The Effect of Balanced Scorecards on Decision Makers of Management in the Oil & Gas Industry
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Added on 2019-12-28
The Effect of Balanced Scorecards on Decision Makers of Management in the Oil & Gas Industry
Added on 2019-12-28
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“The Effect of Balanced Scorecards on Decision Makers of Management in the Oil & GasIndustry”
CHAPTER 2LITERATURE REVIEW`This chapter is a detailed review of literature which is related or associated with thesubject of the effects of Balanced Scorecards on the Decision makers of Management in the oiland gas industry. It is based on previous studies, decision making processes, and the effect ofBSC on decision making. 2.1 Previous Studies:In order to effectively manage as well as deploy various organizational resources to bothdeliver and achieve organizational objectives or goals as was required by management andfinance professionals, different tools were evolved. Such tools, frameworks, and techniques wereevolved in order to help managers included among others total quality management, performanceprisms, values based management, and the Balanced Scorecard. The Balanced Scorecard wasdeveloped with an aim of enhancing the corporate performance of organizations. The BSC wasinitially developed as a “performance measurement tool” but as of now, it is increasinglyassociated or linked with the implementation of strategy. This is because it highly acts as aframework of management that has the potential of both identifying and exploiting their majorvalue drivers of organizations to their own “best strategic advantages” (Tapinos, Dyson, andMeadows, 2011) In report of Tapinos, key aspects related to the balanced score card are beingdiscussed effectively so that goals and objectives can be accomplished in desired manner. It hasbeen noticed that score card is one of significant strategic tool so that decision making processcan be accomplished in desired manner. There are significant differences in some elements of thestrategy 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 BalancedScorecards for the national oil and gas companies across the world is rarely reasonable. This isattributed to the fact that their exterior and interior communication formalizations and businessesare marked with peculiarities and complicacies. The use of BSC by management in the oil andgas industry is very vital because it is through it that translation of strategy into specific measuresand objectives which are effectively linked in a “causal chain” of lagging and leading indicatorsthat cover four major scorecard perspectives are achieved.It is therefore important to come up with a sustainable “Balanced Scorecard” that iscapable 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 maderesearchers to come up with a “significant amount” of literature regarding the issue of BalancedScorecards (Mellat Parast, Adams and Jones, 2011). Study of Mellat indicates that key purposewas to analyse the significant effects of quality management practices on operational andbusiness performance. Along with this, valid and reliable information is being presented whichhas facilitated in understanding the concept of quality management. Process of qualitymanagement and its operational assistance can be understand effectively by industrial andmanufacturing firm. Study provides an importance to the quality management process so thatworking can advanced effectively.However, it was unfortunate that such studies actuallydiffered from one specific country to another one thus making them to become deficient duenumerous methodological shortcomings like bias in relation to the chosen samples oforganizations, unreliable estimates, and low response rates. This research paper considers some of the most recent and updated developments in thethinking of scorecards especially in the major role of “strategy mapping”. It is important to notethat the Balanced Scorecard usually retains the traditional or conventional financial measureswhich tell the story regarding past events. Unlike before when it was thought that investment inthe long term customer relationships and capabilities were not essential for the success oforganizations; this is not the case in the contemporary modern society. This is because despitethe fact that the financial measures may be inadequate, they are capable for both guiding andeven evaluating journeys which companies, those in the oil and gas industry included must madeso as to develop future innovations, technology, and processes.2.2 Balanced Scorecards:Balanced scorecards are performance measurement system that helps organizations orcompanies to effectively translate their strategies and visions into action thus providing acomprehensive and integrated overview of the organizational performance. Balanced scorecardsare an essential part and parcel of a business enterprise because they provide systems that arecapable of measuring the current performance of organizations as well as the “drivers” for anorganization’s future performance (Melnyk and Andersen, 2014) Presentation of data in thereport of Melnyk reflects that the performance management need to be referred effectively sothat goals and objectives can be accomplished. By having improved focus on performancemanagement 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 inappropriate manner. Relationship with members and work activities can also be advanced so thatmanagers can have sustainable development.The use of Balanced Score Models by decision makers in the oil and gas industries isimportant because they help in the enhancement of performance. The use of BSC by decisionmakers of management in the gas and oil industries is critical in helping managers pin togetherjust some few sets of critically and strategically developed measures in a single report. This isindeed quite important because it not only helped in making the “cause and effect” relationshipsbecome transparent, but it also helps managers to avoid placing too much attention on theenhancement of one specific measure at the expense of the other ones. This process is indeed agood method for the application of both financial and non-financial measures. This is because ithelps decision makers of management in the oil and gas industry to communicate several andlinked 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 gasindustries have a closer analysis of their business entities or organizations from four major andimportant perspectives. These perspectives are financial perspectives, internal businessperspectives, customer perspective, and the learning and growth perspectives. The combinationof both financial as well as non financial measures by business managers in the oil and gasindustries helps them to make vital decisions that can help in the enhancement of businessoperations. 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 tocomprehend many relationships (Huang, Lai and Lin, 2011). In addition to this, it can be statedthat balanced score card approach is basically dependent over the sustainable development. Withan assistance of this, key parameters can be analysed effectively so that overall performance canbe developed in desired manner. It has been noticed that multi-criteria decision making can alsobe advanced effectively so that objectives can be accomplished. MCDM approach application isspecific set of standards that improves the competitive advantage. However, it is time consumingwhich might impact overall outcome. There is high need for having BSC for decision makers
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