International May Conference on Strategic Management - IMKSM2016

May 28 30, 2016, Bor, Serbia

EXAMPLES OF GOOD PRACTICE IMPLEMENTATION OF

BALANCED SCORECARD - BSC MODEL

Sabina Sehic - Krslak

Faculty of Management and Business Economics, Bosnia and Herzegovina

Abstract: The most important contribution of this work will be that it will be on examples of
good practice design and implementation of the BSC model - to get knowledge about the new
way of strategic managed, reporting and performance measurements. At the same time will
create the conditions best way of application BSC model in enterprises. Tim will acquire the
conditions for a comparison of the earlier model of strategic performance management with
new models such as the BSC model. The ultimate contribution of this work will be reflected
in the certificate that the BSC model better than conventional models. The usefulness of BSC
model will not only be seen through a system of indicators, but a management system that
shapes the whole process of planning, management and control. In this context, the BSC is
considered central and organizational framework for a holistic management process.

Keywords: strategic management, reporting, performance measurement, BSC model.

1. INTRODUCTION

In modern business conditions, the use of traditional performance measurement

system based on accounting - financial indicators is not able to respond to business needs. As
a result of these needs in contemporary conditions have a number of systems to measure
performance. One of the modern system of the Balanced Scorecard. This paper is a Balanced
Scorecard that complements conventional financial reporting standards and financial
performance standards of the future.
Relevance BSC model is emphasized through the existing literature (Kaplan and
Norton 2001, Niven, 2007), in the real business world to announce the real challenge. For
companies it is important to understanding that implementation of BSC model does not
represent a program of measuring performance, but it is the implementation of a new way of
functioning (Kaplan and Norton, 2001).
Emphasis was placed on the implementation of that methodology in countries whose
companies to successfully apply, and how to apply. General accepted position that is easier to
formulate than to implement the strategy, given the importance of the methodology, as
verified by examples of good practice. Only the model of implementation will show that the
BSC methodology of framework that vision and strategy of transfers part of the strategic
objectives and the strategy to all downloads organizational levels.

2. FINLAND

In the world in recent years among companies developed an interest in the application
of BSC model. Review of research applications BSC model in Finnish companies aims to
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gain insight into research on how companies in Finland use the BSC model. Research
conducted through interviews confirm that a large number of companies in Finland adopted
the BSC model. Of all respondents, 31% said they are already using the BSC in their
business, while 30% intend to adopt the same.22 As the concept of BSC method progressed in
just a few years ago, we tried to assess whether the BSC used as an improved performance
measurement system or as a system of strategic management.
The study included 17 companies from the telecommunications, banking, retail, metal
industry, engineering and FIG. At least the company had 360 employees and the largest
approximately 25.000 employees. In every company we tried to determine the person who is
best addressed in the development and use of BSC. Most of the interviewed companies (15 of
17) had four perspectives in the BSC method, as recommended by Kaplan and Norton. Two
companies were added a fifth perspective, otherwise administered in Swedish companies.
Number of measures in the BSC is varied, there were at least four and a maximum of twenty-
five. Implementation of the BSC method was to adopt new measures that have not been used
before by the majority of enterprises.
Only two companies failed to adopt new measures. Nine respondents gave the answer
that serve to both purposes. These respondents were mainly from large and medium and
mature and fast-growing companies. Six respondents from business planning and control
functions overlook the BSC as a tool for the implementation of the strategy, while two
respondents from business planning BSC seen as an information system. As a conclusion can
be drawn that the use of BSC is not associated with the kind of company with no
organizational structure. Also, the profession of respondents is not too affected the perception
of the same BSC, a majority of respondents had a positive opinion of the BSC model.

3. ERICSSON NIKOLA TESLA

Business processes and environments are changing rapidly. The process of corporate
governance in Ericsson Nikola Tesla is a unique framework designed to enhance flexibility
and control in highly variable conditions. Reviewing the work of all units within Ericsson
Nikola Tesla, it has been noticed that some of them do not go the way they should go.
Therefore, the management of Ericsson Nikola Tesla in 1998 decided to create a business
process management, direct the work of all its units to the same goal, the vision of the
company, monitor achievement in order to know whether the company is going the right way,
and constantly improve.23 1998 Balanced Scorecard was introduced as part of the steering
mechanism in Ericsson Nikola Tesla
Business Management in Ericsson Nikola Tesla is a process in which management
through employee company implements the strategy. How would management of the
company was sure were set realistic basis for the development of enterprises throughout the
process, continuous communication is required higher and lower layers of management. The
starting point is a business management consultation, planning and defining strategies, while
thoroughly analyzing the market, defined vision and mission, and strategy. It is critical to

22
Malmi, T.: Balanced Scorecards in Finnish companies: A research note, Management Accounting Research
12, 2001. god., str. 207.
23
Primjena koncepta Balanced Scorecard u Ericssonu Nikoli Tesli, str. 2-5.
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define long-term goals, which are then tested by SMART method. One of the fundamental
determinants of Ericsson Nikola Tesla is emphasizing the common goals formulated within
five perspectives, namely financial, customer, internal efficiency, innovation, and
employees.24 To the company Ericsson Nikola Tesla was known whether the goals achieved,
they need to be and measure. Measurement and reporting are carried out through key
performance indicators within each perspective. The indicators measure various key processes
in the business. As demonstrated by the experience, after defining the indicators of the same
need to explain to them and make the specification. At the enterprise level, there are 23
indicators, of which almost half is of strategic importance for future prosperity. Performance
indicators are classified into three groups:

1) generic - can be used anywhere in the company (customer satisfaction, satisfaction

of employees, etc.).
2) Strategy - used to monitor specific strategic purpose (market position, the quality of
products, etc.).
3) business - used to specific tasks (delivery).

Within Ericsson Nikola Tesla inspired by the principles that are not only financial
factors that create value, there are people, relationships with customers and suppliers, internal
processes, innovation and so on. Therefore, measurement and monitoring geared mainly
towards the intangible, or hidden factors. They are best seen in the structure of intellectual
capital. The elements that make up this structure are recognized as a model BSC
perspective.25 Given that Ericsson Nikola Tesla aware that all proceeds from the employees,
imagined them as the root of the business. Their wish was to create a system understood by
all, not just management, and thus allow free communication between all levels of the
company. In order to know whether they are on the right track, check their guesses were.
Through employee satisfaction survey (the same is filled once a year), to the questions
received answers that were more than satisfactory. This allowed the company to improve its
financial results.

4. NETHERLANDS

In the Netherlands, BSC model has become widespread and has introduced many
changes in different companies. According to a study conducted in 1999 of 120 CEOs of large
manufacturing enterprises (answer only about 6%), 19% of respondents said their company
benefits BSC model, 29% intend to start using the BSC model, 21% of respondents believe
that the current systems are adequate, while 31% of respondents did not aware of the
existence BSC model. Furthermore, the survey results did not reach expectations, and 50% to
70% of all users are not satisfied or are not completely satisfied with BSC model. When asked
about the reasons for the use of BSC model, 90% of respondents mentioned measure

24
Ibidem
25
Ibidem str. 6.
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performance, and 80% of control. Less than 40% said gray model used by BSC to clarify and
update the strategy of the company.26 Empirical evidence suggests that the actual use of the
BSC model moderate. Studies have shown that between 30% and 50% of Dutch companies
intend to spend BSC model in the future. However, expectations of Dutch intellectuals
interviewed regarding BSC model diverge. Some expect that the BSC model to become an
important foundation for the strategic management and control, if implemented well. No, for
this purpose the concept and its basic principles are yet to be developed. On the other hand,
some leading intellectuals were skeptical of the above-mentioned method. They, in fact,
expect the BSC model is a transit concept that will be replaced by another concept. This will
be a concept which will be better adapted to the needs of enterprises, to unify the fundamental
principles of the BSC model. So, intellectuals expect basic principles remain, but that differ in
certain expectations.27

5. SLOVENIA

Many countries have conducted research on the implementation of the BSC model,
and its significance, which led to the following conclusions. The study, which included 264
Slovenian companies (33% small, 23% medium and 44% large enterprises), showed that only
6.5% of them apply Balanced Scorecard (38.5% did not familiarity model, while 5.7% has the
intention to introduce this model into practice).28 Slovenian organizations are aware of the
need to introduce BSC as a sophisticated ways of managing costs in order to improve its
position in the domestic and foreign markets.

6. GERMAN-SPEAKING

Study was conducted on the use of BSC method companies in Germany, all ATX and
Midcap companies in Austria and the 50 largest companies listed on the stock exchange in
Switzerland. The final sample was 201 company, with 100 German, 51 Austrian and 50 Swiss
companies. Being selected a clearly defined segment of the 200 most important companies
and obtained a very large percentage of responses rather than expert respondents (174
responses to the survey of 201 questionnaires sent), considered to be the most objective
research on the application of the BSC method in German-speaking countries. Most of the
company's first contact with the BSC method was between 1996 and 1999 (of which 10
enterprises in 1996, 16 companies in 1997, 34 companies in 1998 and 18 companies in 1999).
Only seven companies are familiar with using the BSC method earlier, in 1992 one company,
and in 1993 and 1995 by three companies.29

26
Braam, G., Heusinkveld, S., Benders, J., Aubel, A.: The reception pattern of the balanced scorecard:
Accounting for interpretative viability, str. 10-11.
27
Ibidem.
28
Tekavi, M., ink, D.: The use of cost management tools for global competition the case of Slovenian
Companies, University of Ljubljana, str.9.
29
Speckbacher, G., Bischof, J., Pfeiffer, T.: A descriptive analysis on the implementation of Balanced
Scorecards in German-speaking countries, Management Accounting Research 14, 2003., str. 368.-370.
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One quarter of companies have not yet come into contact with BSC model; 18% of
companies know about the same, but it is still not a little more detailed study, while 17% of
companies a little more detail examined the matter but did not take any concrete steps. This
would mean that 60% of companies have not gone beyond the first stages of considering this
model. Six percent of the company made the first step in implementing the BSC, while also
6% of the company began with the first project. Ultimately, 17% of companies implemented
BSC method on the individual level, while 9% is carried out for the entire company, which
would mean that only 45 companies, or one-quarter of all respondents actually has experience
with using the BSC model.30

7. BOSNIA AND HERZEGOVINA31

In order to accelerate economic development of Bosnia-Herzegovina, each institution

should, as a result of its own balanced scorecard, generate a few key indicators. Those key
indicators would be collected by the National Balanced Scorecard Team which would track
the institutions work and their success. The results of our research show the existence of
positive correlation between the following perspectives: educational perspective,
technological perspective, legal perspective and economic perspective.
Bosnia-Herzegovina can also accelerate its economic growth by successful planning
its crucial indicators within each perspective. The increase in GDP, as well as living standards
can occur only if key indicators within each sector are determined, as well institutions
responsible for overseeing those indicators. Thus, every institution (regardless of its level)
would send its key indicators to the National Balanced Scorecard Team, and therefore
establish better coordination between the organizational units in Bosnia-Herzegovina
(ministries). If we know what indicators to measure within the educational perspective and if
we are successful with it, then we would be aware of our core competences within that
perspective.

8. CONCLUSION
Balanced Scorecard model is a system of measurement and performance management
company, which is based on four interrelated and equally important perspective and financial
perspective, the customer perspective, internal business process perspective and the
perspective of learning and development. It is because of these four perspectives BSC method
helps and gives specific and clear guidance to companies in which fields of business mistakes
and how to correct them.
Due to the rapid changing business conditions is very important to rapidly adapt and
follow trends, acquire new knowledge and to cope with the challenges to come. The only way

30
Ibidem.
10 izmi, E, Veselinovi Lj., (2008)., National Balanced Scorecard Concept as an Accelerant of Bosnia-Herzegovinas Economic Development, Conference:
International Conference of the School of Economics and Business Sarajevo, At Sarajevo.,

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the company will be ready to achieve your goals and be successful. BSC method facilitates
setting, facilitates managers to maintain or change the strategy and to report on progress in
achieving the objectives. The key problem in the current models for measuring and managing
performance is a tendency of business management based only on financial indicators,
reporting on past events. Such a model for measuring and managing performance is
insufficient for the successful implementation of the company strategy and the projection of
future events. "A good balanced scorecard should tell the whole story about your business
strategy" - in this sentence is contained the whole bit about the BSC model.
Companies must develop strategies that will achieve production guidance and improve
relationships with customers, and that will differentiate you from the competition. No, it is not
only necessary to develop an appropriate strategy, it is necessary to implement effective
execution. BSC model is not only a system of indicators, but a management system that
shapes the whole process of planning, management and control. It should also be noted that
there is a harmonization of the objectives of individual departments and employees with the
organizational strategy. In this context, the BSC is considered central and organizational
framework.

REFERENCES

1. Braam, G., Heusinkveld, S., Benders, J., Aubel, A.: The reception pattern of the balanced
scorecard: Accounting for interpretative viability.

2. izmi, E, Veselinovi Lj., (2008)., National Balanced Scorecard Concept as an

Accelerant of Bosnia-Herzegovinas Economic Development, Conference: International
Conference of the School of Economics and Business Sarajevo, At Sarajevo.

3. Kaplan, R.S & Norton (2001). Transfomring the balanced scorecard from performance
measurement to strategic management: Part I Accouting horizons 15/1.

4. Malmi, T. (2001). Balanced Scorecards in Finnish companies: A research note,

Management Accounting Research 12.

5. Niven, P. (2007), Balanced Scorecard: Korak po korak, Drugo izdanje Zagreb.

6. Speckbacher, G., Bischof, J., Pfeiffer, T (2003). A descriptive analysis on the

implementation of Balanced Scorecards in German-speaking countries, Management
Accounting Research 14.

7. Tekavi, M., ink, D.: The use of cost management tools for global competition the case
of Slovenian Companies, University of Ljubljana.

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