Insights from the Balanced Scorecard Implementing the Balanced Scorecard at a college of business Chris Papenhausen and Walter Einstein

Chris Papenhausen is an Assistant Professor of Strategic Management at the University of Massachusetts-Dartmouth, North Dartmouth, Massachusetts, USA. Walter Einstein is a Professor of Management and Strategy at the University of Massachusetts-Dartmouth, North Dartmouth, Massachusetts, USA.

Summary Purpose – The purpose of this paper is to show how the Balanced Scorecard approach, a performance management system, could be implemented at a college of business. Design/methodology/approach – The authors’ own college of business is used as an example, to present how a successful Balanced Scorecard would look. Practical implications – A comprehensive guide for implementation of the Balanced Scorecard approach is presented, including presentation of specific objectives and measures appropriate for a college of business. Originality/value – The paper points out that the Balanced Scorecard approach is well suited to a higher education situation and allows the alignment of a wide variety of measures with the unique mission and strategy of a college of business. Keywords Balanced scorecard, Colleges, Business studies, United States of America, Higher education Paper type Case study

Introduction Universities and colleges increasingly face demands to be accountable to their stakeholders. Recent articles authored by business academics and administrators have strongly criticized business education’s relevance to business and the community in general (Bennis and O’Toole, 2005; Holstein, 2005), This problem is magnified by the inability of business schools to adequately measure how much, if any, value is added by their programs (Pfeffer and Fong, 2002), It is thus more important than ever to develop and measure processes that lead to successful outcomes. In this paper we describe and apply a specific method that has significant potential to accomplish such a task in a college of business: the Balanced Scorecard Approach (BSC.) The BSC, developed in the early 1990s by David Norton and Robert Kaplan, measures performance and successful strategy implementation and has been implemented in hundreds of companies and organizations with generally successful results (Dumond, 1994; Kaplan and Norton, 2001), Although originally designed to be used by for-profit companies, the method is flexible enough for all types of organizations, including universities and colleges. Most of the published research on the BSC focuses on for-profit organizations, but a few studies of the BSC look at it in the context of higher education (O’Neil et al., 1999; Sutherland, 2000), Authors who look specifically within business schools include Bailey et al. (1999), who survey business school deans’ opinions about the potential useful measurements for a balanced scorecard. A Chang and Chow (1999) survey that interviewed accounting department heads found support for the BSC applicability and benefits to an accounting program. Armitage and Scholey (2004) successfully applied the BSC to a specific master’s degree program in business, entrepreneurship and technology.

DOI 10.1108/13683040610685757

VOL. 10 NO. 3 2006, pp. 15-22, Q Emerald Group Publishing Limited, ISSN 1368-3047





While these previous studies contribute specific aspects to understanding the applicability of the BSC to colleges of business, none of them lay out a comprehensive and content-specific BSC for a business school as a whole. This article intends to fill this gap.

The Balanced Scorecard approach The BSC is an integrated performance management system that enables organizations to clarify their strategy and translate it into action. By adopting financial and non-financial measures and measuring current performance outcomes as well as future performance drivers, the BSC gives feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance. To this end, the BSC employs four perspectives and develops metrics, collects and analyzes data relative to each of the four perspectives: 1. The financial perspective – (how do we look to financial resource providers?) – uses traditional financial measures to measure past performance. 2. The customer (stakeholder) perspective – (how do stakeholders see us?) – focuses on stakeholder satisfaction and the value propositions for each stakeholder. 3. The internal process perspective – (at what must we excel?) – refers to internal organizational processes. Metrics based on this perspective allow managers to gauge how well their organization is running, and whether its products and services conform to customer requirements (the mission). 4. The learning and growth perspective – (can we improve our ability to grow?) – includes intangible assets such as employee knowledge and organizational cultural attitudes for both individual and organizational self-improvement. In a knowledge-worker organization, people – the repository of knowledge – are the main resource. While some managers recognize that aggregate financial measures (such as operating income, return on investment, and economic value added) are not perfect by themselves, they claim that financial measures are at least well understood and provide clear, explicit, and objective goals on which all organizational participants can focus. Financial measures report on outcomes or past actions, and, as such, they promote short-term behavior that can sacrifice long-term value creation for short-term performance. Such managers feel that multiple measures – some financial and some non-financial – are confusing and lead to ambiguous signals about what the organization values. Using the BSC approach will combine financial performance measures along with measures of the drivers of future financial performance (see Figure 1). The financial and customer perspectives describe the desired outcomes sought by the organization. However, these measures may contain many lagged indicators of performance. The internal processes and internal growth perspectives, on the other hand, show how the organization creates these desired outcomes. In this way, managers can identify a causal chain from the performance drivers to financial outcomes. From the top of the chain on down, desired financial outcomes can only be accomplished only if customers are satisfied. To realize the customer value propositions, internal processes must be created and delivered. Finally, the internal processes must be supported by an organization’s learning and growth. As Kaplan and Norton (2004, p. 42) explain ‘‘Aligning objectives in these four perspectives is the key to value creation, and, hence, to a focused and internal consistent strategy,’’. In developing a structure that links from cause to effect, Kaplan and Norton (2004) created a tool called the strategy map. The strategy map is a visual representation of an organization’s strategy that describes the logic of the strategy by representing the objectives for the critical internal processes that create value and the organizational learning and growth that support those processes. These objectives are then translated by the balanced scorecard into targets and measures. The internal processes most critical to creating the customer’s value propositions are referred to as strategic themes.




Figure 1 The Balanced Scorecard for non profit organizations

Many people think of measurement as a tool to control behavior and to evaluate past performance. Traditional control and performance measurement systems focus on keeping individuals and organizational units in compliance with a pre-established plan. The measures on a BSC are to be used by teams in a different way – to articulate the strategy of the business, to communicate the strategy of the business, and to help align individual, organizational, and cross-departmental initiatives to achieve a common goal. Organizations use the scorecard as a communication, information, and learning system, not as a traditional control system. But for the BSC to be used in this way, the measures must provide a clear representation of a long-term strategy for competitive success.

College mission, strategy and the BSC This section’s purpose is to help the reader comprehend the BSC method as a management strategy and understand each strategic theme as it relates to initiatives, targets and measurement for a college of business. We apply the BSC to the authors’ own college, a public comprehensive university. The college is accredited by the Association to Advance Collegiate Schools of Business (AACSB) and has undergraduate programs in accounting, business information systems, finance, management and marketing and an MBA program. The authors’ college enrolls approximately 1,600 students with approximately 40 tenure-track faculty. We begin with our mission statement, in which we set out the general goals and purpose of the organization: To prepare students to become managers and leaders who will add value to their organizations and communities by: B

offering high quality graduate and undergraduate programs;


conducting valuable basic, applied and pedagogical research; and


supporting regional economic health and development.

Based on this mission, The BSC strategy map will develop three overarching and complementary strategic themes: 1. Teaching themes – selection and retention of faculty who are focused on teaching excellence to gain an increased market share of the educational market.




2. Research themes – identification of college faculty as dedicated research colleagues desiring to be champions in their chosen field. 3. Outreach themes – use of college faculty to support regional education and other intellectual support. The BSC strategy map for the college (Figure 2) uses a generic architecture to describe each strategy. In this way, each measure is rooted in a chain of cause-and-effect logic that connects the desired outcomes from the strategy with the drivers that will lead to the strategic outcomes. The strategy map illustrates how intangible assets are transformed into tangible customer and financial outcomes. Figure 2 Strategy map




After the strategy map is drawn, the next step is the development of a balanced scorecard showing multiple goals and measures for each perspective. Even though the number of measures in each perspective varies, it is important that each measure align with the organization’s strategy. The measurements used are adapted from Bailey et al. (1999) but were tailored to apply to our specific college of business. Financial perspective The financial perspective contains the tangible outcomes in traditional financial terms. Table I is an overview of the financial perspective’s goals and measurements. Stakeholder perspective Value propositions are created to meet the needs of each stakeholder. These value propositions are those that hold the greatest value to each stakeholder and represent outcomes of the college’s internal processes. Satisfactory realization of the value propositions translate into financial outcomes outlined in the financial perspective. Table II is an overview of the stakeholder perspective’s goals and measurements. Internal process The internal process perspective describes the critical internal processes that drive the stakeholder satisfaction and the college’s financial outcomes. Internal business processes deliver the value proposition to stakeholders and drive the financial effectiveness. Table III illustrates this perspective’s strategic themes (critical internal processes), goals, and measurements. Learning and growth perspective The learning and growth perspective identifies the sets of skills and processes that drive the college to continuously improve its critical internal processes. The learning and growth areas that feed into internal processes subsequently drive stakeholder satisfaction and ultimately financial outcomes. Table IV is an overview of this perspective’s goals and measurements.

Conclusion In this paper we propose that in an environment that demands increasing accountability from business schools, the Balanced Scorecard Approach offers a promising and valuable tool for implementing a strategic performance management system in a college of business. Table I Overview of the financial perspective’s goals and measurements Type



Fund raising

Building endowment/fund raising/ annual giving

Size/growth of endowment Donor support for new initiatives Total funds raised Volume and number of grants received Non-tuition revenue as % of annual budget Growth rate of revenues % of funding relative to others in system Degree education ‘‘profitability’’ % of contribution cost Contribution analysis Student/faculty ratio Balanced budgets Extend budget submissions cover all essential requirements Cost per unit of production relative to peers Market growth Rate of increase in generation of student credit hours

Revenue from operations

Increased grants Develop revenue streams Increased state appropriation

Financial management

Increased student fees Profitable program mix Increase teaching productivity To be financially sound

To financially succeed




Table II Overview of the stakeholder perspective’s goals and measurements Stakeholder



Attract high-quality students

Community – employers, alumni, parents


University General


No. and quality of students Persistence rate Applications to programs % admitted Yield Market share Geographic draw area % of undergraduates selecting business as major Develop high-quality students Pre-/posttests Quality of teaching and advising GPA over time Graduate high-quality students Quality and timeliness of placements Starting salaries Quality and no. of on-campus recruiters Internship programs Student satisfaction Ability to get access to ‘‘needed’’ courses Ease in getting ‘‘good’’ job Voluntary attrition as % of students Student evaluations of faculty/courses Graduate exit surveys Alumni retroactive ratings of their experience Business community (employer) Employer survey rating graduates’ effectiveness Ability of grads to ‘‘move up’’ Quality and scope of non-degree programs Service to community No. of faculty involved in community/business service Faculty satisfaction Encouragement given faculty to engage in development activities Effectiveness of orientation and inculcation process for new faculty Availability of well-defined personnel policies and procedures available to faculty Office space and computer availability Alumni Focus groups Level of active alumni chapters Level of alumni giving Alumni service on projects Parents Response to surveys Focus Group Service to the university Adequacy of participation in campus-wide activities Quality of relationships with other elements on campus Teaching quality Corporate evaluation of curriculum Qualifications of faculty Focus on up-to-date teaching practices Academic excellence Quality of students admitted Quality of faculty Accreditation status Quality research contributions Level of faculty publications/citations Consulting No. of articles written by faculty Presentations

We also emphasize that, in addition to the mechanics that we have laid out, support from senior administrators is critical to implementing a successful BSC. Faculty need to provide compelling reasons why administrators need to prevent institutionalization of our needs and demands in ways where they become indistinguishable from other colleges within the university. It is essential that our strategies are unique to the college, and we need to treat them as our college’s own plan of action. Support from all college faculty and staff is imperative to create alignment and synergy across the college. Our recommendation proposes action by senior administration to




Table III Internal process perspective – strategic themes (critical internal processes), goals, and measurements Strategic theme



Teaching/learning excellence

Teaching excellence

Student satisfaction Employer satisfaction Teaching awards Course evaluations Peer and outside reviews Written and oral exit exams Portfolios Grade point standards Pass rates on professional exams Opportunities for writing and oral presentations Assessments by course No. of students going to graduate/professional schools Advancement of alumni in profession Degree of deployment of technology in learning experience No. of new courses developed Degree of innovation No. of new initiatives implemented Degree to which curriculum is up-to-date with educational, business, and commercial trends Degree program internationalization Periodic review of each program on a rolling schedule Concept to implementation time Timeliness of delivery of new products Faculty credentials Faculty appraisals Endowed chairs Faculty development plans Faculty development outcomes Contacts with business and industry Utilization rate of multimedia in classroom Degree cycle time Flunk-out rates of qualified students % of students completing program in 4 years Teaching costs/student Administrative costs/student % of budget dedicated directly to learning Analysis of use of space Type and no. of services provided Placement services and opportunities No. and frequency of advising errors Time required to register Availability of internships – co-ops

Excellence in developing learning and learning skills

Curriculum/program excellence and innovation

Curriculum excellence and innovation

Quality and currency of faculty

Introduction of new programs/innovations Quality faculty

Currency of faculty and classroom material/experiences Efficiency and effectiveness of service

Production efficiency

Student services effectiveness, including advising

Table IV Learning and growth perspective – goals and measurements Type



Teaching/learning excellence and innovation

Faculty development

Dollars for research, travel, library, computer hardware/software Self reports Teaching assessments Student and faculty satisfaction Degree to which technology is used in specific courses Expenditures on hardware/software Development of assessment device/technique for each innovation Evaluation of measuring and reward system in college

Technology leadership (use, development, application)

Mission-driven processes and reward system

Quality of facilities

Teaching/learning innovations Measure, reward, and evaluate goal attainment Establish broad-based and continuous strategic planning process Adequate physical facilities

Evaluation of strategic planning

Adequacy of classroom and equipment facilities for providing globally relevant management education




replace formal reporting structures with strategic themes and priorities that would enable both consistent messages and sets of priorities throughout each college unit. The implementation of a strategy requires active contributions by everyone in the organization. Each member of the college needs to understand this strategy and, beyond that, to conduct day-to-day business in ways that contribute to the success of the strategy. Communication and education are key factors in realizing these initiatives. But in its turn, a successful BSC can furnish feedback to each member of the college that can begin a virtuous cycle that can foster individual growth and the improvement of organizational performance.

References Armitage, H. and Scholey, C. (2004), ‘‘Hands-on scorecarding’’, CMA Management, Vol. 78 No. 6, pp. 34-8. Bailey, A., Chow, C. and Haddad, K. (1999), ‘‘Continuous improvement in business education: insights from the for-profit sector and business deans’’, Journal of Education for Business, Vol. 74 No. 3, pp. 165-80. Bennis, W. and O’Toole, J. (2005), ‘‘How business schools lost their way’’, Harvard Business Review, May, pp. 96-104. Chang, O.H. and Chow, C.W. (1999), ‘‘The balanced scorecard: a potential tool for supporting change and continuous improvement in accounting education’’, Issues in Accounting Education, Vol. 14 No. 3, pp. 395-412. Dumond, E.J. (1994), ‘‘Making best use of performance-measures and information’’, International Journal of Operations & Production Management, Vol. 14 No. 9, pp. 16-31. Holstein, W.J. (2005), ‘‘Are business schools failing the world?’’, The New York Times, 19 June, p. BU13. Kaplan, R.S. and Norton, D.P. (2001), The Strategy Focused Organization, Harvard Business School Publishing Corp., Boston, MA. Kaplan, R.S. and Norton, D.P. (2004), Strategy Maps, Harvard Business School Publishing Corp., Boston, MA. O’Neil, H., Bensimon, E., Diamond, M. and Moore, M. (1999), ‘‘Designing and implementing an academic scorecard’’, Change, Vol. 31 No. 6, pp. 32-40. Pfeffer, J. and Fong, C. (2002), ‘‘The end of business schools? Less success than meets the eye’’, Academy of Management Learning & Education, Vol. 111 No. 2, pp. 78-95. Sutherland, T. (2000), ‘‘Designing and implementing an academic scorecard’’, Accounting Education News, Summer, pp. 11-14.

About the authors Chris Papenhausen received his PhD in Strategic Management from the University of Minnesota. He is an Assistant Professor of Strategic Management at the University of Massachusetts-Dartmouth. His primary research interest is in top managers’ strategic decision-making processes. His research has been published in such journals as Strategic Organization and Managerial and Decision Economics. He is the corresponding author and can be contacted at: [email protected] Walter Einstein received his PhD in Organizational Behavior from Syracuse University. He is a Professor of Management and Strategy at the University of Massachusetts-Dartmouth. He has published numerous articles on such topics as motivation, performance appraisal, and leadership.

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Insights from the Balanced Scorecard Implementing the ...

Keywords Balanced scorecard, Colleges, Business studies, United States of America, ... report on outcomes or past actions, and, as such, they promote short-term behavior .... Dollars for research, travel, library, computer hardware/software.

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