Balanced Scorecard Framework

Vs
Input-Process-Output-Outcome Framework

BY

OFOYEJU PERCY RUKEVWE

PG8/MGT/2020/1214

COURSE TITLE: MANAGEMENT ACCOUNTING THEORY

ACC 851

BEING AN ASSIGNMENT

SUBMITTED TO
DR. ADAMU IDRIS
DEPARTMENT OF ACCOUNTING
FACULTY OF MANAGEMENT SCIENCES
FEDERAL UNIVERSITY DUTSIN-MA, KATSINA STATE.
SCHOOL OF POST GRADUATE STUDIES
1.0 Introduction
According to Behn (2003), Performance measurement can be definined as a means of receiving,
examining and / or communicating information pertaining the perfomance of a person, group,
establishment, structure or component. Various definitions of performance measurement tend to
directed on the premise as to why performance is being measured such as;
Moulin (2002) in his article titled ‘Delivering Excellence in Health and Social Care’ defines
performance measurement as a means of appraising or assessing organizational management’s
efficiency and the benefits customers or consumers and stakeholdes.
The importance of performance measurement can be derived from the common statement: "You
cannot manage or improve what you cannot measure" and "what can be measured gets completed"
(Kaplan and Norton, 1992). According to the UK Department of Trade and Industry, Performance
measurement frameworks should have certain characteristics such as easy comprehension, generaly
understood, high level of integrity, and effectively managed by the organization and promote overall
organizational performance. The logic behind performance assessment emanates from the general
systems theory by Bertalanffy (1968) . Neely et al. (2000) argued that “ performance measurement is
a function that is used to measure the proficiency and/or benefit(s) of an action.” Performance
measurement should be orchestrated in a systemized manner and accordingly, we can also discourse
on efficiency management which its essense is to examine its aims and objectives and to make certain
that the aims and objectives are established all through the organization’s control cycle. This aim is
atainable by initiating applicable actions using specified tools and mechanisms that do not only
evaluate and measure the performance but also, improve it as a whole. (Vignieri 2018).

1.2 Purpose of Performance Measurement Frameworks

According to the Canadian transportation agency, the aim of performance measurement frameworks is
to create consistent method for comprehensively collecting, analyzing, utilizing and reporting on the
performance of an organization.
Over the years, discussions and scholarly articles have centered on nemerous performance
measurement frameworks introduced as a result of certain failings to successfully achieve the core
purposes of Performance measurement in previous frameworks in the bid to finding the perfect
performance model for adoption by organizations and institutions. Traditional accounting models such
as net profit, return on investment, contribution margin, and EPS have been criticised for their
backward approach of focusing on previous financial performance and rigidity or resistance to
change and failures to accommodate the strategies and objectives of the organization ( Sinner, 1974,
Maskell, 1991) hence, encouraging short term achievements and quick fixes. As a result of those
setbacks and demerits, the calls for a better performance measurement framework that encompasses
all the characteristics of a good performance measurement framework has become even more
intensive which has led to various frameworks being introduced over the years such as the following;
 Program Logic model
 The balanced scorecard
 Program logic model
 Enterprise Performance framework
 The SMART (Strategic Measurement and Reporting Techniques) by Wang laboratories.
 The tableau de bord
 EFQM model
 Performance pyramid e.t.c

1.3 Characteristics of a Good Performance Measurement Framework

The search for a flawless or less faulty performance measurement framework has been as a result of
certain recommendations as to what features such framework should possess. Neely, (2007) identified
some of these features in his book ‘Business performance measurement: Unifiying theories and
Integrating practice’ and they are outlined below:
1. The performance measurement framework should provide a brief and clear summary of the
organization’s performance.
2. All key performance indicators of the organization’s success should be measured.
3. A good performance framework should provide an exhaustive analysis of the organizations
operational and admistrative activities.
4. A good framework should be unified or integrated across all management levels so as to
encourage conformity of goals and objectives at all levels.
5. There should be a leveled overview of the organization’s business. That is, it should indicate
monetary and non-monetary measures, measures within and outside the organization, and
proficiency and productive measures.
6. A good performance measurement framework readily make available data or information of
previous perfomance while also enabling futuristic performance (Ballantine and Brignall, 1994).

Majority of the frameworks have not been able to effectively convey all these characteristics although,
organizations have found a way of combining these measures, the balanced scorecard which is still the
most commonly used single performance measurement tool as revealed in the figure 1.1 below and the
Input-Process-Output-Outcome framework has majority of this characteristics. As a result, this paper
seeks to review and compare both frameworks.
Figure 1 Type of Performance Measurement System Used
1 2 3 4 5
45% 41%
40%
35%
30% 28%
24%
25%
20%
15%
10% 6%
5% 1%
0%

Organizational usage

Source: APQC, (2010). The international resource for benchmarks and best practices

1.4 The Balanced Scorecard

The model was proposed by Kaplan and Norton (1992, 1996a) is one of the most commonly and
appriopraitely used single model as it enables easy identification of key performance metrics (i.e. key
performance indicators - KPI). This framework provides management with a adequate information
that transforms an organization’s strategic or tactical objectives into a systemeatic set of performance
process. This is a framework that aside providing performance measurements, it also helps planners
identify what should be done, how it should be done, and how it is to be measured. It enables
executives to easily execute their strategies. Kaplan and Norton (1996b) explained that balanced
scorecard can be fully utilized if only organizations clearly identify their key performance indicators.
Figure 2 The Balanced Scorecard

Source: Kaplan and Norton (1992)

According to Krolick and Ariyachandra (2006) the balanced scorecard developed the existing
peformance mesures, which used to be primarily financial, into four perspectives:
1. financial,
2. internal business,
3. customer, and
4. innovation and learning (i.e. learning and growth).
Merits of the Balanced Scorecard Performance Measurement Framework
1. It gives a proper layout of organizational strategy.
It is a rational, structured is structured in a way that helps organizational leaders ensure all necessary
areas of the organization’s activities are adequately covered to enable easy comprehension and
understanding. It ensures that the organization’s goals are the main focus, and also ensures tracking of
the progress made.

2. It enables easy communication of organizational strategy.

When adequately implemented, it:

 Employees have a clear picture of organizational goals when working on measures to achieve
them.
 It assists employees in identifying key organizational goals.
 It gives employees a better understanding of the specific areas of the strategy that needs
improvement.
 Enmployees are able to see the cascading effect(s) one organizational objective has on another.

3. It helps direct all departments within the organization towards the same goals and objectives

If well implemented, all divisions within the organization would be oriented with a common set of
strategy. With the BSC framework, departmental objectives can be directly linked to organizational
objectives. Also, if the departmental goals cannot be directly aligned with the organization’s
objectives, it creates an avenue for redirection through identification of default areas. It also provides
the structural avenue needed for projects of large nature which are shared amongst various divisions or
departments in the organization.

4. It enables employees identify how their personal goals are or can be linked to the
organization’s strategy
An individual within a department may set up a personal performance standard with a yearly review
and link it with the success of the organization through his or her departmental contribution.

5. The organizational strategy are a core aspect of of departmental reporting process

Organizations tend to abandon initially set up plans due to various operational distractions. The BSC
framework is set up to enable adequate periodic review of organizational plans - which is only
possible if the plans or strategy of the organization is organized. Periodic review meetings will ensure
regular reference to organisational strategy and hence would be center or fore front of the reporting
process.

Demerits of the Balanced Scorecard Performance Measurement Framework

1. The BSC can only be implemented in organizations that already has an existing operational
strategy.
2. Since controls are directed from top to bottom, there is possibility manipulation of bottom level
structure by management in order to suit the outcome expected by higher level management
(Anthony and Govindarajan 2004).

3. For the framework to be succesful, there must be vibrant and effective leadership

4. The balanced scorecard which is mostly managed by organizations using Excel or Powerpoint is not
free of human error as well which might make managers see it as a problem and not as a means of
managing or solving it.

5. Organization’s that are used to a different framework tend to find it difficult to switch to the
Balanced scorecard framework due to the technicality of the framework and as a result many
managers tend to abandon the transition process and return back to their previous framework.

6. The BSC framework is not a quick solution to performance problems. Developing a proper
scorecard takes considerable amount of time to execute.

1.5 The Input–Process–Output–Outcome Framework

Developed by Brown (1996), his model showed a a link between five different stages of a business
process and how their performances are measured. These stages includes the following; inputs,
processing, outputs, outcomes and goal achievement respectively. Brown’s model assumes a
progressive relationship between the identified stages, with each process affecting the next. Although
this framework portrays reality being oversimplified, the framework itself is very useful in
differentiating between various group of measures (see figure 3). The difference these process
measures has been well observed and identified in the public sector, hence it has been mostly adopted
or integrated in public sector.
Figure 3: The Input–Process–Output–Outcome Framework

Source: Brown (1996).

Merits of The Input–Process–Output–Outcome Framework

1) Long term and short term organizational goals are captured.
2) It ecompasses all organizational perspectives.
3) The various categories measured in the framework are clearly distinguished.

Demerits of The Input–Process–Output–Outcome Framework

1. This framework over-simplifies reality
2. According to Hartley and Fletcher (2008) various stakeholders might have different opinions
regarding the framework.
3. The four measures do not ensure that suitable actions arising as a result of the needs from various
stakeholders are adequately assessed
4. Customer opinion or views may be ignored at a later stage.

1.6 Comparison between The BSC Framework and The Input–Process–Output–Outcome

Framework

I. According to Kaplan and Norton (1996b) the balanced scorecard can be fully utilized if only
 organizations clearly identify their key performance indicators. The input process output outcome
framework readily identifies the performance indicators, what is exepcted of every stage, and how
the performance of one stage affects the next.

II. Overtime, the BSC framework has been abandoned by organizations during its adoption stage
due to its technicality and complex nature. The IPOO framework on the other hand has been said
to be too simple due due to its simplified nature and as such can be easily adopted by
organizations.
III. The BSC framework is mostly used in the private sector while the IPOO framework is
predominantly used by the public sector.
IV. In order for the BSC framework to be successful, a vibrant and effective leadership is needed due
to its complex nature. The input process output outcome framework on the other hand does not
require much technicality. That is not to say that the IPOO framework does not require adequate
supervision.

1.8 Conclusion
While this paper compared the Balance Scorecard Framework and the Input-Process-Output-Outcome
frameworks, their advantages and disadvantages, this paper also seek to analyse the the need for
performance measurement frameworks and how they help mangement achieve the set organizational
objectives. The BSC if effectively used would be of a better advantage however, a study by APCQ
(2010) suggests that framework mix have become a new trend in organizations with positive effects.
Although this paper does not specify how achieveable the framework mix is, it however suggests that
a framework mix of BSC and IPOO would further create room for a much comprehensive
performance mesurement model

REFERENCES

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