Does the balance scorecard work: an empirical investigation

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.