Analyzing Balanced Scorecards Effects on Oil and Gas Decision Making

This report delves into the effects of balanced scorecards (BSC) on decision-makers within the oil and gas industry. It begins with an introduction defining BSC as a strategic planning and management system used to align business activities with strategy and vision. The background highlights the increasing attention given to BSC's impact on organizational performance, emphasizing its evolution from a simple performance measurement tool to a strategic planning instrument. The problem statement identifies the improper application of BSC as a critical issue, leading to missed benefits and a failure to provide a clear view of organizational performance. The research aims to ascertain the effects of BSC on decision-makers, the impact of improper application, and the importance of its use, addressing these through specific research questions. The study's significance lies in providing insights for stakeholders, offering information on BSC types, and fostering a greater understanding of its impacts. The scope is limited to top management in oil and gas companies, focusing on those that have not effectively embraced BSC. The literature review covers previous studies, the need for BSC, its types, implementation steps, and its effects on decision-making, supported by relevant theories and company profiles. The report underscores the importance of BSC for strategic alignment, performance measurement, and effective decision-making in the oil and gas sector.

Balanced Scorecards 1
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

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corrective actions that will help in enhancing their operations (Baumworcel et al, 2016). 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 (Gibbons & Kaplan, 2015). This is because 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. The study is also
quite 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 top management of companies and organizations in
both the gas and oil industries because they are the ones who are responsible with the developing
and implementation of policies and strategies that are ultimately used by their respective
organizations. In addition to that, the study will also be limited to only the gas and oil industries
because it was ascertained that they are the ones which have not effectively embraced the use of
BSC in their organizations.
1.7 Operational Definition of Key terms
Effect- An Effect refers to
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.
Scorecard- This refers to a statistical record that is used in the measurement of progress or
achievement towards a specific goal (Crutzen, N., 2016).
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

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imply to a person who faces extreme pressure and long hours in a position as being an
organization’s “top decision-maker”( Haleem, 2016). A decision maker can also be defined as an
individual who is tasked with the responsibility of administering a specific organization or
business entity.
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.
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 Score Card 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.

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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.
CHAPTER TWO

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2.0 Literature Review
This chapter is indeed 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 (Lachmayer et al, 2016). 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
(Ward & Peppard, 2016). 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 (Thekdi & Aven, 2016). 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” (Murthy, 2016).
It has been ascertained that the using of traditional or conventional structures of Balanced
Scorecards for both the national oil as well as gas companies across the world is rarely
reasonable (Idemudia, 2016). This is attributed to the fact that their exterior and interior
communication formalizations and businesses are marked with peculiarities and complicacies
(Joshi & Li, 2016). 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

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are effectively linked in a “causal chain” of lagging and leading indicators that cover four major
scorecard perspectives are achieved (Pacheco, 2016).
The oil and gas sector has actually emerged as one of the most important players in the
economy of some countries such as South Africa and Russia. 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. According to previous studies (Sadiq et al, 2016), it was
ascertained that some of the oil and gas companies across the world actually incorporated issues
to do with sustainability in their integrated reports with specific attention on their social aspects
(Gray & Alles, 2015). It was thus recommended that there is need to incorporate “traditional
balanced scorecard measurements” so as to make sure that sustainability is effectively linked
towards not only the financial objectives, but also to the general objectives of the oil and gas
companies.
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 (Wanderley et al, 2016). However, it was quite 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” (Abdalla et al, 2016.).
It is important for all and sundry to note that the use of balanced scorecards has indeed
developed from time immemorial in order to support the various organizational missions such as
the maximization of profits to optimization of resources. Many organizations in the gas and oil

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industry have now realized the importance that strategic values lies not only in their personnel,
but also in their processes, systems, as well as their abilities to innovate. It is important to note
that the balanced scorecard usually retains the traditional or conventional financial measures
which tell the story regarding past events (Akhtar & Mittal, 2015). 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
(Lundberg et al, 2016). 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 (Ahmadi & Bagheri, 2016).
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 (Badiru & Osisanya,
2016). 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 (Tsaur et al, 2015).
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 (Busco & Quattrone, 2015). 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 (Gardas et al, 2017). 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