Balanced Scorecard: Performance Management

This assignment delves into the concept of the Balanced Scorecard as a strategic performance management tool. It examines the four perspectives of the balanced scorecard: financial, customer, internal processes, and learning & growth. The document discusses how organizations can implement the balanced scorecard framework to align their strategies with operational activities and measure performance effectively. Furthermore, it explores the importance of Key Performance Indicators (KPIs) in each perspective and provides examples of KPIs used in various industries.

The Effect of Balanced Scorecards and
KPIs on Decision Making of Top
Management in the Oil & Gas Industry

Table of Contents
CHAPTER 1 INTRODUCTION.....................................................................................................1
1.1 Introduction...........................................................................................................................1
1.2 Research problem statement.................................................................................................2
1.3 Research questions................................................................................................................3
1.4 Research objectives...............................................................................................................3
1.5 Research contribution............................................................................................................3
1.6 Limitations of the study........................................................................................................4
1.7 Definition of terms................................................................................................................5
1.8 Research organizing..............................................................................................................7
CHAPTER 2 LITERATURE REVIEW..........................................................................................9
Introduction.................................................................................................................................9
Research framework..................................................................................................................20
Hypothesis development...........................................................................................................21
Summary...................................................................................................................................21
REFERENCES..............................................................................................................................22

Illustration Index
Illustration 1: Balance Scorecard...................................................................................................13

CHAPTER 1 INTRODUCTION
1.1 Introduction
In each and every business enterprise, employees are considered as the firm's most
valuable asset as well as its biggest expense. It means that firm's productivity and profitability
depends upon ensuring that the worker's performance needs to exceed to their full potential.
Hence, in regard to survive and prosper in current economic times, businesses can no longer
manage using financial methods alone. Moreover, firm should focus upon improving non-
financial measures such as product quality, customer satisfaction and brand preference in order
to attain desired objectives (Wu, 2012). In regard to manage company's performance it then uses
Key Performance Indicators in order to analyse the track performance and base key strategic
decisions regarding managing people and resources. Using balance scorecards is beneficial
method in order to attain sustainable development of the firm and thus it will lead business to the
level of success. Thus, top management of oil and gas industry focuses upon undertaking balance
scorecards and KPI's which helps them to make effective decision making so that number of
operational activities can be managed in an effective way. Such methods are considered as one of
the best way to enhance the work performance and overcome problems (Barnabè, 2011).
It helps in facilitating top management in order to track execution of activities in
significant way so that objectives can be accomplished in an effective way. KPI and Balance
Scorecard are considered as best factors which helps in bringing effective sustainable
development to develop and implement strategic decision within oil and gas industry. Top
management within firm requires to effectively control and monitor the process so that proper
analysing number of factors play a crucial role in sustainable development. Key Performance
Indicators also helps in improving performance measurement so that top management within oil
and gas industry can make effective decisions regarding business success (Grigoroudis,
Orfanoudaki and Zopounidis, 2012).
It can be stated that through such performance measurement methods i.e. Balance
Scorecard and KPI it helps top management of oil and gas sector to effectively measure the
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performance of their workers and attain desired results. Balance Scorecard helps in considering
as an effective tool in order to develop strategic planning and management system which helps in
providing a great support to working of firm (Sundin, Granlund and Brown, 2010). However, it
is mostly accessed by different organisations and enterprises worldwide in order to have proper
alignment of business operations to the vision and strategy of firm. Further, it also facilitates in
enhancing the internal and external factors such as communication, monitoring etc. so that
crucial decision can be taken within firm.
1.2 Research problem statement
Balance Scorecards method is considered as a strategic planning and management system
in order to provide a great support towards organization's working. However, it is mostly
undertaken by different firms around the globe so that proper alignment of business operations
can be done towards the vision and strategy of firm. Moreover, it also facilitates in improving
internal and external factors such as communication and monitoring etc. Furthermore, Key
Performance Indicator is another measurable factor that helps in demonstrating how effectively
firm helps in achieving key business objectives (Arzu Akyuz and Erman Erkan, 2010). Top
management of firm faces serious issue in establishing the pressure of correct KPI's so that
performance of employees can be analysed, reviewed and accessed. It assists business to obtain
zero defects as well as best customer satisfaction. Hence, it can be considered the oil and gas
industry is more focused towards using such approach and attain results. Businesses are also
facing serious issues in regard to decision making process with the help of this research conflicts
can be assessed in an effective way (Chytas, Glykas and Valiris, 2011).
Furthermore, it can be assessed that oil and gas industry is facing different problems in
relation to decision making process. In regard to improved focus upon balanced scorecards and
KPI's, businesses can overcome problems to attain success. However, improper application of
balanced scorecards is also identified as one of the main issue for the firm. It is crucial for
businesses to have effective understanding of key aspects in order to lay the focus upon current
research (Wu, Lin and Chang, 2011). Further, it will help in regular development of firm and
thus lead towards accomplishing activities to attain impressive level of success. There is no study
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being made in such field and also workers are not satisfied with the end results from the decision
making process of top management.
1.3 Research questions
 What is the role of balance scorecards in decision making process of oil and gas industry?
 How KPI's impact upon the effectiveness of decisions?
 What are the way in which oil and gas sector can utilize both balance scorecards and
KPI's for effective accomplishment of decision making process?
1.4 Research objectives
Main aim of the research to investigate “The effect of Balance Scorecards and KPI's on
decision makers of Top Management in Oil and Gas Industry”. Here, in regard to better
understand regarding the subject matter Oil and Gas sector has been selected. It will help in
exposing the effect, impact of Balance Scorecards upon strategic decision making.
Objectives-
 To determine the role of balance scorecards in decision making process of oil and gas
industry.
 To assess the impact of KPI's on effectiveness of decisions.
 To recommend ways through which oil and gas sector can utilize balance scorecards and
KPI's for effective accomplishment of decision making process.
1.5 Research contribution
It can be assessed that through carrying out the present study it focuses upon identifying
the effects of benchmarking and KPI's so that it helps top management to enhance the
performance of employees and make crucial decision to attain success. Also, the quality and
significance of research will highly depend upon the contribution that research will help in
adding it as a value (Northcott and Ma'amora Taulapapa, 2012). Further, researcher aims to
develop theory and practice in this field as well as policy development so that success can be
attained. Scholar aims to justify the work through contributing something to theory building and
practice it within the field as well as policy development in the particular area. However, a
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research work could be justified thoroughly through assessing the results and importance of
study based on these considerations. Scholar aims to identify the contribution made among this
research and results so that different factors needs to be considered in order to attain results
(Huang, Lai and Lin, 2011).
However, through carrying out the present research it results in helping different
individuals such as companies, people and other related parties. Hence, the research study
assists in helping the top management of different sectors to identify the significance of balance
scorecards and KPI's in order to develop policy and practice so that results can be attained.
Carrying out the research requires reviewing different literature review conducted by researchers
so that conclusion can be carried out effectively (Franco-Santos, Lucianetti and Bourne, 2012).
However, developing the research work helps' scholar to contribute something to theory building
and practice within the field as well as policy development in the area so that importance of the
research can be assessed. It is the best way through which researcher can clearly state the value
that the present research will add to each of the academic field and its literature review,
businesses and other individuals (Wadongo and et.al., 2010).
1.6 Limitations of the study
It can be considered that limitations of the research affects the study to be accomplished
in an effective manner. There are diverse limitations faced by the scholars in relation to small
sample size, measuring instruments or generalizability of the results. All these limitations affects
the carrying out of research and thus influences the business operations. Researcher aims to carry
out the research so that they can follow the guidelines and thus overcome the issues so that
success can be attained (Schaltegger, 2011). It involves different issues such as ethicality of
research. Therefore, scholar aims to carry out the research undertaking proper ethical
considerations so that best results can be obtained.
Furthermore, identify the sample size at the time of study is crucial so that research can
be carried out effectively. Hence, small sample size affects the research and thus it is essential
for scholar to enhance the target sample so that different opinion can be viewed from them in
order to enhance the results of study. Identified limitations need to be overcome so that success
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can be attained in an effective way. Another issue identified is measuring instruments in order to
improve the validity of the study. Business also focuses upon measuring the feasibility of the
instruments so that success can be attained (Agostino and Arnaboldi, 2012).
Another limitation within the study is that generalizability of the results which assesses
that outcomes identified should not be general either they should be specific. Hence, it helps firm
to obtain and bring positive results so that success can be attained. It also assesses that researcher
needs to focus upon measuring the variability of the study in relation to overcome the problems
and thus goals can be attained (Yigitbasioglu and Velcu, 2012). Hence, through overcoming
different limitations positive results can be attained to obtain best results.
1.7 Definition of terms
 Balance Scorecards- It is considered as an effective performance measurement tool that
assists in carrying out strategic planning and management system so that it helps in
providing a great support to working within firm. Also, it is mostly accessed by different
businesses and global enterprises in order to possess alignment of business operations
towards the vision and strategy of firm (Northcott and Smith, 2011). Moreover, it also
helps firm in facilitating in enhancing of internal and external factors such as monitoring,
communication etc. It is the best technique that helps firm to make effective decision
making. However, it also took into account other crucial perspectives such as how the
customer views the firm, operational process and the culture of learning and knowledge
(Wu, 2012).
 KPI- Further, it is another measurable value that aims to demonstrate how effectively a
firm helps in attaining key business objectives. Moreover, business also helps in
evaluating different factors that are important to the success of firm. However, it has been
assessed that KPI's of firm might be different as per the nature of firm. Organisations
thrives of fails to based upon their ability to assess, define, track and act upon the key
performance indicators. Top management of firm are increasingly feeling the pressure in
relation to establish right key performance indicators in regard to enable appropriate
decisions (Barnabè, 2011).
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 Financial perspective- It helps in encourages the identification of few relevant high level
financial measures. Further, it also assists in designing the financial measures so that it
encourages choosing certain measures that assists in answering to the question. Here,
shareholders helps in identifying the cash flow, sales growth, operating income and return
on equity (Grigoroudis, Orfanoudaki and Zopounidis, 2012). All these measures helps in
assessing the financial position of firm so that best results can be attained.
 Customer perspectives- It helps in motivating the identification of measuring that
answer so that customers can be satisfied from the services delivered to them. Individual
needs to be assessed that business should assess as per the introduction of new products,
timely deliver, share of crucial customers, and attaining satisfaction (Sundin, Granlund
and Brown, 2010).
 Internal business processes perspective- Further, it helps in improving and identifying
of measures that assists in internal business processes perspectives so that customers can
be satisfied. Researcher aims to assess the internal business processes so that cycle time,
unit cost, yield and new product introductions can be identified in relation to obtain
effective results (Chytas, Glykas and Valiris, 2011).
 Learning and growth perspective- It is another crucial method that assists in learning
an growth perspectives so that regular improvement can be assessed that helps in creating
value and innovate in relation to develop new generation of products. Moreover, learning
needs to be carried out so that growth perspectives can be assessed and thus maturity of
product life cycle can be assessed (Wu, Lin and Chang, 2011).
 Top management in decision making- Here, it assesses that using effective strategic
tool such as KPI and Balance Scorecard that helps top management in effective decision
making so that success can be attained in an effective way. Thus, it helps in evaluating
the performance of firm and develop crucial decision so that performance can be
measured efficiently (Huang, Lai and Lin, 2011).
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1.8 Research organizing
Here, it can be assessed that in the first chapter researcher identifies the introduction
chapter that consists of background of the research, aims and objectives, research questions,
problem statement, contribution of the research, limitations of the study, defining different
variables involved within the study and research organizing etc. All these parts are involved in
the introduction chapter and thus it helps in conducting the study through introducing the issues
and current state of knowledge in terms of conceptual, theoretical development and research in
the area. Study also assists in identifying the research gaps so that chapter can be concluded
efficiently (Franco-Santos, Lucianetti and Bourne, 2012). In the introduction part it assists
researcher to introduces major variables of the study and thus relate them to the previous
research and theory. Hence, through this it helps scholar to look at different studies or articles
published as currently as possible so that whatever is discussed or reviewed is not something out
of date or even irrelevant. Further, using major variable involved within the study helps in
indicating the fact in order to make individual aware about the problem identified in the research.
Also, in the first chapter background is discussed that highlights the current state of knowledge
and possible gaps in the area. Moreover, applying research studies helps in identifying the
background section that helps in discussing and highlighting the management problems or
business situations and thus success can be attained (Wadongo and et.al., 2010).
Further, another chapter carried out within the research is literature review in which
different previous studies has been carried out upon dependent as well as independent variables.
It also studying of different researches related to the topic so that research development can be
attained (Schaltegger, 2011). This part helps in reviewing and developing hypothesis so that
proper variables has been used to carry out the study and thus information has been provided for
further readers. Here, critically reviewing the published work in the area of study that the student
is undertaking so that theoretical development in order to enhance the significance of study.
Moreover, result of the review needs to showcase the current state of knowledge in the
area in terms of carrying out in-depth research. It also assesses that strengths and weaknesses of
previous research and thus evaluate the knowledge gap that needs further explanation of the
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research. Literature review helps in identifying the expected results in order to comprehensively
helps in providing the reader with a clear picture of knowledge and of major questions in the
subject area researched (Agostino and Arnaboldi, 2012). It also assesses the review that needs to
be based upon the factors or variables that are directly and indirectly related to the research topic.
Thus, identifying appropriate variables helps in assessing the study so that hypotheses for each
independent variable and its relationship with dependent variables is assessed.
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CHAPTER 2 LITERATURE REVIEW
Introduction
After completing the introduction chapter, another crucial part in the thesis is literature
review section. It is considered as the most crucial part that helps in critically evaluating the
previous researches. Within this chapter, opinions and views of different authors are assessed
and thus it is carried out in relation to the subject matter. However, the data under this research is
collected with the help of secondary sources that is considered as the basis of further research.
Here, literature review helps in identifying the knowledge gap within the previous studies as it is
assessed in an effective way (Northcott and Smith, 2011). Moreover, the part helps in examining
the reviews and opinions of the scholar in an critical manner. Further, it also assists in
developing effective theoretical base in regard to the subject matter so that positive results can be
developed. In the current thesis, literature review will carry out the concept of balance scorecards
and KPI's so that it helps in identifying the performance measurement of individual employees.
Further, assessing the impact of KPI's on effectiveness of decision making by top management
so that best results can be attained. At the end, it recommends different ways through which oil
and gas sector can utilize balance scorecards and KPI's for effective accomplishment of decision
making process (Yigitbasioglu and Velcu, 2012).
Previous Studies on Dependent Variable
Role of balance scorecards in decision making process
As per the view of Sundin, Granlund and Brown (2010), balance scorecards is considered
as the crucial performance measurement tool that helps in measuring individual performance so
that success can be attained effectively. It is strategic planning and management system which is
undertaken within firm and develops vision and strategy of firm in order to improve the internal
and external communication. Company also focuses upon monitoring their performance against
strategic goals (Sundin, Granlund and Brown, 2010). It is way through which strategic and non-
financial performance measures helps in developing the traditional financial measures in order to
provide managers and top management professionals a more balanced view of business
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performance. However, Grigoroudis, Orfanoudaki and Zopounidis (2012), argued that balance
scorecard has evolved from the early use of simple performance measurement framework in
order to develop business strategic plan from an attractive use so that performance of individual
can be enhanced in an effective way. Such framework assists in providing performance
measurement and also helps planners to identify the accurate results so that best strategies can be
developed (Grigoroudis, Orfanoudaki and Zopounidis, 2012).
Huang, Lai and Lin (2011), stated that top management of oil and gas sector focuses
upon using balanced scorecard as a set of financial and non-financial measures in relation to
attain firm's success. It is the best way that helps in developing business performance so that
individual can make effective decision in relation to attain business objectives. Such factor can
be adopted by any of the firm so that required results can be attained (Huang, Lai and Lin, 2011).
Balance Scorecard is considered as the set of financial and non-financial measures regarding
business overall success factors. However, it reflects the business value creating activities and
thus helps top management in decision making process to improve the productivity of firm.
Following are the different benefits that helps in measuring the importance of balance scorecards
within firm such as- Overcoming challenges- Akhtar and Lodhi (2016), stated this method assists business to
overcome three fundamental challenges such as measuring performance, rising intangible
assets and implementing strategy. However, the traditional financial measures of
performance does not reflect current performance of firm and also do not motivate long
term thinking. Further, intangible assets creates greater value generated within firm.
However, the balanced scorecards metrics for the effective use of these assets. Such
strategy helps business in successfully implementing a major challenge for all the
businesses in relation to take effetive decision making. It also assists firm to value people
and thus overcome management problems so that effective strategy can be developed in
relation to attain success (Akhtar and Lodhi, 2016). Components- As per the view of Anastacio (2016), Balance Scorecards is the method
that helps in measuring the performance from four different interrelated perspectives such
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as financial, customer, internal business processes and learning and growth. It assesses
that the improvement in individual learning, internal business processes so that desired
results can be attained. Further, it also assists in creating better products or services so
that customer satisfaction can be attained. Top management of firm needs to make
effective decision making so that financial measures can be considered at the time of
improving individual performance (Anastacio, 2016). New management processes- Balance Scorecards assists in initiating four different
management processes that helps in linking towards short term initiatives towards long
term objectives. However, Ayoup (2016), argued that the first process translates the
vision and the strategy into different operational steps. Further, top management needs to
communicate the operational terms to different departments so that performance of
individual can be measured accordingly and thus enhance their efficiency and
productivity. Top executives also carry out business planning and thus focuses upon
attaining desired objectives. It assists managers to adopt most effective alternatives
towards business targets so that it can be attained effectively and efficiently (Ayoup,
2016). At the end, feedback and learning is the best way through which business adopt
towards changing circumstances and thus it ensures the long term survival of firm for
long term. Personal Scorecards- Battagello and Cricelli (2016), stated that small firms rely upon
workers to perform operational tasks so that it helps in encouraging and effective
employees to attain customer satisfaction. Personal scorecards helps in translating the
firm's scorecard into tangible objectives for individual workers (Battagello and Cricelli,
2016). These are tailored as per the individual's roles and strengths so that they create
synergies among workers and motivate cooperation and specialization so that set targets
can be attained. However, Bigliardi and Ivo Dormio (2010), argued that personal
scorecard helps in measuring the performance of individual employees working within
firm so that it encourages them to improve the business performance and thus attain
desired results (Bigliardi and Ivo Dormio, 2010).
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 Benefits- As per the view of Caputo and Tron (2016), organisations often struggle to
survive in the marketplace and thus they mostly focus upon financial goals of firm. It
helps in making the planning for the future problems so that comparison with other
businesses can be made so that performance of firm can be enhanced. On the other hand,
communication is an effective process in order to deliver relevant information so that best
results can be attained. It also minimizes the challenges of workers and thus facilitate
team participation in developing strategies so that success can be attained in an effective
way (Caputo and Tron, 2016).
According to the view point of Carneiro-da-Cunha (2016), balance scorecards is the
effective performance measurement tool that assists management in identifying the outstanding
performance of employees so that best decision can be made in order to incorporate both
financial and non-financial parameters. It overcomes the traditional methods of performance
evaluation and develop the ability to give an integrated view of firm. It is the best tool that helps
in assessing the business strategy so that it helps in remaining within firm for next several years.
Top executives of oil and gas sector uses this method as it helps them to obtain effective decision
making so that efficiency of individual can be measured (Carneiro-da-Cunha, 2016). It also
assists in improving the performance of employees by identifying their strengths and weaknesses
so that it can be overcome to obtain desired results. Hence, it is significant for firm to adopt
effective performance measurement tool so that individual performance can be measured in
relation to enhance the productivity of firm and attain set targets (Chen, Hsu and Tzeng, 2011).
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Illustration 1: Balance Scorecard
(Source: Cullen, 2016)
Implementing Balance Scorecard strategy assists in significantly improving the
implementation of objectives and strategies so that proper control and monitoring can be done to
obtain business progress. It is one of the best communication device that helps team members to
inform the other members of the team effectively. Hence, such strategy helps in translating into
operational and measurable actions and attain strategic implementation so that success can be
attained effectively as stated (Freitag and Found, 2016). Top management of firm understand
that their business measurement system influences the behaviour of managers and workers. They
are required to understand that traditional financial accounting measures such as return on
investment and earning per share can assist in misleading signals for regular improvement and
innovation activities to attain competitive environment. However, the traditional financial
performance helps top management to undertake effective decision making so that skills and
competencies can be improved in an effective way (Greatbanks, 2016).
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As per the opinion of Greiwe and et.al., (2011), top management of oil and gas sector
effectively uses such method in order to improve the performance in an effective way. Thus, it
helps in measuring the performance of employees so that set targets can be attained by them
efficiently. Top executives undertakes effective balance scorecard method in order to make
decision regarding the employees' performance so that it can be enhanced up to a certain extent.
Hence, it is essential for top management to focus upon improving the decision making process
so that best results can be attained (Greiwe, J. and et.al., 2011). It can be analysed that disparity
among improved operational performance and disappointing financial measures that creates
frustration for top management. Top executives realizes that no single measure provides a clear
performance target or focus upon attention to attain desired targets. Hence, managers require a
balanced presentation of both financial and operational measures. Thus, it can be stated that top
management undertakes effective decision making process so that customer satisfaction can be
attained (Gururaja, 2016).
Impact of KPI's on effectiveness of decisions
As per the view of Hossain and Prybutok (2016), using key performance indicators helps
in improving productivity and profitability sop that desired results can be attained. It is also
considered as an effective financial measure in order to manage the business operations for long
time period. Hence, firm requires to track financial measures so that effectiveness can be attained
in decision making. KPI affects the effectiveness upon decisions so that individual can enhance
its performance and thus develop strategy so that business objectives can be attained effectively
and efficiently. Company assists in translating the corporate vision into measurable operational
goals that are communicated to workers (Hossain and Prybutok, 2016). Also, such goals are
linked to individual performance goals that are assessed upon establishing periodic basis so that
expectations of individuals can be fulfilled. It can be evaluate that most of the goals are achieved
just not through efforts of individual person but through multiple people working within different
department across firm. However, performance management experts agrees to the fact that using
KPI within firm helps in making critical decisions so that shared accountability helps in attaining
desired success (Irene and Marika, 2016). Thus, business uses Key Performance Indicators as the
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foundation to assess and track performance in order to make strategic decisions regarding
staffing and other resources so that success can be attained effectively and efficiently.
Kang and Zhao, (2016), stated that employees and managers work effectively in order to
develop overall corporate goal plan so that individual efficiency can be improved in order to
create such as situation that helps in engaging in order to attain success within firm. With the
help of KPI it creates a shared responsibility so that stated goals can be attained. Identifying the
KPI's of the firm helps firm to make effective decision making so that performance can be
maintained in an appropriate form and also deadlines can be met accordingly (Kang and Zhao,
2016). It assesses that there is constant pressure needs to be attained in order to measure the
performance targets so that individual can reach to higher level of performance and make sure
that they work effectively in order to support and further attain business goals. Performance
management is the process used in order to manage the performance so that set targets can be
attained in an effective and efficient way. KPI assists in improving performance of business so
that individual can enhance its effectiveness and thus team works towards organizational goals
and attain the performance objectives (Lu and Goh, 2016).
Furthermore, managers of firm helps in improving the financial performance of business
so that it assists in ensuring the people's work helps in supporting and further attain business
goals. However, Marr (2012), argued that performance evaluation process helps in ensuring that
the employee is doing the right thing so that each and every team member is dedicated towards
business goals so that effectiveness can be attained within decision making. Key Performance
Indicators is stated as the quantifiable metric that reflects upon how well the firm helps in
attaining its stated goals and objectives. KPI helps in identifying the resulting behaviour so that
stated goals can be attained in order to provide superior customer service. Setting Key
Performance Indicators helps firm to set desired objectives upon which firm helps in identifying
the complaints that needs to be overcome so that satisfaction can be attained (Marr, 2012).
Employees are crucial part of business and thus they are involved in performance
management so that goals can be stated in an effective way. Crucial factors is that goals which
are set are aligned that helps in attaining overall strategy of the firm so that success can be
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attained. Mohammed and Taib (2016), stated that when employees goals are defined in terms of
identifying business KPI it helps in ensuing that what the employees are doing in order to align
with the goals of firm. It is critical between employee performance and business success so that
effectiveness can be attained in decision making (Mohammed and Taib, 2016). KPI's are set in
order to improve the performance of business and thus attain desired results so that set objectives
can help in improving the employee performance and business success. Following are the
different characteristics of effective KPI's implemented within business such as- Simple- It can be assessed that KPI's required to be considered as both simple to
understand and to measure the performance so that success can be attained effectively.
Here, it is essential for employees to identify the KPI and measure it properly to obtain
success. Key Performance Indicators helps in delivering better results within firm so that
set objectives can be attained in an effective way (Nørreklit, Nørreklit Mitchell and
Bjørnenak, 2012). Cascading- Oyaneder and Valderrama (2016), stated that effective KPI's cascade from
strategic decision making so that desired objectives can be attained effectively and
efficiently. It means that it needs to trickle down from the overall strategic goals of the
firm to the daily operations of the workers that affects the KPI's. It also assists firm to
measure the performance of individual as per the decided objectives (Oyaneder and
Valderrama, 2016). Measurable- Further, it also assists in measuring the performance of employees in order
to assess the performance of individual. Moreover, business also doesn't possess
quantitative factors to be measured so that it needs to be effectively satisfying the needs
of clients and measure the feedback so that customer can be satisfied (Peng Xu, Chan and
Qian, 2012). Actionable- As per the opinion of Rajesh and et, al., (2012), individual identifies the
measures for employees in order to assess their performance so that desired objectives
can be attained in an effective way. However, at certain point of time when employees
16

clearly understand that they need to do to influence a KPI they are able to manage it
within firm (Rajesh and et, al., 2012). Timely- Here, it assesses that the results of KPIs should be reported in an effective time
frame so that best decisions can be made in order to consider the urgency of the data. KPI
helps in measuring the performance of firm so that it ensure that the results of the report
are being acted upon accomplishing the results in appropriate time (Raynus, 2016).
 Visible- It assesses that making KPI's is meaningless unless the objectives are reported
that helps in allowing business to communicate it through proper e-mail and notice.
As per the opinion of Sainaghi, Phillips and Corti (2013), it can be assessed that effective
KPI's helps in measuring the values that are related to the essential business objectives so that
performance can be monitored effectively and efficiently. It also assists in identifying the sales
and marketing objectives so that firm needs to rely upon the set objectives in order to help
employees to perform effectively (Sainaghi, Phillips and Corti, 2013). It is essential for the sales
department of firm to identify the KPI's so that potential customers can be assessed in order to
attain the desired objectives and improve the performance so that targets can be attained
effectively and efficiently (Strohhecker, 2016). It is considered as an effective business tool in
order to carry out the business strategy so that they also enable sound decision making in order to
attain desired results. Key Performance Indicators are originating from a specific strategic
objective or desired outcome for the firm it assists in attaining success. It also assists top
management to develop a keen action towards firm's KPI's and enable them to make effective
decision making so that success can be attained (Sergeyev, 2016). Further, there are a common
area for improvement within firm and thus it causes a source for competitive edge in order to
enhance the performance in an effective way (Sundin, Granlund and Brown, 2010).
Previous Studies on Independent Variables
Balance scorecards and KPI's for effective accomplishment of decision making process
As per the research of Bigliardi and Ivo Dormio, 2010, it has found that “today’s
managers recognize the role of balance scorecards to take effective decision making process”
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(Bigliardi and Ivo Dormio, 2010). To introduce a new strategy or introducing a new service or a
product in the market, it has been important to bring the improvement in decision making
process. To achieve it, it has essential for the firm use balance scorecard. It allows organizations
to be better able to use their intangible and tangible assets. According to Sainaghi, Phillips and
Corti, 2013, “via balance scorecard, top management of oil and gas sector can take effective
decisions related to measure financial performance.” (Sainaghi, Phillips and Corti, 2013).
Financial perspective includes various measures of importance of the shareholders. For example,
Return-on-capital-employed and cash flow reflected preferences for short-term results. On the
basis of this, top management of oil and gas organizations measures the uncertainty caused by
unexpected variations in financial performance. Therefore, by applying balance scorecard as a
financial measurement tool, oil and gas companies can make their decision making process more
improve and effective (Wetzstein and et.al., 2012).
On the other hand, Chen, Hsu and Tzeng, 2011 has stated that “customer satisfaction is
another way through which oil and gas industry can utilize balance scorecard for effective
accomplishment of decision making process” (Chen, Hsu and Tzeng, 2011). Generally, the
strategy of this sector has emphasised on value based business. With the application of balance
scorecard, companies can rank customers perceptions and take the decisions on the basis of this
either to bring the improvement in the products and services or not. So, balance scorecard assist
in improvements in customer satisfaction and translated into tangible benefits. On the basis of
this, oil and gas sectors can use the following tool in taking effective decision making process in
the respect of the customers (Kaplan and Norton, 2007).
Rajesh, Pugazhendhi, Ganesh, Ducq and Koh, 2012 has asserted that “sometimes it is
important for the oil and gas sector to bring the improvement in internal process in order to make
business process more improve” (Rajesh, Pugazhendhi, Ganesh, Ducq and Koh, 2012). For
example, oil and gas industry defined the life cycle of a project from launch to completion. In
this context, to make this process more improve, balance scorecard can be used as a development
of measures of internal processes. By this, top management can take right decision to develop
and set phases in the project cycle. In this context, Sundin, Granlund and Brown, 2010 has
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suggested that “with the application of balance scorecard as measuring internal process will
bring a major shift in thinking of management of oil and gas sector” (Sundin, Granlund and
Brown, 2010). It assists in development of a comprehensive and timely index of project
performance effectiveness. The result of this is it will bring the improvement in the decision
making process (Kaplan and Norton, 2007).
In the contrast of the above statement, Nørreklit, Nørreklit, Mitchell and Bjørnenak, 201
has stated that “the most appropriate method through which oil and gas sector can utilize balance
scorecards for effective accomplishment of decision making process is identification of an
opportunity of innovation in product and improvement in existing commodities” (Nørreklit,
Nørreklit, Mitchell and Bjørnenak, 201). Innovation and leaning objectives drive the need of
improvement in the services which create a new source of revenues and market expansions. So,
with the application of balance scorecard, top management of oil and gas organizations can take
effective decisions regarding the need of innovation and selection of market for this.
But Yin, Wang and Yang, 2014 has stated that “KPI helps oil and gas sectors to take
decisions regarding making long term strategy” (Yin, Wang and Yang, 2014). For instance, Oil
and Gas Company wants to develop core competencies of the employees. With the application of
KPI, different quantitative measures can be set by the firm. On the basis of this, some long term
strategies such as employee turnover, market share etc can be developed. Along with this, it will
make the decision making process of organizations more effective and quick (Marr, 2012). KPI
allows planning for frequently changing enterprise strategies and objectives to be quickly
adjusted. It also permits the oil and gas industry to develop strategic objectives of the company
and the implementation of operational measures. Along with KPI’s allow business processes
performance to be measured and to take into consideration expected levels of key performance
indicators to verify production orders. It effectively link the strategy of the oil and gas company
with a decision-making process concerning production order acceptance, operational planning of
order realization, and order realization.
On the other hand, Greiwe, JSchönbohm, Bruche, Dörrenbächer, and et.al., 2011 has
asserted that “KPI is a performance measurement tool which is widely used by the organization
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in order to measure the performance of the firm” (Greiwe, JSchönbohm, Bruche, Dörrenbächer,
and et.al., 2011). The current competitive context put manufactures under increasing pressure to
provide products that meet the requirements of the customers. In oil and gas industry, the
demand of oil and gas increases with the time. In this context, Wetzstein, Zengin, Kazhamiakin,
Marconi, Pistore and et.al., 2012 has stated in the favour of above context that “with the
application of KPI, oil and gas sector has able for effective accomplishment of decision making
process” (Wetzstein, Zengin, Kazhamiakin, Marconi, Pistore and et.al., 2012). For example,
company produces the oil by seen the demand of the users in the market. In this context, to take
decision related to make to order, KPI can effectively used. With the help of this, management
can take decisions regarding volume to produce gas. So, this make the decision making process
of oil and gas industry more effective.
Peng Xu, Chan and Qian, 2012 has asserted in the contrast of the above statement that
“driving the process of change is another way through which oil and gas sector can utilize KPI's
for effective accomplishment of decision making process” (Peng Xu, Chan and Qian, 2012).
With the help of application of this, company focus on what it had to do well in order to become
the industry leader. For this, it can develop some performance indicators on which firm can
compare actual performance to set indicators. For the same, Yin, Wang and Yang, 2014 has
concluded that “KPI helps in the division eventually to achieved consensus concerning the
highest priority areas for achievement and improvement and identified additional areas that
needed attention, such as quality and productivity” (Yin, Wang and Yang, 2014). It drives major
change, to become more market oriented, throughout oil and gas industry. It provided a shared
understanding of company goals and determines the ways which requires achieving them.
Research framework
It is considered as one of the significant part of the research. It is essential as with the
help of this, researcher can reach to a specific conclusion. In the current study, interpretivism
philosophy will be implied. Also, deductive approach is being employed as the study involves
formulation of hypothesis. However, the nature of the current research is qualitative. While, the
size of sample will be 60 top management of oil and gas sector. Data collection will be carried
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out through both primary and secondary sources. Additionally, this analysis would be done
through qualitative technique that involves thematic analysis.
Hypothesis development
As per the above analysis, researcher frames different hypotheses so that data analysis
can be carried out in an effective way-
Hypothesis 1:
H10: There is no significance relationship between role of balance scorecards in decision making
process of oil and gas industry.
H11: There is significance relationship between role of balance scorecards in decision making
process of oil and gas industry.
Hypothesis 2:
H20: There is no significance relationship between the impact of KPI's on effectiveness of
decisions.
H21: There is significance relationship between the impact of KPI's on effectiveness of
decisions.
Summary
It can be concluded from the research that oil and gas industry is facing different
problems in relation to decision making process. Therefore, it helps in improving the balance
scorecards and KPI's so that performance measurement can be identified of individual employees
in order to achieve success. Hence, applying the balance scorecards and KPI's helps in
identifying the problems so that goals can be accomplished effectively. Further, it will also help
in regular development of firm and thus lead towards fulfilling activities to attain impressive
level of success.
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