Oil & Gas Industry- Balanced Scorecard Effect On Decision Making

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The effects of Balanced Scorecards on Decision Makers of Management in the Oil and Gas
Industry
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Table of Contents
1.0 Introduction.......................................................................................................... 3
1.1 Background of the Study...................................................................................... 3
1.2 Problem Statement............................................................................................... 4
1.3 Research Objectives............................................................................................. 6
1.4 Research Questions.............................................................................................. 6
1.5 Significance of the Study...................................................................................... 6
1.6 Scope of the Study............................................................................................... 7
1.7 Operational Definition of Key terms.....................................................................7
1.8 Organization of Chapters...................................................................................... 8
1.9 Summary.............................................................................................................. 9
2.0 Literature Review............................................................................................... 10
2.1 Previous Studies................................................................................................. 10
2.2 Balanced Scorecards.......................................................................................... 12
2.2.1 The Need for Balanced Scorecards..................................................................13
2.2.2 Types of Balanced Scorecards/Balanced Scorecards Perspectives..................14
2.2. 3The Steps of Implementing Balanced Scorecards............................................14
2.3 Decision Making................................................................................................. 16
2.3.1 Introduction.................................................................................................. 16
2.3.2The Decision Making Process........................................................................16
2.3.3 Types of Decisions........................................................................................ 16
2.4 Balanced scorecards and its Effects on Decision Making................................16
2.5 Theory of the Study............................................................................................ 17
2.6 Studied Companies’ Profile................................................................................. 18
2.7 Summary............................................................................................................ 19
Bibliography............................................................................................................. 20

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CHAPTER ONE
1.0 Introduction
. A balanced scorecard refers to a “strategic planning and management system” which is used
extensively in industry and business, Non-Governmental Organizations (NGOs), and even in
governments across the world in order to align business activities of such entities to their strategy
and vision (Ahmadi & Bagheri, 2016). A Balanced Scorecard is also used in enhancing both the
external and internal communications and in the monitoring of organizational performance
against the strategic goals. It is important to note that the use of a strategic scorecard evolved
during the early use when it was just used as “simple performance measurement” tool to the
current total “strategic planning and management” system (Trotman et al, 2015).
1.1 Background of the Study
During the last decade, most researchers and academics have devoted some of their time
to increase attention to not only the measurements of organizational performance, but also
towards the influence or impact of the “Balanced Scorecard” or BSC on it as well as on the
strategic planning (Akhtar & Mittal, 2015). Since it was developed by Kaplan Norton in the year
1992, the use of the Balanced Score Card has been adopted widely by various organizations
across the world. In fact, it has greatly evolved from a tool that is used in measuring performance
to an instrument used in the implementation of strategy (Lundberg et al, 2016). The use of the
Balanced Score Cards has a significant impact on most of the decision makers in both the oil and
gas industry. This is attributed to the fact that BSC are used in respect to the achievement of
target strategic goals of operation and development by decision makers in the oil and gas
industry (Abdalla et al, 2016).

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The use of BSC helps in the promotion of an organization’s strategy realization and also
helps organizations to select the most preferred strategies that can effectively be applied in their
specific organizations (Busco & Quattrone, 2015). It can truly be asserted that for the sustainable
development of any contemporary enterprise in any business field, then there is need to design
not only long-term strategies, but also assure the strategic partnership with associated production
units. In the most recent past, the significance associated to the strategic vision of most corporate
entities across the world allows has greatly surged (Badiru & Osisanya, 2016). In the modern
world, world practice presents a broad range of instruments which make it possible for the
harmonization of economic interests for the organizational units (Nenonen, 2015).
The use of the Balanced Scorecard is an example of such one instrument that is used by
decision makers in both the oil and gas industry (Tsaur, 2015). It is important to note that the
current balanced scorecard is capable of transforming the strategic plan of organizations in the
oil and gas industry from an attractive and passive document to provision of marching orders for
such organizations. This is because it provides an effective framework for the performance
measurements and also helps decision makers in the Oil and Gas industry to identify what needs
to be done as well as what needs to be measured (Subramanian & Gunasekaran, 2015). It also
enables executives in the Oil and Gas industry to genuinely execute their set strategies.
1.2 Problem Statement
The improper application in the use of balanced scorecards has actually emerged as one
of the most critical issues facing most of the contemporary organizations across the world
(Grant, 2016). Despite the fact that most of the organizations across the world have adopted the
use of BSC, the improper use of this vital influential idea has made some of such organizations
lose on the benefits attributed to its constant use (Heinzelmann, 2015). Despite the fact that the

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BSC was established with the aim of helping executives and managers to have an additional
strategic “non-financial measures” to the traditional financial metrics, it is quite unfortunate that
most of these leaders have failed to use it in order to have a clear view of their organizational
performances (Rahdari, 2016). Even though the major aim of the BSC is to help executives and
decision makers of management in the Oil and Gas Industry effectively execute their duties and
strategies, it is quite unfortunate that some of the managers have not fully embraced its use
(Kirwan, 2015).
Even though the most recent study that was carried out by “Bain &Co” actually named
the balanced scorecard as being the fifth on the top ten management tools that were widely
applied across the world (White et al, 2016). It is quite unfortunate that some of the
organizations have not yet realized the importance of a BSC (Tsagarakis et al, 2015). Indeed,
BSC was also selected by a team of editors working at Harvard Business Review as being one of
the most “influential business ideas” that have ever occurred for the past seventy five (75) years
(Chiarini, 2016). The improper use or application of BSC by organizations across the world have
made some of the decision makers of management in the Oil and Gas industry to fail to
recognize some of the vagueness and weaknesses of the previous management’s approaches
(Prince & de la Harpe, 2015).
It is quite apparent that some of the decision makers working in the oil and gas industry
to fail in having a clear and comprehensive prescription regarding what ought to be measured so
as to have a financial perspective of their respective organizations in a balanced manner (Kumar,
2016). Failure to effectively apply balanced scorecards by decision makers in the oil and gas
industry has had a negative impact on the affected organizations (Bellamy, 2015). This is
because it has made such decision makers to become unable to effectively clarify both the

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strategy and mission of their industries (Hossan et al, 2016) .This ensures that they are ultimately
transformed into desired action by relevant stakeholders (Wibisono et al, 2016).
1.3 Research Objectives
The aim of carrying out this research study is to:
 To ascertain the improper application and use of balanced score sheet on decision makers
of management in the oil and gas industry.
 To ascertain why the improper application of balanced scorecards by decision makers of
management in the oil and gas industry can have a negative impact on the organizations.
 To ascertain the importance and positive effects of using balanced scorecards by decision
makers in the oil and gas industry.
1.4 Research Questions
 What are the effects associated with the improper application and use of balanced score
sheet on decision makers of management in the oil and gas industry (Agarwal et al,
2016)?
 How can the improper application of balanced scorecards by decision makers of
management in the oil and gas industry have a negative impact on the organizations
affected?
 What are the importance and positive effects of using balanced scorecards by decision
makers of management in the oil and gas industry?
1.5 Significance of the Study
This study is quite important because it will help in providing information to stakeholders
in the oil and gas industry regarding the negative effects that are linked with the improper
application as well as use of the BSC by decision makers and thus help them to take