectives and strategy and sharing with the employees needed to execute the actions supports overall success (Kaplan & Norton, 2007). Third, obtaining accurate financial data to see where improvement needs to be made and adjusted with currently implemented strategies. The organization can keep accurate, organized, and detailed documents and decide where to cut back and divert money if lacking specific areas.

Lastly, the internal business perspective illustrates to management how well the overall mission and business is performing. It displays how the targeted clientele’s services, products, or information provide top-quality amenities and meet requirements. While research shows that there is no one-size-fits all solution to drive performance, the BSC facilitates an environment where experience leads to knowledge collection and ultimately guides informed decision making (Al-Khouri, 2014). The BSC is used to translate the vision, communicate, and link the strategy throughout the organization. The BSC also integrates business plans to achieve strategic goals, including feedback and learning results in organizational actions, evaluate the mission and strategy. It allows the organization to reflect real-time to maintain direction toward long term initiatives (Kaplan & Norton, 2007).

Various Applications of the BSC

As organizations evolve and adapt, so too must their strategic goals. A BSC offers a comprehensive way forward to position organizations that find it useful to become more efficient and effective organizations by aligning interdepartmental objectives and functions with organization strategy (Ardakan et al., 2010). While there may be limitations to BSC’s absolute generalizability, it has a place in the business world, especially on performance management, where it provides organizations a realistic gauge of their strategic alignment. A Balanced Scorecard is a management tool with the ability to evaluate goal execution and achievement of the organization’s performance. The Balanced Scorecard delivers a platform to quantify and assess performance measures and goals directly translated from the organization’s Mission and Vision statements (Rigby & Bilodeau, 2015).

Performance Management

Performance Management is crucial to any organization looking not only to remain viable but also to realize that to do so, they must continuously assess many factors affecting their overall processes. Performance management is an active process where goals are defined, execution is measured, and employee resources are developed in support of organizational goal attainment (Aguinis, 2019). The balanced scorecard is an enhanced system of identifying and addressing additional business aspects, with the ultimate goal of finding problem areas (as well as what is already being done effectively) so that management can implement and/or update specific processes to rectify obstacles or bottlenecks, and thus continue improving company procedures for future sustainability and growth. Businesses have begun to embrace these principles because they know how important it is to understand whether or not their internal processes are working and how they affect their overall output, external stakeholders, clients, customers, etc. Because this “causality” was realized, there is now importance on all business areas’ interconnectedness. When utilizing a balanced scorecard it is critical that internal organizational processes and external viewpoints, like stakeholders, are balanced and equally valued in terms of navigating the increasingly complex and competitive business environment (Yawson & Sutherland, 2010). For the balanced scorecard (and the company) to be effective, managers must pay significant attention to a variety of performance categories including financials, customer satisfaction, internal execution, research & innovation, and employee development (Yawson & Sutherland, 2010). Particular emphasis should be placed on employees. Human capital is an organization’s most important asset. Efforts must be made to cultivate a happy/healthy work environment, resulting in engaged/motivated employees, willing to grow with the company and be an essential part of its success.

Human capital as one of its most considerable assets and the BSC noted as a widely used tool for measuring and controlling strategic performance, the dependency between an organization’s people and performance seems inevitable. Connecting compensation programs and reward systems to BSC performance has been used to link accountability, encourage buy-in, and foster employee engagement (Albertsen & Lueg, 2014).

Employee Engagement

Employee engagement is critical in organization development and change. Engaged employees are loyal and committed to their organizations, which makes them more invested in contributing to the company’s goals (Lee et al., 2020; Upadhyay & Palo, 2013). The balanced scorecard has many benefits, including providing a link between corporate strategy and individual employees. As proposed by Upadhyay and Palo (2013) the balanced scorecard can contribute toward developing a more engaged workforce. Thompson and Mathys (2008) proposed that employee engagement should be included as a fifth perspective on the balanced scorecard.

Upadhyay and Palo (2013) noted employing a BSC can establish the conditions that are necessary for employee engagement. They refer to Saks’s (2006) research, which establishes six antecedents for employee loyalty, commitment, and engagement at work. These conditions include job characteristics, perceived support from the organization, perceived support from their supervisor, reward & recognition, procedural justice, and distributive justice Saks’s (2006). Kahn’s model asserts that three psychological conditions must be present for complete engagement, including meaningfulness, safety, and availability (Upadhyay & Palo, 2013). Implementing the balanced scorecard creates these conditions that enable employee engagement, contributing to more effective scorecard implementation and the achievement of strategic goals. Thompson and Mathys (2008) build on this essential concept of employee engagement in performance management. They argue that employee engagement is so critical for strategic success that the scorecard should include an employee engagement perspective understanding the needs of the organizational culture (Thompson & Mathys, 2008, p. 139).

Adding the employee engagement perspective to the balanced scorecard would result in more initiatives that focus on creating an effective culture and work environment. It would also allow for the measuring and tracking of outcomes related to the organization’s culture. Kaplan and Norton’s scorecard does not disregard the employee, the model focuses on the learning and development aspect, as it supports performing operational processes.

One primary driver for including this additional perspective is an engaged employee’s critical role in creating an engaged customer. Research by the Gallup Institute has shown that creating engaged customers is more critical than having satisfied customers. The findings also indicate a strong relationship between engaged employees and engaged customers. Engaged employees, directly or indirectly, can help create that emotional connection for customers by creating more positive experiences (Thompson & Mathys, 2008).

Some challenges in implementing the employee engagement perspective on the scorecard would be establishing how to measure that emotional connection that constitutes actual engagement accurately. Further, the measures would have to be accepted across an industry to compare results effectively. Thompson and Mathys (2008) point out that some organizations have tools to validate employee engagement information. The Gallup 12 includes a series of questions, for example, that incorporate elements of the job, how well the company provides training and tools, the quality of relationships, the recognition process, and the culture (Thompson & Mathys, 2008). An employee engagement perspective on the balanced scorecard would help establish employee engagement as a priority and support building a culture of engagement. This would allow further link employee performance to the customer and customer-oriented strategies and overall corporate strategy.

In the early 1990s, the US Congress mandated that public organizations become more focused on achieving goals and meeting citizen needs and they began to rate senior executives on customer and employee satisfaction. This change from being mission or results-driven to customer satisfaction driven required agencies to implement a method of measuring strategic goals for non-financial metrics like employee and customer satisfaction (Schay et al., 2002).

Origination of the Balanced Scorecard in the Public Sector

One of the most challenging hurdles of utilizing the BSC in the federal government or any public or nonprofit sector organization is that most of these organizations do not operate for financial gain. They seek to provide mission outcomes, not superior financial performance. Although the BSC aims to take a holistic approach to managing an organization’s stakeholders, it is ultimately a tool to achieve business success. To account for this, some users of the BSC created a modified BSC where not only is the financial perspective replaced with a fiduciary perspective, but it runs concurrently with the customer perspective. This alleviates some of the pressure between the customer being both the financial stakeholder and recipient of the service, as is the case with taxpayers and the government. Distinguishing these stakeholders is necessary because determining who the real customer is, ensures the organization aligns its goals appropriately. Balancing the funding source’s satisfaction and the recipient is crucial to maintaining a reliable funding source while ensuring the organization meets its vision, mission, and ethical goals. Unfortunately, at times the funding source and the recipient of the benefit could be at possible odds. In this situation, a potential risk would be the loss of a funding source based on the methods the organization uses to provide benefits; or due to poor services, the beneficiaries would look elsewhere for assistance (Kong, 2010).

Zawawi and Hoque (2020) conducted a case study with a government agency that implemented the BSC method for its adaptability and longevity. This study revealed the BSC’s successful implementation, widespread adoption across the organization, and top-down support. The agency appreciated the BSC’s efficient style of linking strategically across service centers and aligning to strategic goals (Zawawi & Hoque, 2020).

With a greater emphasis on customer satisfaction, the US federal government developed multiple surveys for their agencies to measure feedback about their services. The surveys were aimed at measuring customer complaints, on-time performance, and repeat business. As “service goals” became a priority within the public sector, a disconnect was uncovered where only 46% of employees, in 1995, recognizes this as important, however, by 2000, that number was 71% (Schay et al., 2002). Internal process development ensures employees are consistently and efficiently able to meet the organization’s customers’ needs. The US federal government uses established databases and informational systems to ensure timeliness. Each agency can measure the specific rate at which a service is provided to determine if the agency is meeting its customer’s needs.

One way in which the BSC is well matched for governmental agencies is in its implementation; the BSC is an “analytical top-down deployment of goals.” In nonprofits, where employee and volunteer input are part of the culture, this may not be well received. Still, in the hierarchical nature of the federal government, top-down measures are expected by most workers (Kong, 2010).

The BSC has proven to be effective at linking key performance indicators in causal relationships with desired outcomes. With increased competition for resources amongst commercial, public sector, and nonprofit entities, transparency and responsibility for how and where government funds are used has become a priority. For organizations to remain true to their core missions, the BSC allows organizations to manage their strategic goals for success.

Additional Applications and Uses

The BSC has been used across industries, organizations, and around the globe (Albertsen & Lueg, 2014). The BSC has had notable influence and documented impact in numerous fields such as architecture, management, marketing, and accounting (Amer et al., 2022). It is essential to also reflect on additional applications of the BSC. Manville et al. (2019) used the balanced scorecard framework to measure knowledge transfer, encourage innovation, and promote stakeholder engagement at higher education institutions. The authors believed that the BSC framework could support turning “tacit knowledge into explicit knowledge” (Manville et al., 2019). The researchers stated that applying the balanced scorecard framework toward knowledge transfer could preserve and transfer knowledge across organizations.

Not only is organizational health influenced by knowledge transfer, but decision-making regarding project selection is also essential. Antmen and Yilmaz (2020) applied the BSC perspectives of financial, customer, internal business, learning, and growth to evaluate project selection’s critical decision and ultimately dictate where organizational resources are invested. The model, the authors, developed utilizing the BSC was found to generate results that allowed organizations to consider budget, resource, and schedule constraints to help support alignment to strategic organizational goals. It should also be noted the review of literature also identified several other applications of the BSC, including supplier performance, research and development, technology, and sustainability evaluations (Antmen & Yilmaz, 2020).

Like applying the BSC framework in supplier performance, quality management has also benefited from implementing balanced scorecards. A robust quality management process has been shown to positively effect organizational performance, cost, efficiency, and even innovation (Nicoletti Junior & Oliveira, 2019). In a study of one company, Nicoletti Junior and Oliveira (2019) found a logical partnership between the BSC process and its alignment of the organization’s strategy and operational initiatives to contribute to the business’s quality management.

Additional use of the BSC also included Firk et al. (2020), who evaluated the application of a BSC to minimize the risk of loss due to unintended disclosure of information during earnings conference calls. Earnings calls are used to share information between managers of an organization and investors. Traditionally, an open nature conference call is used to deliver information and leverage the BSC’s financial and non-financial perspectives to support the lower cost of capital (Firk et al., 2020).

Extending the BSC, Asiaei and Bontis (2019) propose to include corporate social responsibility (CSR) as an additional parameter alongside the traditional revenue, process, and development metrics for a comprehensive view of sustainable performance offered by a BSC. Because there is an argument for both a positive and negative relationship between CSR and fiscal performance, there may exist an indirect relationship that is uniquely suited for the BSC framework (Asiaei & Bontis, 2019). Like CSR, an environmental aspect of organizations has been considered part of the BSC (Khalid et al., 2019). Since one of the unique benefits of a BSC is the connection it has to an organization’s mission, vision, and goals, aspects like CSR and environmental performance could have some level of connection into the BSC if it is appropriate for the organization (Khalid et al., 2019).

Other market of its use is the healthcare industry. BSC is frequently used in healthcare as a framework for quality improvement (Bohm et al., 2021). “BSC in various healthcare settings undergo adaptation from the original description in order to suit a specific health care context” (Bohm et al., 2021). In 2000, Duke Children’s Hospital became the first healthcare organization to implement the BSC and documented remarkable impact. “The hospital was able to convert 11 million dollars of losses into four million dollars of profit” (Amer et al., 2022).

The application of the BSC extends through many industries, organizations, and entities. The Balanced Scorecard Institute (BSI) gathered data on organizations that used a balanced scorecard identifying their industry and location. Figure 2 represents the percentage of organizations identified to be using a BSC by industry. Figure 3 shows the number of organizations identified to be using a BSC by sector. The industries where the BSC was used most frequently include higher education, health care, manufacturing, financial services, banking, and information services.

Figure 2.

Percentage of organizations using a BSC by industry.

Figure 3.

Quantity of organizations using a BSC by industry and country (BSI, n.d.).

Additionally, to allow for the data’s visual representation, we added a summary category titled other. This category was a summation of single instances of industry representation. This “other” category included organizations like Finnforest, Foster Farms, Hilton Hotels, Homestead Technologies, Link List, McCord Travel, Media General, Pfizer, Southern Gardens Citrus Processing, The Handleman Company, The Thompson Corporation, Unicco Service, and UPS.

The data collected by the BSI included 123 organizations. A significant portion of the organizations using the BSC are from the United States; however, this data also represented organizations located in Canada, Germany, Japan, Netherlands, Sweden, and the United Kingdom. Figure 3 also shows the number of organizations identified to be using a BSC by industry and country.

Potential Roadblocks in Applying the BSC in Different Areas

There are a number of potential roadblocks that organizations may face when applying the Balanced Scorecard (BSC) model in different areas. Some of the main roadblocks include:

Complexity: One potential roadblock is the complexity of the BSC model, which can be time-consuming and resource-intensive to implement (Sanchez-Marquez et al., 2020). Organizations may need to invest in training and resources to ensure that employees are able to understand and use the BSC model effectively.

Lack of buy-in: Another potential roadblock to the successful implementation of the BSC model is a lack of buy-in or engagement from employees (Hepler et al., 2016). If employees are not fully committed to the BSC process and do not see the value of the model, they may be less likely to support its implementation or to use it effectively.

Misalignment with strategy: Another potential roadblock to the successful implementation of the BSC model is misalignment with the organization’s strategy (Wagner et al., 2014). If the BSC objectives are not closely aligned with the organization’s overall strategy, it may be difficult to effectively use the BSC to drive performance improvement.

Short-term focus: Another potential roadblock is the short-term focus of the BSC model, which emphasizes the achievement of specific targets and objectives in the short term rather than long-term sustainability (Voelker et al., 2001). This can create tension between the need to achieve short-term results and the need to focus on long-term goals and objectives.

One-size-fits-all approach: Some critics argue that the BSC model is a one-size-fits-all approach that may not be suitable for all organizations, and that it may need to be customized to fit the specific needs and goals of the organization (Lucianetti et al., 2019). This can be a roadblock for organizations that are looking to apply the BSC model in a way that is tailored to their specific needs.

Limited focus on external factors: Another potential roadblock is the limited focus of the BSC model on external factors, such as the competitive environment or external stakeholder expectations (Sinha et al., 2019). If the BSC does not adequately capture these external factors, it may not provide a complete picture of the organization’s effectiveness.

Impact of BSC as an OD Intervention

In its simplest form, the scorecard can be used as a framework for unveiling issues pertinent to organization development (OD) and, therefore, a potent OD intervention tool. If considered in the context of a specific organization, each of the perspectives provokes and questions existing practices and facilitates the consideration of changes. The BSC as an approach or system involves considering and developing specific objectives and indicators (or measures) under each perspective to provide an evenhanded look at organizational performance in support of data driven decision making. In this fuller sense, using a BSC recognizes that there are many parts to an organization’s overall performance. While there is recognized value in identifying and operationalizing indicators for each of the perspectives, one of the key strengths of the BSC is that it provides perspective by drawing together and linking performance drivers across the various organizational components (Kaplan & Norton, 2001; Smith & Sutherland, 2002; Yawson & Sutherland, 2010).

Relevance and Value of the BSC as an OD Intervention Tool

As the BSC has been utilized and redesigned throughout the world, several versions have seen major, significant, and minimal changes. Perkins et al. (2014) looked to define and evaluate the various types of BSC’s. A detailed summary of what makes a plan fit the defined BSC version’s characteristics can help personalize implementation and design. Perkins et al. (2014) identified three different generational evolutions of the BSC along with eight distinct versions. Versions 1.0 and 2.0 are directly descendent of the work and reframing of Kaplan and Norton’s BSC. Version 3.0 was designed by Gavin Lawrie and Ian Cobbold. BSC versions can be simplified thus: BSC 1.0 is the classic Kaplan and Norton version from 1992, BSC 2.0 is similar to the BSC 1.0 version but with a strategy map, and 3.0 implements the destination statement of how the organization will look in the future (Anjomshoae et al., 2019; Jabeen & Behery, 2017; Perkins et al., 2014).

As the BSC generations evolve, consistent organizing of the versions will make it more available to those companies looking to implement a BSC. Consideration for implementations across different needs and complexities may also be relevant for public sector organizations (Smith & Sutherland, 2002; Voelpel et al., 2006), nonprofits (Soysa et al., 2019), Small and medium enterprises (Malagueño et al., 2018), sustainability focused (Mio et al., 2022), and even humanitarian relief organizations (Anjomshoae et al., 2017). Additionally, the versions’ consistency allows those using the BSC to understand and review the other versions available to their organizations. While the BSC was more predominant, it is important to note that there were other comparable organizational evaluation tools, including enterprise risk management which looked to manage and mitigate risk across the organization (Beasley et al., 2006). While the main pieces of a BSC are fairly agreed upon by real-world users, the ability to design and adapt a BSC to meet the company’s type is open to interpretation and creativity.

Integrating Bolman and Deal’s Framework Into the BSC

Bolman and Deal (2008) have explained that everyone has a personal and preferred frame that allows them to establish and explain behavior by collecting information and making judgments. The four frameworks proposed by Bolman and Deal (2008) are the Structural, the Human Resource, the Political, and the Symbolic. The intent of these different yet key organizational aspects is to provide an integrated perspective to enhance the efficiency and effectiveness of an organization. When developing the four frameworks Bolman and Deal (2008) explored the less certain areas of organizations specifically including:

“We are not sure what the problem is.

We are not sure what is really happening.

We are not sure what we want.

We do not have the resources that we need.

We are not sure who is supposed to do what.

We are not sure how to get what we want.

We are not sure how to determine if we have succeeded” (pp. 1–2).

As discussed earlier, with the BSC’s four perspectives, the questions posed by Bolman and Deal (2008) in developing their framework are the same questions the BSC perspectives seek to address. It is, therefore, essential for future work to integrate the Bolman and Deal’s framework into the BSC. Using the Bolman and Deal framework as the starting point in constructing a BSC as an organizational development intervention tool is very promising and requires future diagnosis. Merging Bolman and Deal’s framework and the balanced scorecard, in our contention, would be a very powerful OD and change intervention tool.

Systems Theory and Thinking as a Means to Improve the BSC

Due to the BSC’s overwhelming popularity, many organizations have established it successfully, while others have noted areas of improvement. One critique of the BSC is that positive or negative changes within one of the frameworks may or may not be the result of a causal relationship with the other organizational frameworks (Perkins et al., 2014). For example, due to the complex systems and mutually dependent perspectives that exist within organizations, it is nearly impossible to positively correlate an intentional learning and growth improvement initiative with a positive waterfall improvement in business practices, customer perspective, and financial performance. At times, the inter-reliant relationship between the perspectives could lead to miscalculations, correlation without causality, or even inaccuracies.

Though widely adopted, many organizations have struggled to transform the BSC concept to a usable tool (Anand, 2016; Soderberg et al., 2011). In a 2004 analysis of the evolution of the BSC concept Lawrie and Cobbold (2004) suggest that while Kaplan and Norton continued to better establish the BSC concept in response to a trend of ambiguity and poor implementation of the concept by many firms, operationalizing the concept is still a challenge. Supporting this claim, author, and management consultant Sanjiv Anand suggests that only 50% of organizations that implemented a BSC program continue to have a successful one (Anand, 2016). Like Lawrie and Cobbold (2004), Anand (2016) attributes this high failure rate to inadequacies in implementation. To increase the chances of success of BSC implementation, Soderberg et al. (2011) proposed a five-level BSC taxonomy scheme designed to provide managers with a tool to plan their implementation and benchmark their progress.

Room for Improvement

There is no single best performance measurement and management system. A study conducted by Pollanen and Xi (2015) examined how organizational characteristics affect the potential of the BSC’s outcome. The Pollanen and Xi (2015) study showed that strategy, industry, quality focus, organizational structure, culture, and ownership structure contribute to how effectively the BSC is implemented (Pollanen & Xi, 2015). By linking the BSC to organizational characteristics, this will reduce levels of poor performance while supporting the organization’s culture and structure. If these characteristics are not considered at the development stage, the BSC’s success could be at risk and therefore future research should consider performance benefits of the BSC in relationship to fit with the organization (Pollanen & Xi, 2015).

Kureshi (2014) hypothesized that complex organizations require a balance between knowing and doing and that the BSC may provide a relevant and actionable metric. Assessing the widespread adoption of the BSC, Kureshi (2014) reports on its adaptability as a contributing factor; but warns that the data is inconclusive and the success measurement elusive. Kureshi (2014) highlights two BSC problems: partial implementation and development of BSC goals without stakeholder participation. Also, Kureshi (2014) lists 10 major issues with the BSC, including the following: the scorecards do not measure ethics; the scorecards do not align goals and measures effectively; the scorecards do not penetrate below senior management; the scorecards do not link targets and incentives effectively; and, finally, the metrics are often simplistic or—worse—arbitrary. We contend that Systems Theory and Thinking (ST&T) can be used to address these deficiencies aforementioned.

Addressing the Limitations of the BSC With Systems Theory and Thinking

Systems Theory and Thinking (ST&T) are discussed across and interwoven throughout many aspects of business literature. The term “systems” can be summarized as the connected relationship between each individual’s influences within a group or organization and the combination of the complex way those individuals influence the network to the group itself or even across other groups or organizations (Straussfogel & von Schilling, 2009). Because systems are based on the complex connections of relationships found in so many places like nature, society, businesses, organizations, and sciences, the study of systems theory is also highly complex and multifaceted. Systems theory is an interdisciplinary field of study that includes game theory, cybernetics and chaos theory, the theory of autopoiesis, complexity theory, and dynamic systems theory (Straussfogel & von Schilling, 2009; Yawson, 2015).

Systems are often compared to living organisms because of how they evolve, grow, change, and adapt. The BSC process allows organizations the opportunity to capture the heartbeat of the system in relation to its measured performance. The BSC as the tool that measures the organization’s output also leads the way for evolution, growth, change, and adapting to increase performance. Modern organizations must include ST&T within their balanced scorecard process to understand how BSC actions will affect the organization (Ahmed et al., 2020). Additionally, the BSC as a long-term measurement tool allows organizations to visualize performance changes, considering system delays (Ahmed et al., 2020). Barnabè (2011) connects causal delays due to system dynamics into the BSC process to influence the effectiveness of actions resulting from BSC data leveraging an understanding of the system’s causal relationships.

Many of the BSC limitations recognized in literature are focused on a linear use of BSC information driving organizational actions. Akkermans and van Oorschot (2002) collected the prevalent BSC limitations: the simplistic single directional nature of the BSC parameters, lack of real time action and effect data, unsubstantiated validation, majority internal perspective, and the weak connection between strategy and organizational process. The researchers’ used a two-staged approach to systems dynamics modeling and simulation to identify practical contributions to embed a causal understanding of the organizational systems into the BSC to overcome limitations challenged by existing literature. Barnabè (2011) refers to integrating system thinking with the BSC as “dynamic Balanced Scorecards.” By bringing together the knowledge of ST&T and the BSC process, the benefits of the Kaplan and Norton BSC can be retained whilst providing a platform for understanding and exploring the complex relationship dynamics within an organization (Barnabè, 2011). Yawson (2009) posits that System Dynamic Modeling can be used to represent the ever-changing business environment, account for the cause-and-effect relationships, and provide context for timing limitations associated with actions resulting from BSC measures.

ST&T enhances the BSC process by recognizing and mapping the complexity of organizational relationships, involving feedback in the decision-making process, provisioning for the causal relationship between system components, and responding to the intentional connections between operations and strategy. Systems theory and thinking can be used to improve the Balanced Scorecard (BSC) by providing a framework for understanding the interrelationships and dynamics within an organization and its environment. By using systems theory and thinking to analyze the BSC, organizations can gain a deeper understanding of the relationships between different performance indicators and the factors that influence them. This can help organizations to identify the root causes of performance issues and to design interventions that address these issues more effectively.

Systems theory and thinking can also help organizations to anticipate and plan for potential changes in the external environment, such as changes in customer demand or technological developments (Rajan et al., 2023). This can be particularly useful when developing long-term strategic plans, as it allows organizations to anticipate and respond to potential disruptions or opportunities.

Conclusion

In conclusion, our conceptual review has addressed the following questions: What do we know about the Balanced Scorecard? What are the applications of the BSC in organizations? Can the BSC be used as an OD intervention tool? Is the use of the BSC still relevant in today’s organizations?

The Balanced Scorecard is an effective OD &C and strategic planning and management tool that helps organizations reach their goals and objectives by identifying the organization’s needs and aligning them with its most essential assets, that is, the people, customer relationships, and the capacity for innovation. The use of the Balanced Scorecard has steadily increased over the years as it showed organizations the benefit of analyzing intangible assets. The Gartner Group identified that more than 50% of organizations within the United States had implemented a Balanced Scorecard system by the end of 2000 (Marr, 2019). Organizations had transformed their objectives from being focused on past performances and redirected their focus to synergizing their strategic planning and execution goals.

A 15-year study of a Fortune 500 company’s BSC was undertaken to explore the question of why the BSC has endured over time as a tool of strategic planning (Malina, 2013). The study tracked the utility of the BSC to a company undergoing significant changes over time. Malina (2013) reported the following reasons for the durability of the BSC. First, the scorecard provided a useful feedback loop as the company changed. With this feedback loop, the BSC changed with the company. Secondly, the BSC proved to influence behavior across the organization. Central to the BSC’s durability, flexibility, and relevance was the tool’s focus on balanced, numerical, and non-numerical factors. As Malina (2013) noted, “it appears the company…has reached a balance between objectivity and subjectivity.”

Overall, the BSC model offers a range of potential advantages for organizations looking to align business activities with their vision and strategy, improve internal and external communication, and monitor progress toward strategic goals. However, it is important for organizations to carefully consider the potential critiques of the BSC model and to customize the model to fit the specific vision and strategy. Using systems theory and thinking to improve the BSC can provide organizations with a more comprehensive and nuanced understanding of their performance and the factors that influence it and can help organizations to develop more effective strategies for improving performance and achieving their goals.

Footnotes

Acknowledgements

None

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Ethical Approval

This is not applicable to this research.

ORCID iD

Robert M. Yawson

Data Availability Statement

Data sharing not applicable to this article as no datasets were generated or analyzed during the current study.

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Systems Perspective of the Use of the Balanced Scorecard for Organization Development and Change

Abstract

Plain Language Summary

Keywords

Introduction

Objective, Research Questions and Method of Inquiry

The Balanced Scorecard

The Epistemology and History of BSC

The Balanced Scorecard—A Review

The Elements of a Balanced Scorecard

Various Applications of the BSC

Performance Management

Employee Engagement

Origination of the Balanced Scorecard in the Public Sector

Additional Applications and Uses

Potential Roadblocks in Applying the BSC in Different Areas

Impact of BSC as an OD Intervention

Relevance and Value of the BSC as an OD Intervention Tool

Integrating Bolman and Deal’s Framework Into the BSC

Systems Theory and Thinking as a Means to Improve the BSC

Room for Improvement

Addressing the Limitations of the BSC With Systems Theory and Thinking

Conclusion

Footnotes

Acknowledgements

Declaration of Conflicting Interests

Funding

Ethical Approval

ORCID iD

Data Availability Statement

References