Integrating Financial And Non-Financial Performance Measures: The State Of The Art And Research Opportunities

Abstract

This paper aims to provide a literature review of the need for integrating financial and non-financial performance measures. More specifically, it aims to provide a framework for the adoption of the balanced scorecard (BSC) at strategic business unit level (SBUs). Different aspects of BSC are identified. They include: integrating financial and non-financial performance measures; allocating the financial and non-financial performance measures to the four perspectives (BSC usage); examining the relative weight placed to the four perspectives; questioning the purpose of using BSC. In addition, the management accounting literature provides many contingent variables influencing the different aspects of BSC. They include: the role of consulting firms; organisation size; perceived environmental uncertainty; business unit strategy; product life-cycle; management style; other factors including national and organisational culture. Following the ideas of the contingency theory relating to the proper fit between contingent variables, aspects of BSC and the effectiveness of BSC, several measures of effectiveness are presented. Drawing off the literature and the suggested framework of the adoption of BSC, several areas for future research are identified. The first is to develop an overall measure that includes the different aspects of BSC. The second is to examine the direct and indirect relationship between the contingent variables and the aspects of BSC. The third is to explain why subjective and objective measures of effectiveness of BSC may agree or disagree. The final area is to examine the relationship between BSC for a given business unit with other BSCs of other business units and that of higher organisational level.