Available online at www.sciencedirect.com ScienceDirect Procedia - Social and Behavioral Sciences 143 (2014) 174 – 179 CY-ICER 2014 Balanced Scorecard as an issue taught in the field of Industrial Engineering Jaroslava Kádárová a *, Michaela Durkáčová a, Lenka Kalafusová a a Technical University of Košice, Faculty of Mechanical Engineering, Department of Industrial Engineering and Management, Letná 9, 042 00 Košice, Slovakia Abstract In recent years academic scholars have given increasing attention to the importance of strategic measurement systems including both non-financial and financial measures and have focused attention on the method called Balanced Scorecard Through the Balanced Scorecard, an organization monitors both its current performance (finance, customer satisfaction, and business process results) and its efforts to improve processes, motivate and educate employees, and enhance information systems - its ability to learn and improve © 2014 Published by Elsevier Ltd This is an open access article under the CC BY-NC-ND license © 2014 The Authors Published by Elsevier Ltd (http://creativecommons.org/licenses/by-nc-nd/3.0/) Peer-review under responsibility of the Organizing Committee of CY-ICER 2014 Peer-review under responsibility of the Organizing Committee of CY-ICER 2014 Keywords: Balanced Scorecard, generations, literature, management tool; Introduction The current environment of globalization and economic turbulence has increased the challenges executives face and, therefore, the need to find the right tools to meet these challenges Managers need a rational system for selecting, implementing and integrating the tools appropriate for their companies This article focused on the development of Balanced Scorecard, as a one of the 25 the most popular tools and techniques, on the abundance of literature devoted to the issue of Balanced Scorecard and the various researches realized in this field Balanced Scorecard as a management tool *Corresponding Author: Jaroslava Kádárová Tel.: +421-55-602-3242 E-mail address: jaroslava.kadarova@tuke.sk 1877-0428 © 2014 Published by Elsevier Ltd This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/) Peer-review under responsibility of the Organizing Committee of CY-ICER 2014 doi:10.1016/j.sbspro.2014.07.382 175 Jaroslava Kádárová et al / Procedia - Social and Behavioral Sciences 143 (2014) 174 – 179 The Balanced Scorecard (BSC) is a conceptual framework for translating an organization’s strategic objectives into a set of performance indicators distributed among four perspectives: Financial, Customer, Internal Business Processes, and Learning and Growth Some indicators are maintained to measure an organization’s progress toward achieving its vision; other indicators are maintained to measure the long term drivers of success 2.1 Balanced Scorecard generations BSC as a performance measurement system • The first generation of BSC provided a comprehensive view of the business performance and implied the multidimensional measurement of results based on the integration of financial and nonfinancial indicators • perspectives: financial, customer, internal business processes, learning and growth • Emphasize on the measures in the perspectives • Poor at describing the strategy and change 2nd Generation BSC as a management system • Extension of the original role of the BSC from performance measurement to support and implement the strategy • The BSC focused on the strategic objectives, not just the measures • Basic component - strategy maps • Cascading and aligning objectives within the perspectives and connection key performance indicators to these objectives • Cause and effect model - describes what you want to achieve (the objective), how you will tell (the measures), the level of ambition (the target) and what will change performance 3rd Generation 4th 1st Generation BSC as a strategic management system GENERATION It is over twenty years since Norton & Kaplan published their first article about the balanced scorecard in 1992 Since then, the Balanced Scorecard as a tool, approach and philosophy, has changed almost beyond recognition It has developed from early simplistic measures control system, through to an approach that has supported strategy execution and the management of performance over the last years The stages of thinking about strategy and performance, called generations (Fig 1), have different approaches and benefits • Third generation thinking, developed in the late 1990s, is about systematic, methodical implementation of strategy and about integration of the planning and budgeting processes with the BSC • New element: Destination Statement is a planned indication of where an organisation wishes to be in a specific time horizon • The key attributes are: strategic objectives, strategic maps, perspectives and KPI - basis for developing scenarios and "what-if" analysis • New component: Strategic initiatives projects that are designed to help the organisation achieve its targeted performance Fig Development of Balanced Scorecard, Source: Gavurová, B (2010), Karabašová, Ľ (2010) Fourth generation BSC: (1) starts with model of learning about the strategy as it is implemented, assume that the environment is uncertain, contains risks and assumptions, (2) supports strategy and decision making during uncertainty and change, (3) includes an external perspective, which incorporate social and environmental impact without destroying the cause and effect model across the original balanced scorecards perspectives, because recognize that these are a consequence of the organization’s activities and behavior Environmental impact is added as an external perspective alongside the financial perspective Social impact can be added above the customer perspective This represents the wider impact on society or the community than is represented by the customer perspective, (4) uses External Predicting Indicators (EPIs), which are derived from the Tangible future and Strategy map The EPIs ensure that managers are plugged into the environment in which their strategy is being executed so that when they are reviewing the strategy with their strategy map, they are also conscious of the potential of their environment to change Philosophy of fourth generation BSC is currently very little widespread The evidence is the survey realized by 2GC Active Management - Strategic management consultancy with particular experience in implementing the BSC It has collected data on BSC usage through a survey of organisations with BSC every year since 2009 The survey 176 Jaroslava Kádárová et al / Procedia - Social and Behavioral Sciences 143 (2014) 174 – 179 results in 2013 show that two thirds of participants reported that their BSC implementation was 'very' or 'extremely' useful Fig Types of Balanced Scorecard used,Source: 2CG Active Management (2013) The survey asked about the design elements that featured in respondents’ Balanced Scorecard Over 70% (2012 66%) featured elements specific to the 2nd or 3rd Generation Balanced Scorecards, with a particularly high number having strategic 3rd Generation elements, such as Destination Statements More organisations than ever before are successfully using their Balanced Scorecard as a strategic management tool and there is a steady shift towards the use of modern '3rd Generation' designs 2.2 Balanced Scorecard as a literature topic BSC is the subject of numerous scientific papers and other literature, which reflecting the importance and success of this management tool According to the survey on the website Microsoft Academic Search, enormous growth in the number of publications and citations, related to BSC from 1985 to the present, is seen (Fig 3) Fig Publications and citations relating to the BSC in the world, Source: Microsoft Academic Search (2013) Based on the report obtained from the Web of Knowledge database (Fig 4) 7,369 publications and 56,962 citations (from 1985 to November 2013), dedicated to the BSC method, and are registered in the database 177 Jaroslava Kádárová et al / Procedia - Social and Behavioral Sciences 143 (2014) 174 – 179 Fig Number of publications about the BSC registered in the Web of Science database, Source: Web of knowledge (2013) Increasing in the usage of BSC in various fields is evident in several areas, for example in the field of evaluating supply chain management integration using the BSC (Bhagwat, R & Sharma, K, 2007), research and development (Bremser, G & Barsky, P., 2004), E-Business (Chang, K & Graham, G., 2010), E-commerce (Peide, L & Zhengwei, D., 2008), Enterprise resource planning Systems (Zhou, N & Zhou, F., 2010), project management (Brock, S et al., 2003) and in assessing the performance of non – profit organisations, banks, hotels and universities (Wu, H et al., (2011) 2.3 Balanced Scorecard as a modern management tool Organisations are trying to bridge the gap between strategy and performance of processes with the aim to optimize their performance by using various tools BSC was found to be the fifth most widely used management tool across the globe which also had one of the highest overall satisfaction ratings according to a multi-year research project launched since 1993 by consulting firm Bain & Company, which was implemented and evaluated also in May 2013 (executives participated in these surveys represent a various industries) 50% 40% 3.8 3.6 30% 3.4 20% 3.2 10% 2.8 0% Total usage Overall satisfaction (5 = highest satisfaction) Fig Modern management tools according to a survey realized in 2013, Source: Rigby, D., Bilodeau, B (2013) The most urgent priority indicated by all the global executives in the survey was the need to increase the pace of revenue growth and to find additional ways to make that growth profitable Jaroslava Kádárová et al / Procedia - Social and Behavioral Sciences 143 (2014) 174 – 179 Percentago of Respondents who mentioned 178 30% 25% 2013 20% 2011 15% 10% 5% 0% Fig Current priorities companies for the next three years compared to 2011, Source: Rigby, D., Bilodeau, B (2013) Percentage of respondents using BSC (primary axis) in the management of their business performance and satisfaction (secondary axis) with this tool is shown in the graph (Fig 3) It is expected that in 2013 will significantly increase the usage of this tool in the world - at the level of 73% 100% 80% 60% 40% 20% 0% 1996 1997 1998 1999 2000 Usage (percentage of respondents) 2002 2004 2006 2008 2010 2012 Satisfaction (5 = highest satisfaction) Fig Usage and satisfaction with the BSC since 1996, Source: Rigby, D & Bilodeau, B (2011) 55% of executives they surveyed, are concerned about meeting their earnings targets in 2013 Business leaders are forced to reassess the investments they must make to grow revenues, in areas ranging from information technology, hiring and taxes, to sustainability, price reductions and product differentiation The most urgent priority indicated by all the global executives in the survey was the need to increase the pace of revenue growth and to find additional ways to make that growth profitable Conclusion The slow and uneven emergence from the global economic downturn has left many executives in a bind They need to grow their businesses at a time when forces inside and outside their companies make that task much more difficult With more realistic expectations, executives are taking a more focused approach to the management tools they use to guide their businesses — using fewer tools to pursue revenue and profit growth, but using them more strategically In present research, from among comprehensive models of performance evaluations, BSC model was considered as a more appropriate research model for the evaluation of performance and translating an organization’s strategic objectives into a set of performance indicators Furthermore, the BSC is intended not only as a strategic measurement system but also as a strategic control system which can align departmental and personal goals to overall strategy For these reasons, the issue of BSC is taught in the field of Industrial Engineering Jaroslava Kádárová et al / Procedia - 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ISBN 978-1-4244-5143-2 This contribution is the result of the projects implementation: Project VEGA 1/0669/13 Proactive crisis management of industrial enterprises based on the concept of controlling 179 ... of the business performance and implied the multidimensional measurement of results based on the integration of financial and nonfinancial indicators • perspectives: financial, customer, internal... assessment research based on the D-S theory and the balanced score card method In: FITME '08 Proceedings of the 2008 International Seminar on Future Information Technology and Management Engineering. .. Kaplan published their first article about the balanced scorecard in 1992 Since then, the Balanced Scorecard as a tool, approach and philosophy, has changed almost beyond recognition It has developed