The current issue and full text archive of this journal is available at www.emeraldinsight.com/0888-045X.htm Is the BSC rightIs the balanced scorecard right for for academic academic libraries? libraries? Michele M. Reid North Dakota State University, Fargo, North Dakota, USA 85 Received 17 October 2010Abstract Accepted 18 October 2010Purpose – The purpose of this paper is to consider the potential utility for higher educationalinstitutions, and in particular libraries, of the balanced scorecard (BSC) performance measurementtool, originally developed by Kaplan and Norton for use in businesses and since adapted for the publicand non-proﬁt sectors.Design/methodology/approach – The relevant literature was reviewed to ascertain key aspectsand functionalities of the BSC framework, survey implementations and determine perceptions of thesystem’s effectiveness and weaknesses, and – while the BSC has as yet been put into practice onlyinfrequently in libraries – treat its appropriateness for information service.Findings – The BSC supplements ﬁnancial accounting with non-ﬁnancial leading indicators to linkperformance drivers and outcome measures in cause and effect relationships that can predict futureperformance and drive a single organizational strategy. Also intended as a straightforward reporting“dashboard” revealing whether improvements in one area have been at the expense of another, theBSC is considered more effective as an aid in forecasting the overall health of an organization thantraditional accounting-based models. It provides a capacity to monitor obligations to stakeholders andto produce transparent and reliable ﬁnancial information, and the resulting internal controlenvironment can promote integrity and ethical values.Originality/value – Academic libraries may ﬁnd the BSC a useful approach in determining servicevalue, in demonstrating ﬁscal responsibility, and – through metrics focused on organizational goalsand strategy – in validating their role, as knowledge-based and networked environments, in thedelivery of a quality educational product to their customers.Keywords Academic libraries, Balanced scorecard, Leading indicators, Organizational strategy,Performance measures, Service valuePaper type General review What you measure is what you get [. . .] managers want a balanced presentation of ﬁnancial and operational measures (Kaplan and Norton, 1992, p. 71).IntroductionAs higher education institutions face increased competition for students and researchdollars, the globalization of educational offerings, the expense of emerging technologies,and pressures to practice ﬁscal constraint and accountability, they often look to thebusiness world for useful ﬁnancial tools. Some have seen in the balanced scorecard (BSC)a model with which to address these challenges from a customer service focus:questioning how to offer increased value to their students, and how they can improve The Bottom Line: Managing Librarytheir processes while containing and reducing costs. While, as yet, there have been few Finances Vol. 24 No. 2, 2011published reports of successful applications of the BSC in universities, its potential has pp. 85-95been realized in other settings (Beard, 2009) and, especially given the ﬁnancial needs of q Emerald Group Publishing Limited 0888-045Xuniversity libraries, its applicability should be explored. DOI 10.1108/08880451111169106
BL The balanced scorecard phenomenon The BSC is a performance measurement tool ﬁrst developed by Kaplan and Norton for24,2 the business sector (Kaplan and Norton, 1992), that subsequently evolved into a broader strategic management system and has been customized to meet the needs of a variety of environments and markets (Kaplan and Norton, 2001b). By 2002, 60 percent of Fortune 1000 companies had experimented with the BSC (Moxham, 2009, p. 744; Kaplan and86 Norton, 2005, p. 12), and its implementations in such companies as Best Buy, Cigna, DuPont, Exxon Mobil, Hilton Hotels, Ricoh, Southwest Airlines, Sprint, UPS and Wendy’s have been examined in detailed case studies (Kaplan and Norton, 2001b, 2009). By 2004, it had been adopted by 80 percent of large US companies, making it the nation’s “most popular” management tool for improving performance (Hillstrom, 2009). BSC use has since spread to the public and nonproﬁt sectors (Niven, 2003), including higher education (Beard, 2009; Dorweiler and Yakhou, 2005; McDevitt et al., 2008). The Mayo Clinic and the University of San Diego were early successful adopters in the non-proﬁt and academic realms, respectively (Kaplan and Norton, 2009). Indeed, the BSC “was received and used so enthusiastically and effectively” in recent years that Harvard Business Review listed it as one of the “75 most inﬂuential business ideas of the twentieth century” (Bible et al., 2006, p. 18), while Kaplan and Norton’s ﬁrst BSC monograph (Kaplan and Norton, 1996a) was chosen as one of the “100 best books of all time” by business columnists Covert and Sattersten (2009). Financial and nonﬁnancial measures The BSC model is distinct from previous performance measurement systems in that it includes ﬁnancial and nonﬁnancial measures, reﬂecting a balance between leading and lagging indicators of performance (measures that drive performance and outcome measures). Speciﬁcally, it is designed to supplement ﬁnancial accounting measures (lagging indicators) with performance criteria from three nonﬁnancial dimensions or perspectives (those of the “customer,” “internal business processes,” and “employee learning and development”) that provide leading indicators to support long-term planning. Companies can use the BSC to track ﬁnancial results “while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they will need for future growth” (Kaplan and Norton, 1996c, p. 75). In addition to managing traditional ﬁxed assets, the BSC process allows managers to transform organizations by leveraging their ability to exploit intangibles, such as customer relationships, product development, and intellectual capital (Bible et al., 2006, p. 18). It claims a further advantage over traditional measurement systems in linking long-term strategy with short-term targets, allowing the budgeting process to result in a better allocation of resources (Norreklit, 2000, p. 68). Not only are performance drivers and outcome measures to be seen as linked in cause and effect relationships that aid in predicting future ﬁnancial performance (Kaplan and Norton, 1996b), but spreading the metrics across the four ﬁnancial and nonﬁnancial perspectives can promote a shared vision and drive a single organizational strategy (Bible et al., 2006, p. 19). The BSC is also intended as a straightforward reporting mechanism or dashboard that allows executives to quickly determine whether they have improved in one area at the expense of another (Kaplan and Norton, 1992, p. 71). It is considered more effective as an aid to forecasting the overall health of an organization than traditional accounting-based models that tend to focus only on individual departments (Seraphim, 2006), or that provide data that are often “too aggregated to be of much help to
management” in determining overall strategy (DeBusk and Crabtree, 2006, p. 44). Is the BSC rightOther advantages include the capacity to monitor obligations to stakeholders and to for academicproduce transparent and reliable ﬁnancial information that can be used to createeffective internal control environments facilitating actions “based on integrity and libraries?ethical values” (Callaghan et al., 2007, p. 63).The basic BSC framework 87The basic scorecard asks managers to view their organizations from a variety ofperspectives built around four basic questions: (1) How do we look to shareholders (the ﬁnancial perspective, including such familiar measures as ROI, revenue, net income and cash ﬂow)? (2) How do our customers see us (the customer service perspective, including measures of customer satisfaction)? (3) What must we excel at (the internal process perspective, focusing on performance measures)? (4) Can we continue to improve in creating value (the staff development and learning perspective, focusing on knowledge creation and innovation) (Kaplan and Norton, 1992)?Frigo summarized the dynamic ﬂow within the four perspectives by characterizing theBSC as providing: A hierarchical framework that management can use to link or connect the unique strategic activities to the ultimate goal of ﬁnancial value creation. At the top of the framework is ﬁnancial performance, which is driven by a unique customer value proposition. This is in turn delivered by the right set of business processes (the value chain). At the base of the hierarchy is innovation and growth, which provide the capabilities and infrastructure for continually evolving value proposition and processes. The cause and effect linkages within the BSC hierarchy can be powerful tools for strategy evaluation (Frigo, 2002, p. 6).Kaplan and Norton underscored that ﬁnancial performance “provides the ultimatedeﬁnition of an organization’s success” (Kaplan and Norton, 2004b, p. 27). The basicbusiness BSC is designed to assist a company in creating sustainable growth inshareholder value (the proﬁt motive), and success with targeted customers provides aprinciple component for improved ﬁnancial performance. In contrast, the “strategies ofpublic sector and nonproﬁt organizations are designed to create sustainable value forcitizens and constituents” (p. 28). In adapting the BSC to ﬁt the public and non-proﬁtsectors, including government and higher education, Niven (2003) recognized thatﬁnancial measures “can best be seen as either enablers of customer success orconstraints within which the group must operate” (p. 34).Budgeting and the BSCSome adopters of the BSC claim it is a way to put “strategy back into the center of thebudgeting process,” and that it can be an effective replacement for the traditionalannual budget model in more fully integrating the budget within an organization’sstrategic planning process (Bible et al., 2006, pp. 21-22). Kaplan and Norton, however,viewed ﬁnancial budgeting as two related processes, with BSC organizations utilizingtwo separate budgets:
BL (1) An operational budget of nondiscretionary spending and expenses is determined24,2 by the volume and mix of services produced or delivered. Such a budget is dynamic in allowing for new opportunities and environmental changes. (2) A strategic budget includes discretionary spending on new capabilities and initiatives to enable future growth (Kaplan and Norton, 2001b, pp. 288-295).88 Discretionary spending is therefore directly linked to the organization’s strategy (Bible et al., 2006, p. 22), and may forecast how investments in learning and growth drive continuous process improvement and lead to increased customer satisfaction (Brewer, 2002, p. 46). Managing strategy with the BSC Kaplan and Norton outlined four processes that help managers link the BSC’s strategic objectives to actions: (1) Translating the vision, including clariﬁcation and consensus-building. (2) Communication and linking, including educating staff, goal setting, and linking rewards to performance measures. (3) Business planning, including setting targets, aligning strategic initiatives, allocating resources and establishing milestones. (4) Feedback and learning, including articulating the shared vision, supplying strategic feedback, and facilitating strategy review and learning (Kaplan and Norton, 2001b). With their focus on aligning ﬁnancial and nonﬁnancial measures with an organization’s vision and mission, Kaplan and Norton utilized complex strategy maps to illustrate the linkage of long-term goals to operations, including the cause and effect relationships between the BSC’s key performance indicators (KPIs) (Kaplan and Norton, 2004c). Strategy was further categorized into “strategic themes,” each connected logically to the customer value proposition and ﬁnancial outcomes (Kaplan and Norton, 2004a, p. 44). Challenges with designing scorecards DeBusk and Crabtree cautioned that those designing scorecards must: . Identify the best strategy for their organization or unit. . Select speciﬁc objectives to complement the strategy. . Select no more than 20-25 performance measures to track progress in achieving the strategic objectives. . Establish targets or goals for the performance measures (such as sales growth, market share, employee turnover, student graduation rates, etc.). . Communicate targets to managers and employees. . Encourage managers and employees to meet the targets by offering incentives. . Communicate the BSC to all levels of the organization or unit by developing departmental and employee scorecards complementing the broader organizational measures (DeBusk and Crabtree, 2006, pp. 44-46).
Letza outlined mistakes to avoid in BSC development, including: Is the BSC right . Do not measure the “wrong things right.” Make sure measures relate to the for academic organization’s overall strategic goals. With a choice of so many metrics, libraries? organizations must concentrate on a few key and appropriate ones. . Ensure that all aspects or activities directly relating to the organization’s strategic goals are measured. Letza noted that some managers tend to pick and choose what to measure and their BSCs do not produce a comprehensive picture. 89 . Some organizations have experienced cross-functional conﬂicts, as lines of authority may become blurred when initially implementing the new model (Letza, 1996, pp. 74-75).Reported beneﬁts and cost concernsLetza added that the BSC model’s effective deployment can: . Deliver information forming the backbone of an organization’s strategy. . Function as the “cornerstone” of an organization’s current and future success by balancing short-term, essentially ﬁnancial performance, with long-term growth opportunities. . Highlight performance by connecting ﬁnancial or service results with customer and market interfaces and employee motivation. . Act as an integrating tool, both horizontally (across functionality), and vertically (through levels of management), by communicating an organization’s priorities and business strategy. . Serve as a dynamic, continuous process of evaluating performance and redeﬁning strategy based on results (Letza, 1996, pp. 75-76).Users claim that the BSC has become their “key communication vehicle” for reporting,planning and budgetary processes, and observe that it can streamline communicationand eliminate unit “silos” (Kaplan and Norton, 2001a, p. 65). Despite its beneﬁts,however, the BSC can be expensive to develop and implement on a large scale.Specialized consultants are often needed to help map organizational strategy and aid inselecting relevant performance measures, while an organization’s existing informationsystems may need to be modiﬁed in order to provide the required input data (DeBuskand Crabtree, 2006, p. 46).Recent business researchDespite its increased acceptance, the BSC is not without its detractors, with recentdebates centering on whether it is ﬂexible enough to accommodate a networkedknowledge-based economy (Voelpel et al., 2006, pp. 43-60; Kaplan and Norton, 2006).These concerns may impact the way it is initially received in knowledge-basedorganizations such as libraries. Moreover, the failure rate of BSC implementation in thebusiness sector has been estimated at as high as 70 percent – attributable to factorssuch as not adequately communicating the BSC process and measures to allorganizational levels, a failure to develop a robust feedback or evaluation system, nottranslating BSC concepts into concrete actions, and not clearly operationalizingoutcomes and performance measures (Pforsich, 2005, p. 32).
BL While use and evaluation of the BSC model is still in an “embryonic stage,” recent24,2 studies seem to support the claim of its signiﬁcant effect on performance, including on ﬁnancial measures such as cash ﬂow and proﬁt (Iselin et al., 2008, pp. 71-83). In a survey conducted by DeBusk and Crabtree of members of the Institute of Management, accountants from more than 1,000 organizations reported that most ﬁrms (88 percent) regularly using the BSC experienced improvements in operating performance. A90 signiﬁcant majority (66 percent) also reported improvements in “bottom-line ﬁnancial results” (DeBusk and Crabtree, 2006, p. 46). The BSC and academic libraries With an expanding body of literature on successful BSC implementations in public and nonproﬁt sector institutions, academic libraries may want to consider the potential usefulness of the BSC in aligning ﬁnancial factors with their mission in the context of customer and stakeholder, human resources, and internal process requirements. The BSC can allow libraries to focus on efﬁcient ways to produce high quality service outcomes despite their reliance on usually limited inputs (Kettunen, 2007, p. 409). The BSC process is also ﬂexible, and can be used in conjunction with existing efforts already in place at the university, division, or departmental levels. These can include TQM and other continuous improvement models (Wongrassamee et al., 2003), enterprise risk management (Beasley et al., 2006), change management (Chesley and Wenger, 1999; Kaplan and Norton, 2001a, p. 64), and traditional accounting practices such as activity-based budgeting (Kaplan and Norton, 2001b, pp. 289-291). Additionally, academic libraries may ﬁnd scorecards can: . Help make the case for increased funding. A carefully developed BSC can tie the library’s budget more explicitly to strategic planning and align budget requirements more closely with the larger organization’s priorities. This can put the library in a stronger position from which to request university funds for strategic initiatives directly related to the institution’s broader mission, as well as to secure additional resources through alternative income sources, such as grants and endowments (McDevitt et al., 2008, p. 32). . Build customer and stakeholder awareness and demonstrate accountability. A BSC can increase customer and stakeholder awareness of how the library’s goals and objectives are directly related to ﬁnancial inputs. Outcomes can be linked to direct return on investment. . Provide creative metrics to support the library’s critical role within the university. A BSC could, for instance, facilitate integrating both ﬁnancial and nonﬁnancial measures of performance into reporting documents (McDevitt et al., 2008, p. 32). In today’s economic environment, budget justiﬁcations are based on more than just traditional output measures such as circulation counts, number of interlibrary loan requests ﬁlled, or number of reference questions answered. Libraries must demonstrate their value from the customer perspective, with metrics more directly related to student and faculty success. . Aid in assessment and accreditation. BSC data have been used successfully by faculty departments in self-assessment (McDevitt et al., 2008, p. 33). They can also demonstrate goal achievement to legislative and accrediting bodies (Dorweiler and Yakhou, 2005, p. 140).
. Encourage the use of internal controls to promote an ethical environment. The BSC Is the BSC right model can help facilitate asset management and cost control by taking into account for academic tangible and intangible investments and expenditures related to service delivery. The use of effective monitoring processes within the BSC framework may also lead libraries? to a more systematic focus on ethical behaviors (Callaghan et al., 2007, p. 63). . Improve productivity. The model is designed to link the contributions of each individual to an institution’s core objectives, as well as to promote linking 91 rewards with performance. The internal operations perspective includes an emphasis on continuous improvement in organizational effectiveness.Although early higher education applications provide base models (Dorweiler andYakhou, 2005, p. 140), the BSC must be tailored to each institution’s needs to besuccessful (Butler et al., 1997, p. 242). A generic approach, adapted from Niven (seeFigure 1) and presented in Figure 2, suggests how an academic library can begintranslating the core BSC perspectives into its organizational setting (Niven, 2003). Figure 1. Balanced scorecard for the public and nonproﬁt sectors
Once an academic library determines its needs, based on its vision and strategy, it can Is the BSC rightdevelop appropriate objectives, initiatives, targets and measures for each of the for academicoutlined perspectives along with detailed strategy maps in order to create acustomized, integrated BSC ﬁnancial and planning system. libraries?ConclusionAs the BSC process gains ground in the business world and in public and non-proﬁt 93sector institutions, including in knowledge-based and networked environments,academic libraries may ﬁnd it a useful approach in determining service value anddemonstrating ﬁscal responsibility. Through the use of metrics speciﬁcally focused onorganizational goals and strategy, academic libraries may better measure thoseservices most closely reﬂecting their organizational values in order to validate theircrucial role in the delivery of a quality educational product to their customers. Theprocess of implementing a BSC can provide opportunity for discovering what reallymatters to customers and stakeholders, as well as for determining how limited humanand ﬁnancial resources can be leveraged to drive service to increasingly higher levelsof performance and customer satisfaction.ReferencesBeard, D.F. (2009), “Successful applications of the balanced scorecard in higher education”, Journal of Education for Business, Vol. 84 No. 5, pp. 275-82.Beasley, M., Chen, A., Nunez, K. and Wright, L. (2006), “Working hand in hand: balanced scorecards and enterprise risk management”, Strategic Finance, Vol. 87 No. 9, pp. 49-55.Bible, L., Kerr, S. and Zanini, M. (2006), “The balanced scorecard: here and back”, Management Accounting Quarterly, Vol. 7 No. 4, pp. 18-23.Brewer, P.C. (2002), “Putting strategy into the balanced scorecard”, Strategic Finance, Vol. 83 No. 7, pp. 44-52.Butler, A., Letza, S.R. and Neale, B. (1997), “Linking the balanced scorecard to strategy”, Long Range Planning, Vol. 30 No. 2, pp. 242-53.Callaghan, J.H., Savage, A. and Mintz, S. (2007), “Assessing the control environment using a balanced scorecard approach”, The CPA Journal, Vol. 77 No. 3, pp. 58-63.Chesley, J.A. and Wenger, M.S. (1999), “Transforming an organization: using models to foster a strategic conversation”, California Management Review, Vol. 41 No. 3, pp. 54-73.Covert, J. and Sattersten, T. (2009), The 100 Best Business Books of All Time: What They Say, Why They Matter, and How They Can Help You, Penguin, New York, NY.DeBusk, G.K. and Crabtree, A.D. (2006), “Does the balanced scorecard improve performance?”, Management Accounting Quarterly, Vol. 8 No. 1, pp. 44-8.Dorweiler, V.P. and Yakhou, M. (2005), “Scorecard for academic administration performance on the campus”, Managerial Auditing Journal, Vol. 20 No. 2, pp. 138-44.Frigo, M.L. (2002), “Strategy and the balanced scorecard”, Strategic Finance, Vol. 84 No. 5, pp. 6-9.Hillstrom, L.C. (2009), “Balanced scorecard”, in Helms, M.M. (Ed.), Encyclopedia of Management, eNotes.com, Seattle, WA, available at: www.enotes.com/management-encyclopedia/ balanced-scorecard (accessed 14 December 2009).Iselin, E.R., Mia, L. and Sands, J.J. (2008), “The effects of the balanced scorecard on performance”, Journal of General Management, Vol. 33 No. 4, pp. 71-83.
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About the author Is the BSC rightMichele M. Reid is Dean of Libraries at North Dakota State University in Fargo. Following aBachelor’s degree, summa cum laude, in History and Spanish from the University of Central for academicFlorida, Reid earned a Master’s degree in library studies from the University of South Florida libraries?and a Master’s degree in medieval history from Rutgers University. She is an alumna of theHERS Bryn Mawr Institute for Women in Higher Education Administration and the 2010 UCLASenior Fellows Program, and is pursuing a PhD in Higher Education Administration. MicheleM. Reid can be contacted at: firstname.lastname@example.org 95To purchase reprints of this article please e-mail: email@example.comOr visit our web site for further details: www.emeraldinsight.com/reprints