The BSC concept
The BSC concept as propagated by Kaplan and Norton (1992) border on the philosophy that management should not only focus on financial aspects of the business but also on the customer, internal processes and innovation, and learning aspects. The concept is aimed at giving managers a comprehensive view of the business, and allows them to focus on critical areas of the organization thereby driving the strategy forward. It also helps to communicate and implement an organisation’s strategy. Limitations of the traditional performance measures which emphasized the financial perspectives of the business are what motivated Kaplan and Norton (1992) to come up with the BSC concept.
Other limitations of the traditional performance measures include performance measures not being incorporated into strategy, measures being inflexible and fragmented, and that measures contradict accepted continuous improvement thinking (Wongrassamee et al., 2003).
As a management tool, the BSC helps organizations to translate their mission and strategy into tangible objectives and measures, and also balances the measures between external (financial – for shareholders and customers) and internal measures (internal processes and innovation and learning).
Furthermore, it balances results measures (outcome that is, financial) and driver measures (measures for future improvements that is. customers, internal processes and innovation and learning) (Wongrassamee et al., 2003). Owing to its characteristic of tying performance matrics more closely to a firm’s strategy and long term vision, the BSC is also ranked as an excellent evaluation tool in the sense that it is used to evaluate managerial activities with unbiased view points by providing both tangible financial aspects as well as intangible non financial aspects, and also evaluate customer satisfaction which is very important in business (Kim et al., 2003). Above all, if properly implemented, the internal development of the scorecard helps to create a new corporate culture in an entity which is always aligned to the strategy (Gibbons and Kaplan, 2015).
The main drawback of the BSC concept is that if applied without modification in terms of the entity’s culture, technology, strategy and mission, it will not bring about the intended results ((Kim et al., 2003; Khomba et al., 2012). In addition, the integration of the BSC frameworks in a business unit or whole company is notclearly detailed (Wongrassamee et al., 2003). Despite these limitations, the BSC has been adopted to suit and encompass a number of situations including sustainability (environment, social and ethics).
Recently, a review of literature by Hansen and Schallegger (2014) found that the BSC has been adopted to include sustainability and renamed SBSC. They concluded that using the BSC framework and adding sustainability related objectives and performance measures to come up with the SBSC, the SBSC can be a promising framework for integrating strategy and sustainability in business.
Applicability of the BSC to tertiary institutions of education
The BSC has been adopted and used in other countries to strategically evaluate tertiary institutions of education. In the United States of America, Dorweiler and Yakhou (2005) conducted their study at Michigan Technological University and concluded that higher learning institutions can better manage their institutions using the BSC model. This was also supported by Papenhausen and Einsten (2006) and McDevitt et al. (2008) in their studies done at University of Massachusetts and Fairfield University, respectively.
Umashankar and Dutta (2007) reported similar findings in India when they carried a study on the implementation of the BSC on tertiary institutions of education at the Institute for International Management and Technology in Hayana. Results found in both India and USA universities were collaborated in Taiwan (Chen et al., 2006) at Chung-Yan University, in UK (Thomas, 2007) at Warwick Business School, and lastly but not least in Malaysia (Lee, 2006) at an International Medical University.
However, these studies suffered from various weaknesses which might weaken their conclusions on the use of the BSC model to strategically measure the performance of tertiary institutions of education. For instance, in the studies done by Doweiler and Yakhou (2005) at Michigan Technological University, the researchers focused on the performance of academic administrators only to the exclusion of other stakeholders, similarly, Mc Devitt et al. (2008) used the BSC to measure the performance of only one faculty of the Fairfield University. A major weakness on these two studies borders on the scope of the research as studies on Academic administrators on one hand, and one faculty on the other cannot give sufficient information on the performance of an entire University.
Four perspectives of the balanced score card
Kaplan and Norton (1992) argue that a balanced scorecard model must comprise four dimensions that they call financial, customer, internal processes and innovation and learning perspectives.
Financial perspective
Amaratunga et al. (2001) assert that the financial perspective show the results of strategic choices made in other perspectives of customer, internal processes and innovation and learning, and also indicate whether the organisations strategy, implementation and execution have contributed to the bottom line. In other words, it is used to gauge how the system has performed (Wongrassamee et al., 2003). Lee (2006) alleges that prudent financial management helps to achieve better results as these are achieved at minimum cost.
Financial perspective is important because it gives the results of all other perspectives of customer, internal processes and innovation and learning, and also that without this perspective the other perspectives can fail to take place, as this perspective is about financing the others (Niven, 2002).
However, using the financial perspective as a performance management tool to the exclusion of the other three has been criticised by many researchers. Amaratunga et al. (2001) claim that this arrangement encourages short-termism, furnishes misleading information for decision making, fails to consider requirements of today’s organisation and strategy, provides misleading information for cost allocation and control of investments, and furnishes abstract information to employees. Love and Holt (2000) maintain that over reliance on financial measures is retrogressive and out of date. In their analysis, Kaplan and Norton (1992) concluded that assessing companies based on financial aspects only do not accurately reflect the interest of the shareholders.
The measures that can be used to measure financial performance of an educational institution include good financial management, fund raising capabilities and external relationships (Dorweiler and Yakhou, 2005), tuition income, reduce human resource cost and increase asset usage (Chen et al., 2006).
Customer perspective
Ruekert (1992) defined customer orientation that Lee (2006) quotes as the degree to which an organisation obtains and uses information from customers, develops a strategy that will meet customer needs and implement that strategy by being responsive to customer needs and wants. The customers of an institution like The Polytechnic include all its stakeholders. Examples of stakeholders include students, employers, government, parents, faculty, staff, administration, alumni, and the community at large. Punniyamoorthy and Murali (2008) emphasise that in order to get information from stakeholders, a meeting needs to be organised whereby a face-to-face discussion would take place.
Customer orientation would positively contribute to the performance of the institution in the sense that customers will be satisfied once their needs and wants have been supplied. This would result in high enrolments, and therefore high revenue that could be used to improve the internal processes of the institutions as well as improve its innovation and learning processes (Lee, 2006).
This view is supported by Pelham and Wilson (1996). On the other hand, if customers were not given their needs and wants, it would contribute to the failure of the institution to perform better. This would come about because the customers would look for another institution and educational services, in the process, the institution revenue would drop.
This would also lead to drop in service efficiency, as the institution would not have funds with which to improve internal processes and innovation, and learning which are key to educational institutions. Various researchers have measured customer orientation in tertiary institution of education using different measures.
For instance, Chen et al. (2006) measure customer orientation from two perspectives: namely the customer satisfaction point of view and the promotion of the institutions’ image point of view. On one hand, they measure satisfaction by looking at number of customer complaints and how fast students get employed from the institution. On the other, they suggest that the image of the institution can be measured by looking at the reputation of the institution, number of students who want to get tuition at that institution and participation in charity activities by the institution.
Even though some measures like reputation can be difficult to objectively measure, they all perfectly describe the type of relationship that exists between the institution and the stakeholders. Despite the difficulty in operationalising some measures, this research will employ all of them to measure the institutions’ orientation to its customers.
Internal processes
Papenhausen and Einstein (2006) look at internal processes as critical internal processes that drive the customers (stakeholders) satisfaction, and eventually the financial outcome. Amaratunga et al. (2001) share this position, when they view internal processes as mechanisms through which performance expectations are achieved. Once an institution has solicited needs and wants of its customers, it needs to put in place processes that can turn the wishes of customers into realities (Lee, 2006).
People would need to have the necessary technical knowledge and skills at all levels in order to provide the needs to the customers. The skills and knowledge would be complimented by up to date facilities and technology, and also appropriate procedures and regulations (Punniyamoorthy and Murali, 2008).
Internal processes play a big role in determining the performance of an institution. Dorweiler and Yakhou (2005) claimed that good internal processes in an academic institution lead to, among other things, quality of educational services and efficiency.
Chen et al. (2006) measured internal processes from two perspectives, namely quality service process and complete teaching facilities. On quality service process they look at administration efficiency and student staff ratio.
Regarding teaching facilities, they propose teaching facilities renew rate, and teaching facilities use rate. In addition to these, Dorweler and Yakhou (2005) insisted on quality of faculty, teaching excellence, service efficiency and effectiveness, strategic plan, performance evaluation and board assessment. Both of these are measuring internal processes by considering the quality of service, teaching facilities and quality of teaching.
Innovation and learning
Innovation and learning can be defined as the identification of the sets of skills, and processes that drive the college to continuously improve its critical internal processes (Papenhausen and Einstein, 2006). Once the needs of the customers have been obtained, institutions convert these requirements into activities that can process them into tangible output that customers can use.
At times, it is found that there is a gap between the internal processes requirements in terms of skills, information systems and the organisation climate, and what is available (Lee, 2006). For instance, the institution might be lacking some skills that are necessary for the provision of a need to the customer. It is the duty of the innovation and learning to consider what it must do to maintain and/or develop the know-how required for understanding and satisfying customers needs (Amaratunga et al., 2001). In addition to meeting the gaps that might be there, Amaratunga et al. (2001) also emphasise that the purpose of this perspective is to consider how it can sustain the necessary efficiency and productivity of processes which are presently created for customer.
Dorweiler and Yakhou (2005) recommended that innovation and learning should be measured by looking at an institution’s teaching and technology leadership, programme/curriculum innovation, pedagogy enhancement, reward system, whereas Thomas (2007) considered training and development of human resources, developing an institution’s knowledge culture, an institution’s involvement in research as some of the measures of innovation and learning.
Performance is a multidimensional construct and Kaplan and Norton (1996) considered time, quality, flexibility, financial efficiency, customer satisfaction and human resource as key dimensions of performance. These dimensions are consistent with those set by the Ministry of Education in Malaysia as reported by Lee (2006). The Ministry of Education in Malaysia at the time had, efficiency, effectiveness, quality of service, students’ academic achievement, student discipline, student participation in sports and extra curricula activities as main constituents of performance dimension.
However, Lee (2006) viewed these dimensions into common factors of efficiency, quality, responsiveness, cost and overall effectiveness. In the commercial world, customers use their knowledge and expectations to measure the quality of the services being offered (Parasuraman et al., 1986). However, unlike products that are manufactured, it is not easy to measure the quality and effectiveness of services in service industry like the teaching and learning because of the intangibility of the outcome. Despite this challenge, Soutar and Mc Neil (1996) recommend the use of a service-marketing instrument called SERVQUAL (Service quality) to measure intangibles. This instruments prescribe that service be viewed from five dimensions. The dimensions include: tangibles, reliability, responsiveness; assurance
and empathy.
Grygoryev and Karapetrovic (2005) assert that a tertiary institution of education’s academic performance is said to be high if the students being educated at the institution are well prepared to become productive citizens of the future. This implies that graduates from institutions must have been well equipped to perform tasks that their prospective employers will need them to accomplish or be able to accomplish tasks needed in their businesses, if self employed. However, for educational institutions to impart skills and knowledge required by prospective employers, tertiary institutions of education need to adapt the marketing principle that says corporate strategy must flow from the customer needs (Soutar and Mc Neil, 1996).
In the education sector, customers are substantially employers and therefore if employers are happy with graduates, then one can conclude that the institution produces high quality graduates.
Performance variables include service effectiveness, academic performance and quality students (Ministry of Education, Malaysia in Lee, 2006)). The conceptual framework that was applied in the study is depicted in Figure 1.
