Of the many decisions a company must face to achieve success is how to measure employees' performance and how to reward them (Kleiner and Gautreau 2001).For the avant-garde management accounting information system,
Emulation of strategies incorporated amongst organizations is a tell-tale whereby the former company is performing admirably efficient and effective through well formulated resources allocation on its strategy. Of the many decisions a company must face to achieve success is how to measure employees' performance and how to reward them (Kleiner and Gautreau 2001).
For the avant-garde management accounting information system, it cannot live on financial measure alone because management can manipulate such data by cutting cost, investing less and hence forth. The accounting system requires a mix of non-financial and financial data to give a more balanced view of firm's overall performance (Bushman et al. 1996). Research by Cumby and Conrod, 2001 indicates that non-financial information is highly value-relevant for knowledge-based industries and shown as an effective tool to evaluate an academic organization and demonstrate accountability to government and the public (Dorweiler and Yakhou 2005). Current non-financials could also predict organization's future financial performance (Smith 2005; Amaratunga et al. 2001). Unlike usual performance measurements system decades ago, more importantly now, is to measure performances relative to organizations' goals and strategies. Amongst other key issues in the development of performance measurement tools in past decades have been quandaries pertaining customer loyalty. The emerging new generation is more educated with their customer rights thus, more demanding. Declining customer loyalty is due to extensive choices. Hence, corporations have to focus strategy and behavior to not merely selling products/services, but also serving customers (Hope and Fraser 2001).
Moreover, there has been a need to increase firms' pace of innovation. Competitions have proliferated and firms must constantly refresh their strategies and methods; generating new business concepts and processes while coping with the changing nature of technology (Kaplan and Norton 2001). Additionally, prices are falling and costs ought to reduce to remain competitive and profitable. Hence, operation costs are challenged (Inman 2000). Furthermore, talented people are hard to find; even harder to attract. Firms then have to provide a challenging work environment that enables personal development (Hope and Fraser 2001). Large businesses were leading and performing well financially but by early 80s they were displaced as market leaders as competitors vie through quality, innovation, etc (Anthony 1998; cited by Kleiner and Gautreau 2001).
Managing intellectual capital or Knowledge Management, is vital to gain competitive advantage at this era. Knowledge management being a long-term strategy, development of BSC helps the company to align its management processes and focuses the entire organization to implement it (Arora, 2002). By 'implementing' meaning turning the scorecard into a true management system and sustaining the system (Rohm and Halbach 2006). With BSC, intangible assets are valued (Marr and Adams 2004) while above issues have been addressed also. The scorecard actually balances external measures with the internal measures, financial with non-financial information and short-run with long-run performance drivers (Johnsen 2001; Cobbold and Lawrie 2002a). Strategy of firm in BSC is matched between internal capabilities and external relationships (Kay 1993; cited by Johnsen 2001). Strategy implementation is balancing internal and external demands. Management control and performance measurement are concerned with decision relevance, thus, performance indicators on the BSC are important to managers (Mayston 1985; cited by Johnsen 2001). Learning and growth perspective in BSC can sustain efficient employees while shareholders and customers' needs are met by realigning values and sustaining good customer relationship in the customer perspective in BSC. Besides, business processes are innovated to keep up with the increasing pace of market uncertainties. BSC helps staff understand more, unlike before, how they could contribute to the strategic success of the organization as well as proven to be a valuable tool in linking vision and strategy to daily actions (CIMA 2001). BSC appears to be very effective and valuable for a divisional manager in a large US company (Mouritsen et al. 2005). The BSC has definitely helped in daily planning activities for different industries. The strength of the scorecard is that it has ascertained the reasons due to its 'balanced-nature' (Carmona and Gronlund 2003). In higher learning institutions, the European Foundation for Quality Management was used as performance measurement, do not reflect interests of all stakeholders and not linked to strategic management. Studies show that BSC is adopted instead (Cullen et al. 2003). Hotels also rely on non-financial and financial indicators with increasing confidence in strategic issues (Harris and Mongiello 2001). By using BSC, organizations can also minimize the negative consequences of risk (Scholey 2006) and identify cost reduction opportunities, resulting in overall improvement (Anand et al. 2005).
For the avant-garde management accounting information system, it cannot live on financial measure alone because management can manipulate such data by cutting cost, investing less and hence forth. The accounting system requires a mix of non-financial and financial data to give a more balanced view of firm's overall performance (Bushman et al. 1996). Research by Cumby and Conrod, 2001 indicates that non-financial information is highly value-relevant for knowledge-based industries and shown as an effective tool to evaluate an academic organization and demonstrate accountability to government and the public (Dorweiler and Yakhou 2005). Current non-financials could also predict organization's future financial performance (Smith 2005; Amaratunga et al. 2001). Unlike usual performance measurements system decades ago, more importantly now, is to measure performances relative to organizations' goals and strategies. Amongst other key issues in the development of performance measurement tools in past decades have been quandaries pertaining customer loyalty. The emerging new generation is more educated with their customer rights thus, more demanding. Declining customer loyalty is due to extensive choices. Hence, corporations have to focus strategy and behavior to not merely selling products/services, but also serving customers (Hope and Fraser 2001).
Moreover, there has been a need to increase firms' pace of innovation. Competitions have proliferated and firms must constantly refresh their strategies and methods; generating new business concepts and processes while coping with the changing nature of technology (Kaplan and Norton 2001). Additionally, prices are falling and costs ought to reduce to remain competitive and profitable. Hence, operation costs are challenged (Inman 2000). Furthermore, talented people are hard to find; even harder to attract. Firms then have to provide a challenging work environment that enables personal development (Hope and Fraser 2001). Large businesses were leading and performing well financially but by early 80s they were displaced as market leaders as competitors vie through quality, innovation, etc (Anthony 1998; cited by Kleiner and Gautreau 2001).
Managing intellectual capital or Knowledge Management, is vital to gain competitive advantage at this era. Knowledge management being a long-term strategy, development of BSC helps the company to align its management processes and focuses the entire organization to implement it (Arora, 2002). By 'implementing' meaning turning the scorecard into a true management system and sustaining the system (Rohm and Halbach 2006). With BSC, intangible assets are valued (Marr and Adams 2004) while above issues have been addressed also. The scorecard actually balances external measures with the internal measures, financial with non-financial information and short-run with long-run performance drivers (Johnsen 2001; Cobbold and Lawrie 2002a). Strategy of firm in BSC is matched between internal capabilities and external relationships (Kay 1993; cited by Johnsen 2001). Strategy implementation is balancing internal and external demands. Management control and performance measurement are concerned with decision relevance, thus, performance indicators on the BSC are important to managers (Mayston 1985; cited by Johnsen 2001). Learning and growth perspective in BSC can sustain efficient employees while shareholders and customers' needs are met by realigning values and sustaining good customer relationship in the customer perspective in BSC. Besides, business processes are innovated to keep up with the increasing pace of market uncertainties. BSC helps staff understand more, unlike before, how they could contribute to the strategic success of the organization as well as proven to be a valuable tool in linking vision and strategy to daily actions (CIMA 2001). BSC appears to be very effective and valuable for a divisional manager in a large US company (Mouritsen et al. 2005). The BSC has definitely helped in daily planning activities for different industries. The strength of the scorecard is that it has ascertained the reasons due to its 'balanced-nature' (Carmona and Gronlund 2003). In higher learning institutions, the European Foundation for Quality Management was used as performance measurement, do not reflect interests of all stakeholders and not linked to strategic management. Studies show that BSC is adopted instead (Cullen et al. 2003). Hotels also rely on non-financial and financial indicators with increasing confidence in strategic issues (Harris and Mongiello 2001). By using BSC, organizations can also minimize the negative consequences of risk (Scholey 2006) and identify cost reduction opportunities, resulting in overall improvement (Anand et al. 2005).
