Description
The use of management and monitoring strategic performance tools such as the Balanced Scorecard (BSC) have been popular; even to Small and Medium-sized Enterprises. This paper aims to investigate whether the BSC is being used in monitoring the performance of small businesses, particularly in small fuel retailers companies, which are competing in co-branding; and if not, it aims to identify its strategic orientation in order to recommend a possible strategy map for those managers that are willing to adopt this model as an alternative to traditional ones for organizational performance evaluation, which often focus only on evaluation of the organizational financial performance.
Abstract—As current business environment is demanding a
constant adaptation of companies, the planning and strategic
management should be an ongoing and natural process in all kind of
organizations. The use of management and monitoring strategic
performance tools such as the Balanced Scorecard (BSC) have been
popular; even to Small and Medium-sized Enterprises. This paper
aims to investigate whether the BSC is being used in monitoring the
performance of small businesses, particularly in small fuel retailers
companies, which are competing in co-branding; and if not, it aims to
identify its strategic orientation in order to recommend a possible
strategy map for those managers that are willing to adopt this model
as an alternative to traditional ones for organizational performance
evaluation, which often focus only on evaluation of the
organizational financial performance.
Keywords—Balanced Scorecard, Performance Management and
Evaluation, SMEs, Strategy Maps
I. INTRODUCTION
OR several decades performance measurement systems
have been used as an information tool for evaluating
internal departmental procedures and decision-making at the
budgeting level [1]. Since it emerged, in the nineties of XX
century, the Balanced Scorecard (hereinafter BSC) has raised
several surveys and research on its applicability. This
methodology is one of the most used as organizational
performance monitoring process. It is a system for measuring
and monitoring business performance, with a comprehensive
field of vision, composed by short and long term and also
financial and nonfinancial indicators as well as internal and
external indicators that reflect the critical factors of an
organization and its relationship with strategy [2]. There are
lot of research about the implementation of performance
measurement models for large corporations with complex
management systems and hierarchical organization. However,
the BSC as philosophy and model for organizational
performance measurement and strategy management
monitoring is very useful and adaptable to Small and Medium-
sized Enterprises (SMEs). One can appoint several reasons for
the success and advantages of implementation of BSC in
SMEs but also some difficulties and barrier to not succeed.
Ana Paula Monte is with School of Technology and Management (ESTiG)
of Polytechnic Institute of Bragança (IPB), Campus de Sta. Apolónia, ap.
1134, 5301-857 Bragança - Portugal and NECE- UBI - Center for Studies in
Business of University of Beira Interior
1
- Covilhã - Portugal (corresponding
author - mobile: 00-351-919.52.2075; phone: 00-351-273.303.102; fax: 00-
351-273.313.051; e-mail: apmonte@ ipb.pt).
Christiane Fontenete , was with School of Technology and Management
(ESTiG) of Polytechnic Institute of Bragança, Campus de Sta. Apolónia, ap.
1134, 5301-857 Bragança Portugal. (e-mail: [email protected]).
1
R&D Centre funded by the Multiannual Funding Programme of R&D Centres of
FCT – Portuguese Foundation for Science and Technology, Ministry of Education and
Science
In this paper, it is intended to determine, through a survey
by questionnaire, if the small and medium fuel retail
companies, i.e. small gas stations, fuel dealers’ brand GASPE,
are using BSC or any system of performance measurement
and evaluation that somehow comes close to this management
tool and what perspectives its managers give more relevance.
It is also aim of this research to identify the strategic direction
of these companies, or if the various companies that are part of
this research follow a uniform strategy or identify different
categories. In addition, using these results, one intends to
suggest a suitable strategic map to them.
This research seems to be unique as it is applied to SMEs
that are competing under co-branding, that do not have to
follow the same strategy and do not explicit use a formal
performance management system but most of them consider it
relevant. The majority of research published usually relies on
surveys on sectors or is a case study on a single corporate. In
the case presented here is a case study on small companies that
uses the same brand marketing but do not have to follow
strictly the same strategy and are not homogeneous. By this
way is intention of the researchers to suggest to these
managers strategy maps and a recommended BSC model that
can orient them in the implementation of this tool, after some
adaption to its own corporation (based on data collected in this
survey).
The paper is organized as follows: starts by addressing the
BSC, its perspectives, indicators and performance drivers. It
follows a brief approach to the BSC as a tool for strategic
monitoring, particularly in SMEs. Section 4 describes the
methodology adopted, in particular the questionnaire,
followed by the presentation and analysis of results of the
survey, describing very briefly the proposed strategy maps.
Finally, concludes with highlighting the main findings and
some suggestions for future research.
II. THE PERSPECTIVES, INDICATORS AND PERFORMANCE
DRIVERS OF BALANCED SCORECARD
The BSC is a management tool for assessing organizational
performance, built on the concept that companies, based on
the definition of its mission and vision, should be evaluated in
four major perspectives: financial, customer, internal
processes and learning and growth. Each of these perspectives
attempts to answer the following questions [2], [3]:
(a) To be succeeded financially how should we appear to
our shareholders or partners? - Financial perspective - which
intends to define and evaluate goals related to the satisfaction
of key stakeholders of the company, namely its owners. Some
of the general objectives used in this perspective are
profitability and improving productivity, turnover growth
(diversification and increase) and value creation;
(b) To achieve our vision how should we appear to our
customers? - customers/market perspective - which targets
should be set to meet customer needs in order to achieve the
Small Gas Stations in Portugal
F
Balanced Scorecard in SMEs – A Proposal for
Ana Paula Monte, Christiane Fontenete
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1083 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
financial objectives. Niven [4] states that managers should
take advantage of the BSC in the first place and realize that
the concerns of customers tend to fit into four categories: time,
quality, performance, service and cost;
(c) To satisfy our shareholders and customers, what
business processes must we excel at? - Internal processes
perspective - which objectives should be achieved in order to
have more efficient business processes. In this perspective,
one identifies the critical processes that strives for excellence
in order to meet financial targets and customers [2]; and
(d) To achieve our vision how will we sustain our ability
to change and improve? - Learning and Growth perspective -
which goals is expected to reach to motivate and prepare our
human resources. This perspective defines intangible assets
important to the strategy, because it assesses the skills and
abilities of employees, the quality of information systems and
their alignment with organizational objectives [2].
Kaplan and Norton [5] declare that their proposal of four
perspectives is only one possible model, but it is not
mandatory. Depending on the sector where the organization
fits into and its strategy then it will be normal to adapt the
standard model and add one or more perspectives. According
to Voelker, Rakich and French [6], modify the traditional
structure of the BSC does not change the model itself, but
reflects the organizational strategy. Some authors advocate the
use of more perspectives (e.g. [7], [8]), while others advocate
the use of original ones (e.g. [9], [10], [11]).
As in recent years has been observed a growing awareness
by organizations that generate environmental impacts for the
preservation of the environment and consider this as a scarce,
therefore environmental issue is no longer seen as just a cost
and shall be regarded as a factor of competitiveness and
efficiency [12]. The use of the BSC to evaluate the
environmental performance of companies has been sustained
by several authors (e.g. [13], [14], [15], [16], [17], [18], [19],
[20], [21]). However there is no standardization in the
structure of the traditional four perspectives already mentioned
and environmental issues. So it has been suggested a variety of
alternatives for structuring these five potential perspectives
[22]:
(a) Maintain the traditional four perspectives (Financial,
Customer, Internal Processes and Learning and Growth) and
include environmental performance indicators distributed
through these four perspectives ([5], [23], [24], [25], [26]);
(b) Empowering the environmental perspective by
creating a fifth perspective ([5], [13], [17], [23], [24], [27]);
and
(c) Create a specific scorecard (Sustainability Balanced
Scorecard) to a Strategic Business Unit ([17], [23], [28], [29],
[30], [31]).
The consideration of the environmental perspective alone or
distributed by the traditional four perspectives can be relevant
in the fuel retail companies, since, although the primary
function of the gas stations is to fuel the vehicle, at present
they are not limited to this activity. The exchange of
lubricating oils, vehicle washing, mechanical service, tire
service and convenience stores are some of the other activities
carried out by gas stations [32]. All these activities involve
several operations, which are generating potential
environmental impacts that must be exercised in accordance
with the rules and laws while minimizing the risks to the
environment and ensuring the safety and health of the
community in general, so it is relevant to monitor the
environmental performance of the organization and
monitoring of environmental indicators.
The BSC enables a balance between financial and
nonfinancial measures, short, medium and long term
indicators of outcomes (lagging indicators) and performance
drivers (leading indicators), thus providing an overall
assessment and adapted of organizational performance [33].
The lagging indicators (also referred to as status indicators,
occurrence, or generic) are essential in order to evaluate and
monitor the current state that is the results presented. The
performance drivers (trend or strategic indicators) are intended
to describe and monitor those inductors considered responsible
for the future performance of each perspective [34] and are
exclusive to one business unit [35]. According to Kaplan and
Norton [36] any of the selected measures should be part of a
chain of cause-effect relationships that result in improved
financial performance. In this manner it is fundamental to
articulate these cause-effect links on performance measures
(financial and non-financial) and strategic objectives [37],
[38]. The emphasis on building cause-effect relationships in
BSC generates a dynamic reasoning, allowing that individuals
in different sectors of the organization understand how the
pieces fit together, how their role influences the role of other
employees, and facilitate the definition of vectors performance
and efforts correlated not only to measure the change, but also
the feed them [5]. Ensuring the cause and effect relations the
manager can establish measures that reflect the organizational
strategy that lead to desired objectives [39].
The process of implementing the BSC in an organization
should be developed from the strategic planning process and
consistent with the mission and vision, as demonstrated in Fig.
1, and the construction of the BSC will be divided into four
phases [5], [37]: (a) definition of the indicators architecture, in
which is defined the business unit where will be applied the
BSC; (b) consensus on the strategic objectives, which seeks
consensus among the strategic objectives of each of their
perspectives and its detailed description; (c) Selection and
preparation of indicators, where they are defined for each
strategic objective and its targets; and (d) preparation of the
BSC Implementation Plan, wherein appears the final approval
of the strategic objectives, indicators and action plans.
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1084 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
(Source: Prepared by the authors)
Fig. 1 Process of Implementing a BSC in an Organization
After defining the organization's strategy, one must prepare
a strategy map that will enable to communicate and
disseminate organization’s mission, vision and strategic
objectives to be achieved and the cause-effect relationships
between them as well as the performance evaluation indicators
(measures) and its targets in each of the perspectives that are
generally considered in the BSC [40]. On the Web site of Prof.
Alfonso Lopez from the University of Zaragoza, one may find
examples of the most used indicators by perspective [41].
Note that this process must be continuous, i.e., after the
implementation it should be periodically reviewed and
adjusted in line with the strategic evolution of the organization
[5].
The hierarchy/ranking among perspectives, according to its
degree of importance, will depend on the organizations’
strategy and the nature of its business. It is natural that for
profit companies put on top the financial perspective, since it
contains long-term financial goals [2], serving as main target
to objectives and measures of other perspectives [42]. In the
case of non-profit organizations and public administration, the
ranking of perspectives will be different; the financial
perspective will be in the bottom and not the ultimate goal of
the cause-effect relationships constructing. For example, in a
public service (local government or public administration), the
BSC should be built in order to maximize the usefulness and
user (citizen) satisfaction without neglecting the concern with
the rational use of financial resources [43].
III. BALANCED SCORECARD AS A TOOL FOR STRATEGIC
MONITORING IN SMES
As already mentioned, BSC is a tool for strategic control
[44] that helps organizations in implementing the strategy into
operational objectives, in order to guide both organizational
performance and its behavior [45] that should be integrated
into a strategic training process. For the success of the BSC
adoption is essential that this is viewed by the organization as
a strategic management system and not just financial
management, as its main purpose is to measure organizational
performance in a perspective of relationship with the strategy
[2]. Although the majority of the literature (e.g. [3], [46], [47],
[48]) indicates that are larger enterprises, in general, that better
adopt this tool, due to its greater complexity and the fact that
require more specialized and formalized management systems
[48] and rely on sophisticated information and control systems
that use multiple measures [3], this does not mean that the
application of BSC to smaller organizations is ineffective and
should not therefore be limited to its use in large companies.
The methodology of implementing the BSC in larger
companies should be adapted to the characteristics of SMEs;
in particular, it should be a faster and simpler procedure, since
these organizations have less complex and less formalized
management systems [43], [49]. Regardless of organizational
size, BSC implementation’ success depends on whether it can
persuade employees to align their behaviors with the strategic
objectives of the organization [49], [50] but also if the
Revision and
feedback
V
I
S
I
O
N
M
I
S
S
I
O
N
STRATEGIC
ANALYSIS
External
Environment
Strategy Map
Perspectives Objectives Indicators/measures Targets Initiatives
Financial
Customers/Markets
Business Internal
Processes
Learning/Organizacional
Growth
STRATEGY
Internal
Environment
(a) Definition of
indicators architecture
(b) Definition of the strategic
objectives for each perspective
(c) Selection and
preparation of indicators
(d) Preparation of
Implementation Plan
STRATEGY MAP
Balanced
Scorecard
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1085 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
organization’ strategy is stable [51]. BSC can be a
recommended tool for small businesses when they already
have some sense of its organizational strategy [52]. It should
be noted, therefore, the importance of raising awareness
among SME managers the need to change the model in
managing their businesses, which may involve the adoption of
the BSC, which not only help them to understand past and
present but also allow managers to make predictions [53],
[54].
As BSC is a key factor in strategic planning, Russo and
Martins [54] found, from a survey with 50 Portuguese SMEs,
that companies that are relate to the international market have
management models compatible with the BSC. According to
these authors, this tool is not justified in companies of small
size with little formal management processes and practices
that have not strategic planning. Nevertheless, BSC reveals
itself in small businesses as a simple and powerful tool for
improving competitiveness and identifying new business
opportunities [55]. However, the biggest obstacle in BSC
implementation in SMEs is related to unclear definition of
medium term objectives [56] or the sector demands an
ongoing and flexible strategy of adaptation to the environment
that not give time to prepare new BSCs [51].
Due to less complexity in SME’s organizational structure,
in the design of SMEs’ strategy map one should distinguish
the following "building blocks": (a) the strategic perception of
the manager; (b) its own composition; (c) its development; and
(d) the influence of SME’s management peculiarities [55]. The
performance evaluation systems are necessary to support
SMEs in managing an increasing complexity [57]. All
organizations, regardless of their size, give importance to
essential aspects of strategic management, namely (a) the need
for a clearly defined vision; (b) knowledge of the business
area; (c) the ability to predict; and (d) flexibility [49].
The steps for the implementation of this tool are similar to
those of larger organizations. However, the difference is the
duration of the implementation process that would be lower in
SMEs. Usually the phase of preparation of the strategy map
and design of BSC model is faster. The implementation of the
BSC in SME (a) requires a less degree of formalization, (b)
becomes a more rapid and simple process and (c) does not
require expensive procedures; managers and employees of
smaller organizations can "see" better the set of strategic
objectives and associated measures, thus becoming a powerful
tool for this type of organizations.
However, the main factors hampering the use of
performance evaluation systems in SMEs are [50] as follows:
(a) the scarcity of human and financial resources; (b) lack of
strategic planning; and (c) ignorance of the advantages of
performance evaluation. Some the limitations pointed out in
adopting the BSC for small size companies are the excessive
importance given to sales and growth as well as the fact the
feedback is received immediately. The successful
implementation of BSC in either large companies or SMEs
requires adjustments to the management processes used by
companies.
Thus, the BSC may become the "cornerstone" of the
management of an organization [2], [58]. The BSC can be
used as an element of communication, dissemination and
transmission of the strategy throughout the company, thus
integrating all departments and human resources towards the
achievement of strategic objectives of the organization [59],
being crucial the engagement of all employees along with the
collaboration of the management boards in the implementation
of BSC.
IV. METHODOLOGY
This research intends to be a case study on small gas
stations that are dealers of brand GASP operating mostly in
the north region of Portugal. These companies are racing
through Co-Branding, i.e. by sharing the fuel retail’s brand,
thus not only reduces costs in marketing, but also allows the
image transfer and reputation’s brand for its businesses, thus
making the process faster and more effective marketing. For
this research all these small gas stations were selected; thus,
corresponds to the entire population of dealers of fuel retail’s
brand GASPE, which consists of 33 companies whose
respondents belong to the management board of these
organizations. Having been possible to obtain the cooperation
of all the companies concerned, the survey focuses on the total
population.
In sequence it was outlined the following research
objectives: (a) investigate if these companies are using any
formal organizational performance evaluation system (the
BSC or other performance evaluation system); (b) identify the
perspectives, objectives, measures and performance indicators
being used and which managers gives more relevance; (c)
identify the strategy in use of these companies (or its implied
strategic orientation); (d) finally, aim to suggest a strategy
map, based on previous results, that can be a orientation for
those managers to implement a simple and effective BSC
model for their company.
The research was then designed in two steps: (1) it was
done a survey on these companies through an application of a
questionnaire to managers/owners of gas stations that are
dealers of brand GASP (thus obtaining a large amount of
written information) to answer to the first three research
objectives; (2) derived from results obtained in the first step it
was designed a proposal of a strategy map that can be used by
managers of these SMEs to design and implement a
performance management system based on BSC model.
Given the first three objectives of this research, the
following research hypotheses were defined:
H1: The BSC is used by companies for strategic
monitoring.
H2: There is an association between the level of knowledge
about the BSC and the motivation to implement it.
H3: The objectives and indicators used by companies are
also considered most important.
To accomplish the fourth objective, Multiple
Correspondence Analysis (MCA) was used to identify the
implied strategy and then to recommend a proposal of strategy
map and BSC model, according to the MCA results.
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1086 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
The questionnaire was based on parts of a questionnaire
previously tested and applied to the commanders and leaders
of the Portuguese police [60] but adapted to the present case
study. It is composed mostly of closed questions, whose
answer is assigned a Likert scale. The questionnaire is
structured into three main parts, with the first one directed to
the characterization of the respondent (job, age, gender,
qualifications, seniority) and his business (location, number of
employees, activities, and turnover). The second part is
devoted to the measure and evaluation performance; intending
to know if the company uses any sort of measures and
evaluation performance system, it is asked about the use the
use of measures/indicators to evaluate performance by the
company in each of the BSC perspectives, as well as their
level of use. It is also asked to the respondent to indicate the
importance attributed to each of these perspectives to the
company. In order to qualify the targets and indicators for
each of the BSC perspectives, the respondent is asked to
indicate three objectives for each perspective that considers
the most used by company, and the indicators commonly used
to achieve those objectives. Then it is enquired the degree of
importance attached to several objectives, for each of the
perspectives, as well as the most important indicators for the
company to achieve those objectives. One should notice that
objectives and indicators related to environmental issues were
distributed by conventional BSC perspectives. The last part of
the survey focuses on the knowledge and implementation of
BSC these companies. It is intended to verify the respondent's
level of knowledge about the BSC and the willingness from
the personal and corporate standpoint for a possible
implementation of BSC. On respondents that show some
knowledge of this management tool, is asked the degree of
their agreement with several statements about the BSC.
Concerning the implementation of BSC, the respondent is
questioned, given a number of different statements
characterizing the BSC, its degree of applicability in the
company and if this is been implemented. If so, shall also
indicate the degree of implementation, how long is involved in
the development of the BSC, its degree of use and its
contribution to organizational success. Finally, all respondents
are driven to answer questions about the factors that determine
the success (for those who implemented the BSC) or hinder
the implementation of BSC in their company.
After the adaptation of the questionnaire to this case, it was
subjected to a pre-test. Data was collect in the period of
second week of August 2010 till the end of September 2010.
V. FINDINGS
A. Analysis of Data Collected from the Survey
The 33 companies under survey are distributed by the
districts of Bragança (57.5%), Vila Real (24.2%), Aveiro
(9.1%), Porto (6.1%) and Castelo Branco (3.0 %), being
mostly constituted by private limited corporations (45.5%)
with fewer than 10 workers (93.9%) and 54.5% presenting a
turnover of more than two million Euros in 2009. In relation to
the respondents, 87.9% were male, 42.4% are over 50 years
and 57.6% have no higher education but great experience.
From the analysis of data gathered from the questionnaires,
it was found that none of the companies have implemented
BSC model. Using the Binomial test (observed ratio = 100%,
theoretical ratio = 50%, p-value
The use of management and monitoring strategic performance tools such as the Balanced Scorecard (BSC) have been popular; even to Small and Medium-sized Enterprises. This paper aims to investigate whether the BSC is being used in monitoring the performance of small businesses, particularly in small fuel retailers companies, which are competing in co-branding; and if not, it aims to identify its strategic orientation in order to recommend a possible strategy map for those managers that are willing to adopt this model as an alternative to traditional ones for organizational performance evaluation, which often focus only on evaluation of the organizational financial performance.
Abstract—As current business environment is demanding a
constant adaptation of companies, the planning and strategic
management should be an ongoing and natural process in all kind of
organizations. The use of management and monitoring strategic
performance tools such as the Balanced Scorecard (BSC) have been
popular; even to Small and Medium-sized Enterprises. This paper
aims to investigate whether the BSC is being used in monitoring the
performance of small businesses, particularly in small fuel retailers
companies, which are competing in co-branding; and if not, it aims to
identify its strategic orientation in order to recommend a possible
strategy map for those managers that are willing to adopt this model
as an alternative to traditional ones for organizational performance
evaluation, which often focus only on evaluation of the
organizational financial performance.
Keywords—Balanced Scorecard, Performance Management and
Evaluation, SMEs, Strategy Maps
I. INTRODUCTION
OR several decades performance measurement systems
have been used as an information tool for evaluating
internal departmental procedures and decision-making at the
budgeting level [1]. Since it emerged, in the nineties of XX
century, the Balanced Scorecard (hereinafter BSC) has raised
several surveys and research on its applicability. This
methodology is one of the most used as organizational
performance monitoring process. It is a system for measuring
and monitoring business performance, with a comprehensive
field of vision, composed by short and long term and also
financial and nonfinancial indicators as well as internal and
external indicators that reflect the critical factors of an
organization and its relationship with strategy [2]. There are
lot of research about the implementation of performance
measurement models for large corporations with complex
management systems and hierarchical organization. However,
the BSC as philosophy and model for organizational
performance measurement and strategy management
monitoring is very useful and adaptable to Small and Medium-
sized Enterprises (SMEs). One can appoint several reasons for
the success and advantages of implementation of BSC in
SMEs but also some difficulties and barrier to not succeed.
Ana Paula Monte is with School of Technology and Management (ESTiG)
of Polytechnic Institute of Bragança (IPB), Campus de Sta. Apolónia, ap.
1134, 5301-857 Bragança - Portugal and NECE- UBI - Center for Studies in
Business of University of Beira Interior
1
- Covilhã - Portugal (corresponding
author - mobile: 00-351-919.52.2075; phone: 00-351-273.303.102; fax: 00-
351-273.313.051; e-mail: apmonte@ ipb.pt).
Christiane Fontenete , was with School of Technology and Management
(ESTiG) of Polytechnic Institute of Bragança, Campus de Sta. Apolónia, ap.
1134, 5301-857 Bragança Portugal. (e-mail: [email protected]).
1
R&D Centre funded by the Multiannual Funding Programme of R&D Centres of
FCT – Portuguese Foundation for Science and Technology, Ministry of Education and
Science
In this paper, it is intended to determine, through a survey
by questionnaire, if the small and medium fuel retail
companies, i.e. small gas stations, fuel dealers’ brand GASPE,
are using BSC or any system of performance measurement
and evaluation that somehow comes close to this management
tool and what perspectives its managers give more relevance.
It is also aim of this research to identify the strategic direction
of these companies, or if the various companies that are part of
this research follow a uniform strategy or identify different
categories. In addition, using these results, one intends to
suggest a suitable strategic map to them.
This research seems to be unique as it is applied to SMEs
that are competing under co-branding, that do not have to
follow the same strategy and do not explicit use a formal
performance management system but most of them consider it
relevant. The majority of research published usually relies on
surveys on sectors or is a case study on a single corporate. In
the case presented here is a case study on small companies that
uses the same brand marketing but do not have to follow
strictly the same strategy and are not homogeneous. By this
way is intention of the researchers to suggest to these
managers strategy maps and a recommended BSC model that
can orient them in the implementation of this tool, after some
adaption to its own corporation (based on data collected in this
survey).
The paper is organized as follows: starts by addressing the
BSC, its perspectives, indicators and performance drivers. It
follows a brief approach to the BSC as a tool for strategic
monitoring, particularly in SMEs. Section 4 describes the
methodology adopted, in particular the questionnaire,
followed by the presentation and analysis of results of the
survey, describing very briefly the proposed strategy maps.
Finally, concludes with highlighting the main findings and
some suggestions for future research.
II. THE PERSPECTIVES, INDICATORS AND PERFORMANCE
DRIVERS OF BALANCED SCORECARD
The BSC is a management tool for assessing organizational
performance, built on the concept that companies, based on
the definition of its mission and vision, should be evaluated in
four major perspectives: financial, customer, internal
processes and learning and growth. Each of these perspectives
attempts to answer the following questions [2], [3]:
(a) To be succeeded financially how should we appear to
our shareholders or partners? - Financial perspective - which
intends to define and evaluate goals related to the satisfaction
of key stakeholders of the company, namely its owners. Some
of the general objectives used in this perspective are
profitability and improving productivity, turnover growth
(diversification and increase) and value creation;
(b) To achieve our vision how should we appear to our
customers? - customers/market perspective - which targets
should be set to meet customer needs in order to achieve the
Small Gas Stations in Portugal
F
Balanced Scorecard in SMEs – A Proposal for
Ana Paula Monte, Christiane Fontenete
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1083 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
financial objectives. Niven [4] states that managers should
take advantage of the BSC in the first place and realize that
the concerns of customers tend to fit into four categories: time,
quality, performance, service and cost;
(c) To satisfy our shareholders and customers, what
business processes must we excel at? - Internal processes
perspective - which objectives should be achieved in order to
have more efficient business processes. In this perspective,
one identifies the critical processes that strives for excellence
in order to meet financial targets and customers [2]; and
(d) To achieve our vision how will we sustain our ability
to change and improve? - Learning and Growth perspective -
which goals is expected to reach to motivate and prepare our
human resources. This perspective defines intangible assets
important to the strategy, because it assesses the skills and
abilities of employees, the quality of information systems and
their alignment with organizational objectives [2].
Kaplan and Norton [5] declare that their proposal of four
perspectives is only one possible model, but it is not
mandatory. Depending on the sector where the organization
fits into and its strategy then it will be normal to adapt the
standard model and add one or more perspectives. According
to Voelker, Rakich and French [6], modify the traditional
structure of the BSC does not change the model itself, but
reflects the organizational strategy. Some authors advocate the
use of more perspectives (e.g. [7], [8]), while others advocate
the use of original ones (e.g. [9], [10], [11]).
As in recent years has been observed a growing awareness
by organizations that generate environmental impacts for the
preservation of the environment and consider this as a scarce,
therefore environmental issue is no longer seen as just a cost
and shall be regarded as a factor of competitiveness and
efficiency [12]. The use of the BSC to evaluate the
environmental performance of companies has been sustained
by several authors (e.g. [13], [14], [15], [16], [17], [18], [19],
[20], [21]). However there is no standardization in the
structure of the traditional four perspectives already mentioned
and environmental issues. So it has been suggested a variety of
alternatives for structuring these five potential perspectives
[22]:
(a) Maintain the traditional four perspectives (Financial,
Customer, Internal Processes and Learning and Growth) and
include environmental performance indicators distributed
through these four perspectives ([5], [23], [24], [25], [26]);
(b) Empowering the environmental perspective by
creating a fifth perspective ([5], [13], [17], [23], [24], [27]);
and
(c) Create a specific scorecard (Sustainability Balanced
Scorecard) to a Strategic Business Unit ([17], [23], [28], [29],
[30], [31]).
The consideration of the environmental perspective alone or
distributed by the traditional four perspectives can be relevant
in the fuel retail companies, since, although the primary
function of the gas stations is to fuel the vehicle, at present
they are not limited to this activity. The exchange of
lubricating oils, vehicle washing, mechanical service, tire
service and convenience stores are some of the other activities
carried out by gas stations [32]. All these activities involve
several operations, which are generating potential
environmental impacts that must be exercised in accordance
with the rules and laws while minimizing the risks to the
environment and ensuring the safety and health of the
community in general, so it is relevant to monitor the
environmental performance of the organization and
monitoring of environmental indicators.
The BSC enables a balance between financial and
nonfinancial measures, short, medium and long term
indicators of outcomes (lagging indicators) and performance
drivers (leading indicators), thus providing an overall
assessment and adapted of organizational performance [33].
The lagging indicators (also referred to as status indicators,
occurrence, or generic) are essential in order to evaluate and
monitor the current state that is the results presented. The
performance drivers (trend or strategic indicators) are intended
to describe and monitor those inductors considered responsible
for the future performance of each perspective [34] and are
exclusive to one business unit [35]. According to Kaplan and
Norton [36] any of the selected measures should be part of a
chain of cause-effect relationships that result in improved
financial performance. In this manner it is fundamental to
articulate these cause-effect links on performance measures
(financial and non-financial) and strategic objectives [37],
[38]. The emphasis on building cause-effect relationships in
BSC generates a dynamic reasoning, allowing that individuals
in different sectors of the organization understand how the
pieces fit together, how their role influences the role of other
employees, and facilitate the definition of vectors performance
and efforts correlated not only to measure the change, but also
the feed them [5]. Ensuring the cause and effect relations the
manager can establish measures that reflect the organizational
strategy that lead to desired objectives [39].
The process of implementing the BSC in an organization
should be developed from the strategic planning process and
consistent with the mission and vision, as demonstrated in Fig.
1, and the construction of the BSC will be divided into four
phases [5], [37]: (a) definition of the indicators architecture, in
which is defined the business unit where will be applied the
BSC; (b) consensus on the strategic objectives, which seeks
consensus among the strategic objectives of each of their
perspectives and its detailed description; (c) Selection and
preparation of indicators, where they are defined for each
strategic objective and its targets; and (d) preparation of the
BSC Implementation Plan, wherein appears the final approval
of the strategic objectives, indicators and action plans.
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1084 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
(Source: Prepared by the authors)
Fig. 1 Process of Implementing a BSC in an Organization
After defining the organization's strategy, one must prepare
a strategy map that will enable to communicate and
disseminate organization’s mission, vision and strategic
objectives to be achieved and the cause-effect relationships
between them as well as the performance evaluation indicators
(measures) and its targets in each of the perspectives that are
generally considered in the BSC [40]. On the Web site of Prof.
Alfonso Lopez from the University of Zaragoza, one may find
examples of the most used indicators by perspective [41].
Note that this process must be continuous, i.e., after the
implementation it should be periodically reviewed and
adjusted in line with the strategic evolution of the organization
[5].
The hierarchy/ranking among perspectives, according to its
degree of importance, will depend on the organizations’
strategy and the nature of its business. It is natural that for
profit companies put on top the financial perspective, since it
contains long-term financial goals [2], serving as main target
to objectives and measures of other perspectives [42]. In the
case of non-profit organizations and public administration, the
ranking of perspectives will be different; the financial
perspective will be in the bottom and not the ultimate goal of
the cause-effect relationships constructing. For example, in a
public service (local government or public administration), the
BSC should be built in order to maximize the usefulness and
user (citizen) satisfaction without neglecting the concern with
the rational use of financial resources [43].
III. BALANCED SCORECARD AS A TOOL FOR STRATEGIC
MONITORING IN SMES
As already mentioned, BSC is a tool for strategic control
[44] that helps organizations in implementing the strategy into
operational objectives, in order to guide both organizational
performance and its behavior [45] that should be integrated
into a strategic training process. For the success of the BSC
adoption is essential that this is viewed by the organization as
a strategic management system and not just financial
management, as its main purpose is to measure organizational
performance in a perspective of relationship with the strategy
[2]. Although the majority of the literature (e.g. [3], [46], [47],
[48]) indicates that are larger enterprises, in general, that better
adopt this tool, due to its greater complexity and the fact that
require more specialized and formalized management systems
[48] and rely on sophisticated information and control systems
that use multiple measures [3], this does not mean that the
application of BSC to smaller organizations is ineffective and
should not therefore be limited to its use in large companies.
The methodology of implementing the BSC in larger
companies should be adapted to the characteristics of SMEs;
in particular, it should be a faster and simpler procedure, since
these organizations have less complex and less formalized
management systems [43], [49]. Regardless of organizational
size, BSC implementation’ success depends on whether it can
persuade employees to align their behaviors with the strategic
objectives of the organization [49], [50] but also if the
Revision and
feedback
V
I
S
I
O
N
M
I
S
S
I
O
N
STRATEGIC
ANALYSIS
External
Environment
Strategy Map
Perspectives Objectives Indicators/measures Targets Initiatives
Financial
Customers/Markets
Business Internal
Processes
Learning/Organizacional
Growth
STRATEGY
Internal
Environment
(a) Definition of
indicators architecture
(b) Definition of the strategic
objectives for each perspective
(c) Selection and
preparation of indicators
(d) Preparation of
Implementation Plan
STRATEGY MAP
Balanced
Scorecard
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1085 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
organization’ strategy is stable [51]. BSC can be a
recommended tool for small businesses when they already
have some sense of its organizational strategy [52]. It should
be noted, therefore, the importance of raising awareness
among SME managers the need to change the model in
managing their businesses, which may involve the adoption of
the BSC, which not only help them to understand past and
present but also allow managers to make predictions [53],
[54].
As BSC is a key factor in strategic planning, Russo and
Martins [54] found, from a survey with 50 Portuguese SMEs,
that companies that are relate to the international market have
management models compatible with the BSC. According to
these authors, this tool is not justified in companies of small
size with little formal management processes and practices
that have not strategic planning. Nevertheless, BSC reveals
itself in small businesses as a simple and powerful tool for
improving competitiveness and identifying new business
opportunities [55]. However, the biggest obstacle in BSC
implementation in SMEs is related to unclear definition of
medium term objectives [56] or the sector demands an
ongoing and flexible strategy of adaptation to the environment
that not give time to prepare new BSCs [51].
Due to less complexity in SME’s organizational structure,
in the design of SMEs’ strategy map one should distinguish
the following "building blocks": (a) the strategic perception of
the manager; (b) its own composition; (c) its development; and
(d) the influence of SME’s management peculiarities [55]. The
performance evaluation systems are necessary to support
SMEs in managing an increasing complexity [57]. All
organizations, regardless of their size, give importance to
essential aspects of strategic management, namely (a) the need
for a clearly defined vision; (b) knowledge of the business
area; (c) the ability to predict; and (d) flexibility [49].
The steps for the implementation of this tool are similar to
those of larger organizations. However, the difference is the
duration of the implementation process that would be lower in
SMEs. Usually the phase of preparation of the strategy map
and design of BSC model is faster. The implementation of the
BSC in SME (a) requires a less degree of formalization, (b)
becomes a more rapid and simple process and (c) does not
require expensive procedures; managers and employees of
smaller organizations can "see" better the set of strategic
objectives and associated measures, thus becoming a powerful
tool for this type of organizations.
However, the main factors hampering the use of
performance evaluation systems in SMEs are [50] as follows:
(a) the scarcity of human and financial resources; (b) lack of
strategic planning; and (c) ignorance of the advantages of
performance evaluation. Some the limitations pointed out in
adopting the BSC for small size companies are the excessive
importance given to sales and growth as well as the fact the
feedback is received immediately. The successful
implementation of BSC in either large companies or SMEs
requires adjustments to the management processes used by
companies.
Thus, the BSC may become the "cornerstone" of the
management of an organization [2], [58]. The BSC can be
used as an element of communication, dissemination and
transmission of the strategy throughout the company, thus
integrating all departments and human resources towards the
achievement of strategic objectives of the organization [59],
being crucial the engagement of all employees along with the
collaboration of the management boards in the implementation
of BSC.
IV. METHODOLOGY
This research intends to be a case study on small gas
stations that are dealers of brand GASP operating mostly in
the north region of Portugal. These companies are racing
through Co-Branding, i.e. by sharing the fuel retail’s brand,
thus not only reduces costs in marketing, but also allows the
image transfer and reputation’s brand for its businesses, thus
making the process faster and more effective marketing. For
this research all these small gas stations were selected; thus,
corresponds to the entire population of dealers of fuel retail’s
brand GASPE, which consists of 33 companies whose
respondents belong to the management board of these
organizations. Having been possible to obtain the cooperation
of all the companies concerned, the survey focuses on the total
population.
In sequence it was outlined the following research
objectives: (a) investigate if these companies are using any
formal organizational performance evaluation system (the
BSC or other performance evaluation system); (b) identify the
perspectives, objectives, measures and performance indicators
being used and which managers gives more relevance; (c)
identify the strategy in use of these companies (or its implied
strategic orientation); (d) finally, aim to suggest a strategy
map, based on previous results, that can be a orientation for
those managers to implement a simple and effective BSC
model for their company.
The research was then designed in two steps: (1) it was
done a survey on these companies through an application of a
questionnaire to managers/owners of gas stations that are
dealers of brand GASP (thus obtaining a large amount of
written information) to answer to the first three research
objectives; (2) derived from results obtained in the first step it
was designed a proposal of a strategy map that can be used by
managers of these SMEs to design and implement a
performance management system based on BSC model.
Given the first three objectives of this research, the
following research hypotheses were defined:
H1: The BSC is used by companies for strategic
monitoring.
H2: There is an association between the level of knowledge
about the BSC and the motivation to implement it.
H3: The objectives and indicators used by companies are
also considered most important.
To accomplish the fourth objective, Multiple
Correspondence Analysis (MCA) was used to identify the
implied strategy and then to recommend a proposal of strategy
map and BSC model, according to the MCA results.
World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:6, No:6, 2012
1086 International Scholarly and Scientific Research & Innovation 6(6) 2012 scholar.waset.org/1999.10/3645
I
n
t
e
r
n
a
t
i
o
n
a
l
S
c
i
e
n
c
e
I
n
d
e
x
,
E
c
o
n
o
m
i
c
s
a
n
d
M
a
n
a
g
e
m
e
n
t
E
n
g
i
n
e
e
r
i
n
g
V
o
l
:
6
,
N
o
:
6
,
2
0
1
2
w
a
s
e
t
.
o
r
g
/
P
u
b
l
i
c
a
t
i
o
n
/
3
6
4
5
The questionnaire was based on parts of a questionnaire
previously tested and applied to the commanders and leaders
of the Portuguese police [60] but adapted to the present case
study. It is composed mostly of closed questions, whose
answer is assigned a Likert scale. The questionnaire is
structured into three main parts, with the first one directed to
the characterization of the respondent (job, age, gender,
qualifications, seniority) and his business (location, number of
employees, activities, and turnover). The second part is
devoted to the measure and evaluation performance; intending
to know if the company uses any sort of measures and
evaluation performance system, it is asked about the use the
use of measures/indicators to evaluate performance by the
company in each of the BSC perspectives, as well as their
level of use. It is also asked to the respondent to indicate the
importance attributed to each of these perspectives to the
company. In order to qualify the targets and indicators for
each of the BSC perspectives, the respondent is asked to
indicate three objectives for each perspective that considers
the most used by company, and the indicators commonly used
to achieve those objectives. Then it is enquired the degree of
importance attached to several objectives, for each of the
perspectives, as well as the most important indicators for the
company to achieve those objectives. One should notice that
objectives and indicators related to environmental issues were
distributed by conventional BSC perspectives. The last part of
the survey focuses on the knowledge and implementation of
BSC these companies. It is intended to verify the respondent's
level of knowledge about the BSC and the willingness from
the personal and corporate standpoint for a possible
implementation of BSC. On respondents that show some
knowledge of this management tool, is asked the degree of
their agreement with several statements about the BSC.
Concerning the implementation of BSC, the respondent is
questioned, given a number of different statements
characterizing the BSC, its degree of applicability in the
company and if this is been implemented. If so, shall also
indicate the degree of implementation, how long is involved in
the development of the BSC, its degree of use and its
contribution to organizational success. Finally, all respondents
are driven to answer questions about the factors that determine
the success (for those who implemented the BSC) or hinder
the implementation of BSC in their company.
After the adaptation of the questionnaire to this case, it was
subjected to a pre-test. Data was collect in the period of
second week of August 2010 till the end of September 2010.
V. FINDINGS
A. Analysis of Data Collected from the Survey
The 33 companies under survey are distributed by the
districts of Bragança (57.5%), Vila Real (24.2%), Aveiro
(9.1%), Porto (6.1%) and Castelo Branco (3.0 %), being
mostly constituted by private limited corporations (45.5%)
with fewer than 10 workers (93.9%) and 54.5% presenting a
turnover of more than two million Euros in 2009. In relation to
the respondents, 87.9% were male, 42.4% are over 50 years
and 57.6% have no higher education but great experience.
From the analysis of data gathered from the questionnaires,
it was found that none of the companies have implemented
BSC model. Using the Binomial test (observed ratio = 100%,
theoretical ratio = 50%, p-value