Table of Contents Introduction 3 The Balanced Scorecard debate 3 The Balanced Scorecard and Small to Medium Enterprises 4 The Balanced Scorecard as a Top-Down model 5 Review of literature 5 Findings 6 Ways to influence the success of the Balanced Scorecard in Small to Medium Enterprises 6 The limitations of this study 7 Conclusion 8 Appendix 9 References 13 Bibliography 15 Introduction With reference to appendix 1, the balanced scorecard (BSC) is a performance management strategy (PMS) (Niven, 2002: 3) that is now used by businesses all over the world to combine business vision and strategy to the activities of organisations (Pandey, 2005; Atkinson, 2006). Created by Kaplan and Norton in 1990 (Niven, 2002: 4) the BSC’s goal is to improve internal and external communications, and monitor performance against strategic goals (Pandey, 2005). However, there have been issues regarding the BSC for small-to-medium enterprises (SMEs) where questions have been raised about the BSC’s suitability for SMEs as opposed to larger corporations (Johanson, 2006; Rompho, 2011). This paper aims to explore the debate of how good the BSC is as a PMS for SMEs by investigating a number of case studies about the BSC in SMEs while comparing the factors that influenced conclusions.The Balanced Scorecard debate There is a debate about the BSC’s validity where there are a number of advantages and limitations seen in the use of the model. The BSC’s popularity is influenced by the way in which it supports the strategic relevance of corporate activities by linking them to long-term goals, basing measurements on relevant activities (Figge, 2002; Atkinson, 2006). Nevertheless, it was still cited in a 1998 KPMG report that the failure rate of the BSC was nearly 70% (Johanson, 2006) which could question some reasons behind the popularity of it. Another advantage in the use of the BSC is that it combines financial and non-financial factors, recognising a relationship between them and responding to the desire of both being included in PMSs (Atkinson, 2006; Pandey, 2005). However, this casual relationship across the four dimensions has come under scrutiny because it has been said that this is only an assumption e.g. customer satisfaction might not always increase customer loyalty and financial gain due to neo-classical economic analysis where customers are satisfied due to lower prices which negatively affect profits (Salem, 2012; Pandey, 2005). Another advantage is that the BSC recognises employee satisfaction unlike other PMSs (Salem, 2012). However there has also been a debate about whether or not measures actually support strategies. There was also a study with a Greek software company that concluded with measures not achieving a satisfactory level of affect that also supports the view of measures only being assumptions (Johanson, 2006). The Balanced Scorecard and Small to Medium Enterprises SMEs have found challenges in using the BSC (Manville, 2007). Large ...

1. Table of Contents
Introduction 3
The Balanced Scorecard debate 3
The Balanced Scorecard and Small to Medium Enterprises 4
The Balanced Scorecard as a Top-Down model 5
Review of literature 5
Findings 6
Ways to influence the success of the Balanced Scorecard in
Small to Medium Enterprises 6
The limitations of this study 7
Conclusion 8
Appendix 9
References 13
Bibliography 15
Introduction
With reference to appendix 1, the balanced scorecard (BSC) is a
performance management strategy (PMS) (Niven, 2002: 3) that
is now used by businesses all over the world to combine
business vision and strategy to the activities of organisations

2. (Pandey, 2005; Atkinson, 2006). Created by Kaplan and Norton
in 1990 (Niven, 2002: 4) the BSC’s goal is to improve internal
and external communications, and monitor performance against
strategic goals (Pandey, 2005). However, there have been issues
regarding the BSC for small-to-medium enterprises (SMEs)
where questions have been raised about the BSC’s suitability
for SMEs as opposed to larger corporations (Johanson, 2006;
Rompho, 2011). This paper aims to explore the debate of how
good the BSC is as a PMS for SMEs by investigating a number
of case studies about the BSC in SMEs while comparing the
factors that influenced conclusions.The Balanced Scorecard
debate
There is a debate about the BSC’s validity where there are a
number of advantages and limitations seen in the use of the
model. The BSC’s popularity is influenced by the way in which
it supports the strategic relevance of corporate activities by
linking them to long-term goals, basing measurements on
relevant activities (Figge, 2002; Atkinson, 2006). Nevertheless,
it was still cited in a 1998 KPMG report that the failure rate of
the BSC was nearly 70% (Johanson, 2006) which could question
some reasons behind the popularity of it. Another advantage in
the use of the BSC is that it combines financial and non-
financial factors, recognising a relationship between them and
responding to the desire of both being included in PMSs
(Atkinson, 2006; Pandey, 2005). However, this casual
relationship across the four dimensions has come under scrutiny
because it has been said that this is only an assumption e.g.
customer satisfaction might not always increase customer
loyalty and financial gain due to neo-classical economic
analysis where customers are satisfied due to lower prices
which negatively affect profits (Salem, 2012; Pandey, 2005).
Another advantage is that the BSC recognises employee
satisfaction unlike other PMSs (Salem, 2012). However there
has also been a debate about whether or not measures actually
support strategies. There was also a study with a Greek software

3. company that concluded with measures not achieving a
satisfactory level of affect that also supports the view of
measures only being assumptions (Johanson, 2006).
The Balanced Scorecard and Small to Medium Enterprises
SMEs have found challenges in using the BSC (Manville, 2007).
Large corporations are unlike SMEs regarding three main
factors; evolution, uncertainty and innovation (Rompho, 2011).
SMEs are exposed to market changes that affect them greater
than larger corporations, driving their needs for drastic changes
more frequently. The problem with this issue is that a BSC for a
SME can end up with new measures that require more time and
planning to create, while old measures become obsolete forms
of wastage (Rompho, 2011). Furthermore, constant changes can
also be too complex for employees and managers to follow
(Rompho, 2011). Another limitation regards the customer
perspective of the BSC in SMEs where complexity can arise
because it focuses on operations in response to customer needs,
impacting the resources of SMEs more than large corporations
(Marques, 2012). In some cases, entrepreneurs of SMEs may not
feel the need to use the BSC because they are naturally
concerned and closely involved in their business, giving them
the ability to lead operations using their skills to create a
greater visibility and proximity to customers (Marques, 2012).
Although SMEs have found difficulties with the BSC, there are
some benefits that SMEs can have using this model. The BSC
can help define strategies in SMEs (Marques, 2012) and they
have different benefits to be gained regarding the BSC when
compared to large corporations. SMEs benefit from descriptive
prioritised objectives in their strategies that influence enhanced
strategic management processes and large corporations gain
from the effective communication of their strategies (Rompho,
2011). However, there are issues regarding the BSC’s efficiency
that have been raised as a link to failures (Atkinson, 2006).

4. Although, Atkinson mentions about another PMS tool, created
in 2006 by De Waal and Gerritsen-Medema, evaluating the
efficiency of PMS tools and can enhance use of the BSC
(Atkinson, 2006). This is a sign of innovation and growth for
the BSC showing that although it has failed numerously;
strategists are still creating new ways to strengthen their results
with the use of other PMSs.
The Balanced Scorecard as a Top-Down model
The BSC has been described as a top-down model and has
characteristics that are different to bottom-up models
(Johanson, 2006). Bottom-up structures tend to be suited
towards learning and exploration whereas top-down structures
relate to dictation and have been criticised for being
unambiguous, while supporting management exploitation over
exploration strategies (Mom et al, 2007). Due to the BSC’s top-
down structure, it has also been criticised for spreading
paradigmatic understandings that can cause problems at the
lower ends of a company (Johanson, 2006) and has been
suggested as unsuitable for extra top-down control by Professor
Claude Lewy (Atkinson, 2006). Authors believe that the BSC
can be implemented at different levels or divisions of a
company to strengthen the communication of strategies, to
avoid top-down structure limitations (Agostino, 2012).
However, smaller companies should be affected less by these
challenges meaning some smaller SMEs may have an advantage
in having closer business operations and less people.Review of
literature
There are four case studies that will be explored in this paper

5. (Rompho, 2011; Gumbus, 2006) to gain a further understanding
of the BSC in SMEs with reference to appendix 2. All the case
studies are based on a set of interviews and observations.Out of
the four case studies, SAQ is a failed attempt (Rompho, 2011)
and Hyde Park Electronics (HPE), Futura and Southern Gardens
Citrus (SGC) are successful attempts (Gumbus, 2006) at
implementing the BSC approach in a SME.
Findings
With reference to appendix 2, in SAQ a major factor that is
highlighted as a reason for failure is the effect from changing
market conditions. In the case of SAQ the company’s
distribution channel was changed to boost sales; however this
factor affected the customer perspective of the BSC, resulting in
measure transformations. Furthermore, due to the relationship
between the internal business process perspective and the
customer perspective, measures for internal business processes
were also adapted to reflect the customer perspective. The
changes created confusion among the employees and even the
manager/owner, and cause/effect linkages could not be
established due to all the changes which ended up in a waste of
effort (Rompho, 2011).
As for the three companies that had success from the BSC
(HPE, Futura and SGC) there are major similarities between all
of them. HPE and Futura had been operating for over 30 years
which could indicate that they had a strategy that was unlikely
to change majorly. And as for SGC, although they started in
1995, the industry that they operate in is quite focused (being

6. an orange grove juice factory) which could indicate a strategy
that was also unlikely to change considerably. The companies
were able to create long term cost reducing or quality improving
benefits from the BSC that gave them a competitive advantage
against their competitors, enabling them all to grow into larger
organisations (Gumbus, 2006).Ways to influence the success of
the Balanced Scorecard in Small to Medium Enterprises
Simple version of the BSC
Different adaptations of the BSC have been created to aid the
use of it for SMEs. One is adopting a simplified version of the
BSC where the four perspectives are converted into three new
view points; work fluency, productivity and safety. The
economic/financial perspective is covered by productivity,
internal processes are covered by work fluency and safety
overlooks the two viewpoints, reducing the risks of deviations.
The customer and learning and growth perspectives are
essentially ignored under the assumption that they will improve
as long as the three viewpoints are developed (Sinisammal,
2012).This could eliminate the complexity that the customer
perspective has created in the past with SMEs, especially in the
case of SAQ (Rompho, 2011).
Circular approach
Another adaptation of the implementation of the BSC is the use
of a circular approach where the creation of the scorecard starts
with examining the Key Performance Indicators that are already
available, and aligning them to the suitable measures and
perspectives. This approach is a bottom-up strategy that tries to
tailor the scorecard to the different realities that SMEs are faced
with by combating the challenges they have met, with regards to
measures becoming too complex to pursue (Garengo, 2012).

7. This theory was implemented by a company that wanted a PMS
that was not too complex for them, and it succeeded. This
theory reflects a comment made by the CEO of another SME
when he discussed the success of the BSC in his company,
expressing that the BSC should not be a “monster” that his
company is “worshiping” but rather an empowering tool
(Manville, 2007).The limitations of this study
Unfortunately, there seems to be a lack of literature directly
focusing on the implementation of the BSC in SMEs (Johanson,
2006; Garengo, 2012; Manville, 2007) highlighting an area that
is open to more research. All of the case studies were based on
a set of interviews and although interviews can generate data
that is rich in information about perceptions and individual
feelings, there are a number of limitations that should be
considered when examining this study (Cameron, 2009:368).
Results from interviews were created using different structures
meaning they were challenging to compare, hence why a table
has been created comparing the different critical factors of the
case studies in appendix 2. Furthermore, the sample size is
small, focusing on only four companies to give a reflection of
the BSC in SMEs as a whole and interviews are generally
susceptible to influences, creating biased conclusions and
misinterpretations (Cameron, 2009:369).
Conclusion
The main discussion of this paper has been around the debate of
the BSC and how suitable it is for SMEs. After looking at a
number of case studies and comparing their results, with one

8. failing to implement the BSC and the rest succeeding, one can
see that there are factors that affect the results of the BSC in
SMEs. A main factor seems to be how an SME can adapt the
implementation of the BSC to change. The SMEs that were
successful in implementing the BSC had enough resources to
adapt to changes for example; in the forms of increased
monitoring measures such as customer feedback tools (Gumbus,
2006). And as for SAQ, their strategy was not mature enough
and their decision to change their distributors affected the
outcomes of their BSC approach (Rompho, 2011). It seems that
SMEs that are looking to use the BSC should assess how steady
their business strategy is before implementing it and how able
they are to implement their measures with the resources they
have, considering further changes that may be needed to ensure
that the measures are implemented correctly. Furthermore, it
was also said by Manville (2007) that SMEs have significant
barriers with the BSC due to “resource issues and the fact that it
can be too strategically orientated” which supports this main
view. Companies that are more likely to change their main
strategies should act with more caution in the use of the BSC by
using it as a strategic guide to aid decision making, without
putting too much effort and resource into the BSC’s measures.
This is because a long time can go by before results are seen
from the BSC, hence why it is built to improve long-term
strategy. The BSC cannot be effective when the strategy it is
built upon changes, because a new BSC needs to be created to
reflect the new strategy. Additionally, two new approaches to
the BSC have been outlined; the circular approach and
simplified method. These methods can also be used as a way
for SMEs to act more cautiously, aiding the adaptation of the
BSC to the realities that they are faced with (Sinisammal, 2012;
Garengo, 2012). Overall the BSC is a tool that SMEs are able to
use successfully, with advantages over larger corporations by
having closer operations to ease the communication of strategy
through their organisations. However SMEs should use it with
caution, understanding their business to see if they are at risk to

9. business changes that could affect the BSC, reducing their
chance of failure from inadequate analysis. Furthermore, they
need to assess the degree to which they can adapt to changes
that may be needed to implement the BSC, assessing what they
can gain from it against what it may cost to avoid wasted
efforts.
Appendix
Appendix 1
Balanced scorecard (BSC) definitions:
The BSC is a strategic planning and management structure that
is now used by businesses all over the world to combine
business vision and strategy to the activities of the
organisations (Pandey, 2005; Niven, 2002: 17). The goal of the
BSC is to improve internal and external communications, and
monitor performance against strategic goals (Pandey, 2005).
The BSC’s 4 perspectives:
Financial: a Shareholder’s perspective of a strategy for
profitability and risk where classic lagging indicators are
normally situated e.g. sales revenue growth (Kaplan, 2001: 23;
Niven, 2002: 17).
Customer: a customer’s perspective for the creation of customer
value and differentiation e.g. customer satisfaction (Kaplan,
2001: 23; Niven, 2002: 15).
Internal business processes: the strategic priorities for various
business processes to support shareholder and customer
satisfaction e.g. product development (Kaplan, 2001: 23; Niven,
2002: 15-16).
Learning and growth: these measures are the priorities that
influence innovation and organisational change that support the
three perspectives e.g. Employee skills (Kaplan, 2001: 23;
Niven, 2002: 16).

10. (Balancedscorecard.org, 2014)
The logic behind the BSC tool:
Performance measures inside the BSC:
Lag indicators: The consequences of actions taken that are
indicated from lead indicators e.g. Market share. These are
normally easily identifiable however, they do not reflect present
activities and they are harder to predict (Niven, 2002: 116).
Lead indicators: The consequences from actions that drive lag
indicators e.g. Hours spent with customers. These are predictive
in nature, allowing businesses to make changes that are based
on them but, they may be difficult to identify and new to the
company as a measure (Niven, 2002: 116).
Key performance indicators/drivers: The lagging
indicators/drivers that influence the achievement of core
strategic goals (Figge, 2002) e.g. customer satisfaction (Pandey,
2005).
Strategy Mapping: These are communication tools that explain
how value is created in a business through the relationships of
objectives. In the BSC, strategy maps are used to explain
logical connections in the cause-effect chain (Niven, 2002:
164).
The cause-effect chain relationship: The hypothesis that a
measure in the BSC correlates with another measure,
particularly in another perspective of the BSC. This is seen as
important to help describe and understand strategic direction
when implementing the balanced scorecard according to Kaplan
and Norton (Niven, 2002: 164)

11. Appendix 2
Company profiles and a critical success factor comparative
table
Hyde Park Electronics: Manufacturer of Ultrasonic proximity
sensors (Gumbus, 2006).
Futura: Operating aluminium extruding, finishing, fabricating,
machining and designing (Gumbus, 2006).
Southern Gardens Citrus: A subsidiary of the United States
Sugar Corporation that competes in the not-from-concentrate
orange juice market (Gumbus, 2006).
SAQ: A producer of air purifiers in the retail electrical
appliance sector (Rompho, 2011).

12. Critical success factor comparative table (Rompho, 2011).
SAQ
Hyde Park Electronics (HPE)
Futura
Southern Gardens Citrus (SGC)
Appropriate amount of measures
24 measures which is in the appropriate range
At least 15 measures
23 measures
Unsure however, there are 14 measures for the employee bonus
card that is based on BSC metrics
Mission classification through the company
Yes, revisions in monthly meetings
Unsure, however revisions in monthly meetings
Yes, through employee compensation scheme
Yes, through core value philosophy
Management’s support of the BSC
Yes, CEO was fully committed and held meetings to revise
strategies
Yes, CEO completed a Harvard BSC program, held meetings to
revise strategies and management team were closely involved
Yes, CEO was fully committed
Yes, critical feedback was taken from staff.
Employee involvement
Yes, employees were closely involved

13. Unsure, however the management team were closely involved
and BSC results were posted for all employees to see indicating
involvement
Unsure
Yes, through bonus card scheme and feedback.
BSC communication through the company
Yes, interviewees believed this was not a problem because they
only have 12 employees
Yes, BSC results were posted for all employees to see
Yes, through employee compensation scheme
Yes, through bonus card scheme
Development
Process efficiency
Yes, interviewees believed the process was fast
Unsure, however BSC was successful
Unsure, however BSC was successful
Unsure, however BSC was successful
Resource and time availability
Yes, interviewees believed there were no limitations. 1 manager
and 12 employees
8 managers and 42 employees
230 employees
150 employees
Software system and hardware adequacy
Yes , interviewees believed there were no limitations
Unsure, however BSC was successful
Unsure, however BSC was successful
Unsure, however BSC was successful
Years in operation
8
39
50+
14
Was the BSC successful?
No, due to a change in main strategy (distributor switch)

14. Yes
Yes
Yes
References
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organization. Boston, MA: Harvard Business School Press.
2. Niven, P. (2002) Balanced scorecard step by step. 1st edn.
New York: Wiley.
3. Cameron, S. and Price, D. (2009) Business research methods.
London: Chartered Institute of Personnel and Development.
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Balanced Scorecards: The “what” and “how” of control’,
European Management Journal, 30(4), pp.327-339.
5. Atkinson, H. (2006) ‘Strategy implementation: a role for the
balanced scorecard?’, Management Decision, 44(10), pp.1441-
1460.
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The Journal for Decision Makers, 30(1).
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Scorecard: Weaknesses, strengths and its ability as a
performance management system versus other performance
management systems’, Journal of Environment & Earth Science,
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(2006) Balancing dilemmas of the balanced scorecard.
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(2007) ‘Investigating Managers' Exploration and Exploitation
Activities: The Influence of Top-Down, Bottom-Up, and
Horizontal Knowledge Inflows*’, Journal of Management

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deployment: a Balanced Scorecard approach’, Measuring
Business Excellence, 15(3), pp.63-85.
11. Figge, F., Hahn, T., Schaltegger, S. and Wagner, M. (2002)
‘The sustainability balanced scorecard-linking sustainability
management to business strategy’, Business strategy and the
environment, 11(5), pp.269-284.
12. Garengo, P. and Biazzo, S. (2012) ‘Unveiling strategy in
SMEs through balanced scorecard implementation: A circular
methodology’, Total Quality Management & Business
Excellence, 23(1), pp.79-102.
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framework in a not for profit SME’, International Journal of
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Enterprises (SMEs) In Portugal’, Business & Management
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SMEs: A Case Study’, International Journal of Business &
Management, 6(11).
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SMEs through balanced scorecard implementation: A circular
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17. My Reflective Statement
I chose two subjects for my presentations and I chose them
because I thought they would be good subjects for my final
report but choosing the topic for my report was still a challenge
for me. Originally I wanted to base the report on my second
presentation that was about problems in valuation that included
intangible assets and mark-to-market accounting; however I
realised that the subject was too broad. After this realisation I
was forced to do the balanced scorecard (BSC).
I started by looking for 10-15 peer-reviewed journal articles
that were about the BSC and wrote 500 words of my report for
my tutor to check. When I saw him he told me that my work was
too broad and that I had to narrow down my subject which was
when I decided to do the BSC in small-to-medium enterprises. I
did more research to find articles that focused on the BSC in
SMEs however I found it difficult to research in because there
were not a lot of articles in this subject area. I used
Google.Scholar in conjunction with the university Metcat search
engine to look for articles and found Google.Scholar very useful
because it highlights a piece of text in the search results,
making it quicker to find what one is looking for. Eventually I
found enough articles and I was able to continue my report.
I really enjoyed working on the report because for the first time
in my degree I was able to choose a topic and create a
hypothesis for it, while showing a wide range of reading to
support my hypothesis. This piece of work was a shorter version
of a dissertation for me and I was thankful to do it. It did take
me 2-3 weeks to finish however, I had a few hiccups on the way
which did waste time but because I started the work early and
proof read it I was able to correct any mistakes I made, learning
important lessons along the way. A lesson I learned was to be
careful when choosing sources to reference, especially from

18. Google.Scholar because it is not as safe as the Metcafe search
engine. I accidently mistook a discussion paper that I found on
Google.Scholar for a peer-reviewed journal article and used it
in my report, however I noticed the mistake and I changed my
work. This taught me that I need to be careful when using
Google.Scholar, ensuring that everything I use is certified.
Overall I found this module very helpful and interesting because
it gave me the freedom to choose what I wanted to learn about
and that was refreshing to me. I feel like this module was more
of a test of character, rather than a test of how much one can
remember which is what I believe a lot of university subjects
have been based on. Students were able to show their stand-
alone presenting and critical thinking skills and I really enjoyed
being challenged in this way because, I believe the skills that
are assessed in this module are skills that I will be assessed in
throughout my career. Furthermore I was able to gain
researching techniques and an understanding of critical thinking
that I believe has helped me in other assignments. However, the
confidence that I feel I have gained from doing this module has
been the most rewarding and I feel that anything can be
achieved, depending on how much effort is put into it.
15