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

This study examines the impact of Balanced Scorecards on decision makers in the oil and gas industry. It explores the improper application of Balanced Scorecards and its negative effects on organizations. The study also highlights the importance and positive effects of using Balanced Scorecards in decision making.

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

CHAPTER 1
INTRODUCTION
In 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. To survive and prosper
in current economic times, businesses can no longer manage using financial
methods alone. A firm should focus upon improving non-financial measures
such as product quality, customer satisfaction and brand preference in order
to attain desired objectives. Using Balance Scorecards is beneficial method in
order to attain sustainable development of the firm and it will lead business
to the level of success management of oil and gas industry focuses upon
undertaking Balance Scorecards which help them to make effective decision
making so that number of operational activities can be managed in an
effective way. These business tools have helped business units in making informed
business decisions which has enhanced the overall growth and success aspects of
the business units.
The study reveals that performance measurement tools has developed
significant impact on the decision making aspect of the business
development and growth of the business units (Nudurupati and et.al., 2011)The
study has made an analysis on increased use of performance measurement systems as per the
emerging dynamic business environment. It has helped organizations in enhancing
the decision making aspect as the performance and evaluation of the
company develop widely through implementation of the stated method.
Also, a Balanced Scorecard refers to a “strategic planning and management
system” which is used extensively in industries, businesses, Non-
Governmental Organizations (NGOs) and even in governments across the
world in order to align business activities to their strategy and vision. A

Balanced Scorecard is also used in enhancing both the external and internal
communications and in 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 “strategic planning and management”
system.
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 (BSC) on it as well as on the strategic planning (Agostino
and Arnaboldi, 2012)This article asserts that how organisations use to develop and apply balance
scorecard system to match the design of performance measurement system. Since it was
developed by Kaplan Norton in the year 1992, the use of the Balanced
Scorecard has been adopted widely by various organizations across the
world. It has greatly evolved from a tool that is used in measuring
performance to an instrument used in the implementation of strategy. The
use of the Balanced Scorecards has a significant impact on most of the
decision makers in the oil and gas industry (Tapinos, Dyson and Meadows, 2011)
Balance scorecard is a strategic tool which is not only a performance measurement tool but also
aids in growth of organisation through increased learning. . 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.
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 (Mellat
Parast, Adams and Jones, 2011) The study of article states that various activities supported by

top management like training and development are helpful in improving quality of
performances.. It can truly be asserted that for the sustainable development of
any contemporary enterprise in any business field, there is need to design
not only long-term strategies, but also assure the strategic partnership with
associated production units (Ratnayake, 2012) For effective decision making it is
necessary that all processes related to production should be monitored to ensure optimisation and
cost effectiveness of procedures.. In the most recent past, the significance
associated to the strategic vision of most corporate entities across the world
allows has greatly surged. 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 (Melnyk and et.al., 2014)The present
article states about fit of performance measurement tools as per the changing business
environment.
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. It is
important to note that the 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
(Huang, Lai and Lin, 2011) The study shows that use of Balance scorecards help organisation in
efficient decision making by achievement of competitive advantage. 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.
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 (Rompho, 2011)The research reveals about uses along
with limitations of using balance scorecard system in organisations. 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. Despite the
fact that the 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 (Muchiri and et.al., 2011)The article presents the way in which performance
measurement tools are able to analyse significant factors of performance. 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.
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. It is quite
unfortunate that some of the organizations have not yet realized the
importance of a BSC. Balanced Scorecard 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 (Khaki, Najafi and Rashidi, 2012) The article attempts to reveal approach of
balance scorecard system along with other tools of performance measurement in integrated way
to evaluate business plans. 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
(Machado, 2013)The research shown makes an attempt to analyse the usage of balance scorecard
system along with encouragement to use this system among various enterprises.

It is apparent that some of the decision makers working in the oil and gas
industry 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. Failure to effectively apply
balanced scorecards by decision makers in the oil and gas industry has had a
negative impact on the affected organizations. This is because it has made
such decision makers to become unable to effectively clarify both the
strategy and mission of their industries.This ensures that they are ultimately
transformed into desired action by relevant stakeholders (Marques, Gourc and
Lauras, 2011)This article has made a detailed analysis on decision making system with
incorporation of proper performance measurement system.
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 examine the effect of Balanced Scorecard on Decision Makers.
 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:
The study to find the effect of Balanced Scorecard on Decision Makers. The
dependent variable is here is the Decision Making (makers) and the
Independent Variable is the Balanced Scorecard. The study will answer the
following questions:

 What are the effects associated with the improper application and use
of Balanced scorecard on decision makers of management in the oil
and gas industry.
 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?
 Does Balanced Scorecard have effect on Decision Makers? (Al-Najjar and
Kalaf, 2012)This article has basically focussed on analysing various causes due to which
different organisations shifted to use balance scorecard system for measuring
performances rather than other tools.
 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 corrective actions that will help in
enhancing their operations. This study is quite essential in the contemporary
society because it will aid in the provision of important information on why it
is good to decision makers in the oil and gas industry to apply the used of
Balanced Scorecards. It will provide information regarding the different types
of balanced scorecards and help them in ascertaining which one may work
the best in their respective organizations (Franco-Santos, Lucianetti and Bourne,
2012)The article presents deep study on various industries to know the impact of performance
measurement systems. The study is also very important because it will assist
stakeholders in the oil and gas industry to have a greater understanding of
both the positive and negative impacts of using the Balanced Scorecard.

1.6 Scope of the Study:
This research study will be limited to the decision makers in the gas and oil
industry. The study is limited to two variables, namely, Balanced Scorecards
and Decision Makers. This is to investigate if BSC has an effect on Decision
Makers. The study is limited to the premium Oil & Gas Company.
1.7 Operational Definition of Key Terms:
For this study, the below definitions of terms are used
Balanced Score Card: This refers to a strategic planning as well as
management system used in organizations to align their business activities
with their strategy and vision (Niven, 2011) This article has presented the detailed
meaning of balanced scorecards with its increased application on various organisations.
Scorecard- This refers to a statistical record that is used in the
measurement of progress or achievement towards a specific goal (Banchieri,
Campa Planas and Sanchez Rebull, 2011)The present article shows the importance of balanced
scorecards along with its applicability on various industries.
Decision Maker- This refers to an individual who is tasked with the
responsibility of deciding things or issues especially at high organizational
levels within a specific organization. It can also imply to a person who faces
extreme pressure and long hours in a position as being an organization’s
“top decision-maker. A decision maker can also be defined as an individual
who is tasked with the responsibility of administering a specific organization
or business entity (Davenport, 2012)This article presents different frameworks that helps in
proper decision making in various organisations.

Management: Management refers to a process of controlling or dealing
with people or things. Management can also be defined as a composition of
interlocking functions of developing corporate policy, planning, directing,
controlling, and organization organizational resources so as to achieve the
policies of a set objective (Awadh and Alyahya, 2013)This article presents a developed
approach with an analysis of performance of company in relation to work culture of organisation.
1.8 Organization of Chapters:
This research paper is composed of five major chapters. Chapter one of the
research paper deals with the introduction in which the definition of the
Balanced Scorecard is given. Chapter one also deals with the background of
the study, problem statement, research objectives, research questions,
significance of the study, scope of the study, operational definition of the
major terms which have been used, and finally, it presents a summary of the
whole chapter.
The second chapter of the research paper is the literature review and it
presents previous information regarding the issue of Balanced Scorecards
and offers a discussion on why there is need for organizations to have
balanced scorecards. In addition to that, the second chapter of the research
paper also offers a discussion on the various types of the Balanced
Scorecards and also offers a discussion on the perspectives of the balanced
scorecards. The steps that are involved in the developing and
implementation of the balanced scorecards in organizations as well as the
types of decisions, decision making process in organizations, among other
aspects have also been discussed in the second chapter.

1.9 Summary:
This chapter has effectively discussed the meaning of the terms “Balanced
Scorecards” and offered a general overview regarding the other chapters of
this research paper. The reason as to why this study has been carried out
has also been well discussed in the chapter thus giving readers a
background knowledge regarding what the research paper is all about
through research objectives. It provides an introduction to the main problem
that this study concerning on the effect of Balanced Scorecards on Decision
Makers on Management in the Oil and Gas Industry.

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