Improving Productive Values through Balanced Scorecard Approach

The assignment content focuses on the Balanced Scorecard (BSC) approach as a technique for performance evaluation and strategic management. The BSC approach allows organizations to identify gaps and analyze reasons behind issues, thereby framing better strategies to meet key goals and objectives. It also enables dynamic understanding of policy design, leading to improved strategic management systems. Furthermore, it has been witnessed that the efficiency of work performance can be advanced effectively by improving managerial control through the BSC. The approach is dependent on sustainable development and has facilitated in understanding the concept of quality management, ultimately leading to long-term improvement.

“The Effect of Balanced Scorecards on Decision Makers of Management in the Oil & Gas
Industry”

CHAPTER 2
LITERATURE REVIEW
`This chapter is a detailed review of literature which is related or associated with the
subject of the effects of Balanced Scorecards on the Decision makers of Management in the oil
and gas industry. It is based on previous studies, decision making processes, and the effect of
BSC on decision making.
2.1 Previous Studies:
In order to effectively manage as well as deploy various organizational resources to both
deliver and achieve organizational objectives or goals as was required by management and
finance professionals, different tools were evolved. Such tools, frameworks, and techniques were
evolved in order to help managers included among others total quality management, performance
prisms, values based management, and the Balanced Scorecard. The Balanced Scorecard was
developed with an aim of enhancing the corporate performance of organizations. The BSC was
initially developed as a “performance measurement tool” but as of now, it is increasingly
associated or linked with the implementation of strategy. This is because it highly acts as a
framework of management that has the potential of both identifying and exploiting their major
value drivers of organizations to their own “best strategic advantages” (Tapinos, Dyson, and
Meadows, 2011) In report of Tapinos, key aspects related to the balanced score card are being
discussed effectively so that goals and objectives can be accomplished in desired manner. It has
been noticed that score card is one of significant strategic tool so that decision making process
can be accomplished in desired manner. There are significant differences in some elements of the
strategy so with an assistance of balance score card the gape can be overcome effectively. .
It has been ascertained that the using of traditional or conventional structures of Balanced
Scorecards for the national oil and gas companies across the world is rarely reasonable. This is
attributed to the fact that their exterior and interior communication formalizations and businesses
are marked with peculiarities and complicacies. The use of BSC by management in the oil and
gas industry is very vital because it is through it that translation of strategy into specific measures
and objectives which are effectively linked in a “causal chain” of lagging and leading indicators
that cover four major scorecard perspectives are achieved.
It is therefore important to come up with a sustainable “Balanced Scorecard” that is
capable of addressing the needs of oil and gas industries in the affected countries.

The oil and gas industry was faced with numbers numerous challenges which made
researchers to come up with a “significant amount” of literature regarding the issue of Balanced
Scorecards (Mellat Parast, Adams and Jones, 2011). Study of Mellat indicates that key purpose
was to analyse the significant effects of quality management practices on operational and
business performance. Along with this, valid and reliable information is being presented which
has facilitated in understanding the concept of quality management. Process of quality
management and its operational assistance can be understand effectively by industrial and
manufacturing firm. Study provides an importance to the quality management process so that
working can advanced effectively. However, it was unfortunate that such studies actually
differed from one specific country to another one thus making them to become deficient due
numerous methodological shortcomings like bias in relation to the chosen samples of
organizations, unreliable estimates, and low response rates.
This research paper considers some of the most recent and updated developments in the
thinking of scorecards especially in the major role of “strategy mapping”. It is important to note
that the Balanced Scorecard usually retains the traditional or conventional financial measures
which tell the story regarding past events. Unlike before when it was thought that investment in
the long term customer relationships and capabilities were not essential for the success of
organizations; this is not the case in the contemporary modern society. This is because despite
the fact that the financial measures may be inadequate, they are capable for both guiding and
even evaluating journeys which companies, those in the oil and gas industry included must made
so as to develop future innovations, technology, and processes.
2.2 Balanced Scorecards:
Balanced scorecards are performance measurement system that helps organizations or
companies to effectively translate their strategies and visions into action thus providing a
comprehensive and integrated overview of the organizational performance. Balanced scorecards
are an essential part and parcel of a business enterprise because they provide systems that are
capable of measuring the current performance of organizations as well as the “drivers” for an
organization’s future performance (Melnyk and Andersen, 2014) Presentation of data in the
report of Melnyk reflects that the performance management need to be referred effectively so
that goals and objectives can be accomplished. By having improved focus on performance
management the work standards can be advanced in critical manner. It also helps in measuring

and application of diverse metrics. With an assistance of this, PMM system can be strengthen in
appropriate manner. Relationship with members and work activities can also be advanced so that
managers can have sustainable development.
The use of Balanced Score Models by decision makers in the oil and gas industries is
important because they help in the enhancement of performance. The use of BSC by decision
makers of management in the gas and oil industries is critical in helping managers pin together
just some few sets of critically and strategically developed measures in a single report. This is
indeed quite important because it not only helped in making the “cause and effect” relationships
become transparent, but it also helps managers to avoid placing too much attention on the
enhancement of one specific measure at the expense of the other ones. This process is indeed a
good method for the application of both financial and non-financial measures. This is because it
helps decision makers of management in the oil and gas industry to communicate several and
linked organizational goals. Such goals must be reached in order to achieve the targeted long-
term.
2.2.1 The Need for Balanced Scorecards:
Balanced scorecards are quite important because they help managers in the oil and gas
industries have a closer analysis of their business entities or organizations from four major and
important perspectives. These perspectives are financial perspectives, internal business
perspectives, customer perspective, and the learning and growth perspectives. The combination
of both financial as well as non financial measures by business managers in the oil and gas
industries helps them to make vital decisions that can help in the enhancement of business
operations. It is prudent for all and sundry to note that the combination of customer, financial,
organizational learning perspective, internal processes, and balanced scorecards aid managers to
comprehend many relationships (Huang, Lai and Lin, 2011). In addition to this, it can be stated
that balanced score card approach is basically dependent over the sustainable development. With
an assistance of this, key parameters can be analysed effectively so that overall performance can
be developed in desired manner. It has been noticed that multi-criteria decision making can also
be advanced effectively so that objectives can be accomplished. MCDM approach application is
specific set of standards that improves the competitive advantage. However, it is time consuming
which might impact overall outcome. There is high need for having BSC for decision makers

working in the oil and gas industry because it helps them to in enhancing problem solving and
decision making in their organizations.
2.2.2 Types of Balanced Scorecards/Balanced Scorecards Perspectives:
The four major BSC perspectives are: Financial Perspective: This effectively helps in identifying how a business entity wishes
to be regarded or viewed by its different stakeholders. Financial measures are actually the
oldest and most commonly used tools of measurement in management. Customer Perspectives: This represents the association or relationship between
customers and an organization. This is because the core of “any business strategy” lies in
its customers. Internal Business Process Perspective: this mainly focuses or places major attention on
internal processes of an organization that will not only have a great impact on the
satisfaction of customers, but also on an organization’s financial objectives.
 Learning and Growth Perspective: this emanates from 3 principle sources namely
systems, organizational procedures, and the people.
Balance Scorecards Perspectives
2.2.3 The Steps of Implementing Balanced Scorecards:
A balanced scorecard is quite essential because it offers an effective platform for
deployment of strategy through the alignment of both people and processes.
There are several major steps that are used when implementing balanced scorecards and these
include:

Step one -Training and Executive Commitment:
It is important to note that for any BSC concept to be successfully implemented, then a clear
comprehension of such concepts by the top management of companies in the oil and gas
industries is required. Lack of effective understanding of such a concept implies that the concept
will be implemented wrongly.
Step Two - Finalization of the Strategy Map:
It is important to note that there is always a fixed structure that is used in the presentation of the
balance sheet or financial structure but however, there is no specific structure that can be used in
presenting strategy. Every methodology used in developing strategy by the oil and gas
companies must always be validated.
Step Three: The Preparation of the Balanced Score card
Most of the strategies are usually stated in statements or words and so there is need to ensure
they are translated into “operational language”. This is helpful in helping meet the organization’s
targets and identification of initiatives.
Step Four: Departmental BSC preparation:
It is important to ensure that each and every department is well aligned to its specific processes
or strategies
Step 5: Preparation of Individual Score Cards:
Individual scorecards or should be prepared based on the activities or responsibilities of
individuals.
Step Six: Gap Analysis/ Stretching Targets:
The individual score cards as well as the BSCs targets should be fixed in a systematic or logical
manner.
Step 7: The Review Process:
Actual benefit or effectiveness of the BSC can only be achieved or attained using an effective
review process.
2.3 Decision Making:
2.3.1 Introduction:
Decision is to achieve some result or to solve some problem. The outcome of a process
that is influenced by many forces. At organizational level, minor decisions that are embraced
today are capable of having disproportionately and unforeseen major consequences on an

organization. That is why it is important to ensure that viable decisions are made in order to
avoid the organization in trouble in future. The decision is a choice which made to choose one
alternative among more available alternatives. Decision making is the process of choosing the
best alternative from more alternatives for reaching objectives. If the decision taken randomly, it
may affect negatively on the business.
2.3.2 The Decision Making Process:
Making decisions using a balanced scorecard is very important and beneficial for an
organization. It is therefore important to ensure that decision makers of management in the oil
and gas industry makes wise decisions regarding important issues that are prone to affect the
company not only during the present periods but also in future to increase productivity and
profitability. There are processes of decision processes. Identifying the problem; Generating
Alternatives; Evaluating Alternatives; Choosing an alternative; Implementing the decision; and
Evaluating Decision Effectiveness.
2.3.3 Types of Decisions:
There are various types of decisions that can be made in an organization and these
include the non-programmed and programmed decisions, strategic and routine decisions,
operational and tactical decisions, group and individual decisions, minor and major decisions,
and personal and organizational decisions. Decision can be segregated as programmed and Non-
Programmed Decisions. It is important that decision makers go for best decisions.
2.4 Balanced scorecards and its Effects on Decision Making:
Balanced scorecards play a vital role on decision making in the oil and gas industry
because it helps decision makers to have a tangible structure that can be used in guiding them
during the measure selection process. It also helps decision makers to be in a better position of
indentifying and systematically considering the criteria that can be used as alternatives such as
measures. Balanced scorecards have a significant impact or effect on the decision making
process because they provide a support through which the use of “multi-criteria tools” can be
applied thus leading to better quality decisions in the oil and gas industry
2.5 Theory of the Study:
The Balanced scorecards were based on the Early Metric Driven Incentives or MDIs
which were heavily focused on an organization’s financial aspects through either claimed to

increase their profits margins or minimize the costs. However, they were not always successful
since they could drive the costs down at the expense of quality. Two very eminent doctors
known as David Norton and Robert Kaplan evolved the “Balanced Scorecard system” from the
early metric driven incentives and thus jointly led to the production of a groundbreaking book
during the year 1996.
2.6 Studied Companies’ Profile:
2.7 Summary:
Based on the above information, it is quite apparent that the issue of Balanced Scorecards
started a long time ago and that it has been undergoing tremendous changes to what it is today. It
is apparent that any organization which exists in the contemporary society cannot underestimate
the importance associated with the implementation of Balanced Scorecards in ensuring
organizational success. Based on this chapter, it can also be truly asserted that decision making is
a critical process in any organizational because it affects how the organization will be in present
and in its future form. It is therefore important that decision makers in the oil and gas industry
embrace the best Balanced Scorecards that will help them achieve their set objectives. It is an
obvious fact that Balanced Scorecards play a vital role in ensuring organizational success and
therefore it is important for all decision makers and relevant people to ensure that they embrace
the best tools that can be used in decision making processes.

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aspect which need to be referred effectively. By having improved focus on the key aspect of
balanced scorecard the issues can be overcome in desired manner. Along with this, level of
satisfaction can be advanced effectively so that sustainable opportunities can be attained in
desired manner. Patience of employees can also be improved for better opportunities in the
market.
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analysed effectively so that overall performance can be developed in desired manner. long with
this, valid and reliable information is being presented which has facilitated in understanding the
concept of quality management. With an assistance of this, supply chain also be improved in
desired manner.