Citation:
Andy Neely, Does the balance scorecard work: an empirical investigation. RP 1/08, Cranfield University School of Management
Abstract:
Commentators suggest that between 30 and 60% of large US firms have adopted the
Balanced Scorecard, first described by Bob Kaplan and David Norton in their seminal
Harvard Business Review paper of 1992 (Kaplan and Norton, 1992; Marr et al, 2004).
Empirical evidence that explores the performance impact of the balanced scorecard,
however, is extremely rare and much that is available is anecdotal at best. This paper
reports a study that set out to explore the performance impact of the balanced scorecard by
employing a quasi-experimental design. Up to three years worth of financial data were
collected from two sister divisions of an electrical wholesale chain based in the UK, one of
which had implemented the balanced scorecard and one of which had not. The relative
performance improvements of geographically matched pairs of branches were compared to
establish what, if any, performance differentials existed between the branches that had
implemented the balanced scorecard and those that had not. The key findings of the study
are that while the Electrical division – the division that implemented the balanced
scorecard – sees improvements in sales and gross profit; similar performance
improvements are also observed in the sister division. Hence the performance impact of
the balanced scorecard has to be questioned. Clearly further work on this important topic
is required in similar settings where natural experiments occur.