An Analysis: Balanced Scorecards and Decision Making in Oil & Gas

This report investigates the impact of Balanced Scorecards (BSC) on decision-making processes within the oil and gas industry. It begins with an introduction to effective decision-making, emphasizing the importance of employee resources and strategic planning. The report outlines the problem statement, research questions, and objectives, focusing on how BSC affects decision-making. A comprehensive literature review explores previous studies on decision-making and BSC, including different perspectives such as financial, customer, internal processes, and learning & growth. The research framework and hypothesis development are also presented. The methodology section details the research design, population, sampling, instrumentation, data collection, and analysis techniques. The report aims to determine the extent to which BSC influences decision-making, examining the effects of financial, customer, internal processes, and learning & growth perspectives. The study highlights the benefits of BSC, such as aligning business activities with strategy and vision, and addresses the challenges of its implementation. Ultimately, the research seeks to contribute to the knowledge base by identifying the effects of BSC and assisting decision-makers in enhancing employee performance and making informed decisions for success in the oil and gas sector.

The Effect of Balanced Scorecards on Decision
Making in the Oil and Gas Industry
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TABLE OF CONTENTS
CHAPTER- 1 INTRODUCTION ...................................................................................................4
1.1 Introduction............................................................................................................................4
1.2 Problem statement..................................................................................................................7
1.3 Research questions.................................................................................................................7
1.4 Research objectives................................................................................................................8
1.5 Research contribution............................................................................................................8
1.6 Limitation of the study...........................................................................................................8
1.7 Definition of terms.................................................................................................................9
1.8 Significance of the study......................................................................................................10
1.9 Research organizing.............................................................................................................11
CHAPTER- 2 LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT.....................12
2.1 Introduction..........................................................................................................................12
2.2 Previous Studies on Dependent Variable:............................................................................12
2.2.1 Decision Making...............................................................................................................12
2.2.2 The Decision Making Process..........................................................................................12
2.2.3 Types of Decisions............................................................................................................13
2.3 Previous Studies on Independent Variable (IV)..................................................................14
2.3.1 Balanced Scorecards:........................................................................................................15
2.3.2 The Need for Balanced Scorecards:..................................................................................17
2.3.3 Types of Balanced Scorecards Perspectives:....................................................................18
2.3.4 The Effect of Balanced Scorecards on Decision Making.................................................20
2.3.5 Benefits of balance scorecard...........................................................................................22
2.3.6 Challenges of using The balance scorecard......................................................................23
2.4 Research Framework:..........................................................................................................24
2.5 Hypothesis Development:....................................................................................................24
2.6 Summary:.............................................................................................................................25
CHAPTER- 3 RESEARCH METHODOLOGY...........................................................................26
3.1 Introduction..........................................................................................................................26
3.2 Research Design...................................................................................................................26
3.3 Population and Sampling.....................................................................................................28
3.4 Instrumentation....................................................................................................................28
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3.5 Data Collection....................................................................................................................30
3.6 Scale Reliability...................................................................................................................30
3.7 Data analysis........................................................................................................................31
3.8 Research approach...............................................................................................................31
3.9 Research philosophy............................................................................................................32
3.10 Research type.....................................................................................................................33
3.11 Ethical consideration..........................................................................................................34
3.12 Research limitation............................................................................................................35
3.13 Summary............................................................................................................................36
REFERENCES .............................................................................................................................37
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CHAPTER- 1 INTRODUCTION
1.1 Introduction
Effective decision making on employee resources can lend itself to the continued
progression and growth of a specific company. For those employees that have a great amount of
knowledge and potential, upward mobility and opportunity are vital to keeping those types of
employees within the company (Campbell, Ganco, Franco and Agarwal, 2012). 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.
In every business, employees are considered as the firm's most valuable asset. It means
that firm's productivity and profitability depends upon ensuring that the worker's performance
needs to exceed to their full potential. That profitability and performance is often based upon the
knowledge of those specific employees. It is an instrumental part of a company’s survival to
maintain a knowledgeable and effective workforce (Willax P, 2007).
To survive and prosper in current economic times, businesses can no longer manage
using financial methods alone but should focus upon improving non-financial measures such as
product quality, customer satisfaction and learning in order to attain desired objectives. Using
Balanced Scorecards is a beneficial method in order to attain sustainable development of the firm
and it will lead business to the level of success which helps management to make effective
decision making (Khedr, Abdel-fattah & Solayman, 2015).
Balanced Scorecard (BSC) 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. (Bhagwat and Sharma, 2007).The electronic BSC scheme aims to support e-business
managers during the business strategy making process (Wang, Mora and Raisinghani, 2015).
Balance scorecard is regarded as strategy performance tool- a semi standard structured report
which is assisted by design methods as well as automation tools that can be utilized by the
managers for keeping the track of execution of activities by the staff in their control. Further it
can be utilized towards monitoring the consequences that are arising from such actions. Several
business has made adoption of balance scorecard. The experience that is being gained by them
from using it is that it has assisted in meeting the various managerial requirements. Balance
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scorecard is effective in bringing together in a particular management report, many of the
seemingly disparate elements of a company’s competitive agenda: becoming customer oriented,
shortening response time, improving quality, emphasizing teamwork, reducing new product
launch times, and managing for the long term.
Second, the scorecard guards against suboptimization. By forcing senior managers to
consider all the important operational measures together, the balanced scorecard lets them see
whether improvement in one area may have been achieved at the expense of another. Even the
best objective can be achieved badly. (Bhushan and Rai, 2007). Companies can reduce time to
market, for example, in two very different ways: by improving the management of new product
introductions or by releasing only products that are incrementally different from existing
products. Spending on setups can be cut either by reducing setup times or by increasing batch
sizes. Similarly, production output and first-pass yields can rise, but the increases may be due to
a shift in the product mix to more standard, easy-to-produce but lower-margin products (Kaplan
and Norton, 2017).
The approach of Balance scorecard possess four perspectives. This is comprised of financial,
internal business processes, learning and growth as well as customer. Each one of the four
perspective is interdependent. Further the enhancement in single area is not important recipe for
the success within other fields.
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 usage of the Balanced Scorecard (BSC) on it as well as on the strategic planning.
BSC is used not only for decision making, but also for managers motivation (Agostino, Deborah
& Arnaboldi, 2012). Since it was developed by Kaplan Norton in the year 1992, the use of the
BSC 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. Norton & Kaplan published “The Balanced Scorecard: Measures that drive
performance”. This thesis described how BSC can assess the activities of both tangible and
intangible assets of an organization (Kaplan & Norton, 1992).
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Over the past 25 years there has been a revolution of performance measurement
techniques and frameworks. The BSC can be considered one of the most popular tools to be used
(Sun, Weihan, 2013). The use of the Balanced Scorecards has a significant effect on most of the
decision makers. The tool is available to managers for use in facilitating strategic decision
making and enhancing the strategy development process in their organizations (Tapinos,
Efstathios, Dyson & Meadows, 2011). This is attributed to the fact that BSC is 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 (Fill, Busa & Puskás, 2015). BSC is an example of such one instrument
that is used by decision makers in the oil and gas industry. It is important to note that the BSC is
capable of transforming the strategic plan of organizations in the oil and gas industry from an
attractive and passive document to provision of orders for such organizations. This is because it
provides an effective framework for the performance measurements and also helps decision
makers to identify what needs to be done as well as what needs to be measured. In Addition,
BSC is being used: to manage the strategy or to provide information for decision-making
(Banchieri, Planas & Rebull, 2011).
The balanced scorecard has evolved from its early use as a simple performance
measurement framework to a full strategic planning and management system. The “new”
balanced scorecard transforms an organization’s strategic plan from an attractive but passive
document into the "marching orders" for the organization on a daily basis. It provides a
framework that not only provides performance measurements, but helps planners identify what
should be done and measured. It enables executives to truly execute their strategies (Balanced
Scorecard Basics,2017).
The balanced scorecard revolutionized conventional thinking about performance metrics.
When Kaplan and Norton first introduced the concept, in 1992, companies were busy
transforming themselves to compete in the world of information; their ability to exploit
intangible assets was becoming more decisive than their ability to manage physical assets. The
scorecard allowed companies to track financial results while monitoring progress in building the
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capabilities needed for growth. The tool was not intended to be a replacement for financial
measures but rather a complement—and that’s just how most companies treated it (Kaplan and
Norton, 2007).
1.2 Problem statement
One of the problem statements is that some of the decision makers are not satisfied with
the end results from decision making solutions and this leads in the failure in having a clear
understanding regarding what should be measured. This has made such decision makers to
become unable to effectively clarify both the strategy and mission of their industries (Wiersma,
Eelke, 2009).
One of the tools used to improve decision making is using the application of BSC has
actually emerged as one of the most critical issues facing most of the organizations across the
world. In fact that most of the organizations across the world have adopted the use of BSC. In
addition to 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. BSC as
being the fifth on the top ten management tools that were widely applied across the world. It is
found that some of the organizations have not yet realized the importance of a BSC (Sun,
Weihan, 2013).
1.3 Research questions
The study is to find the effect of Balanced Scorecard on Decision Making. The dependent
variable is here is the Decision Making (DM) and the Independent Variable is the Balanced
Scorecard (BSC). The study will answer the following main question: To what extend does BSC affect decision making in the oil & gas industry.
Sub questions:
1a. To what extend does the Financial Perspective of BSC affect decision making in the oil &
gas industry.
1b. To what extend does the Customer Perspective of BSC affect decision making in the oil &
gas industry.
1c. To what extend does the Internal Processes Perspective of BSC affect decision making in
the oil & gas industry.
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1d. To what extend does the Learning & Growth Perspective of BSC affect decision making in
the oil & gas industry.
1.4 Research objectives
The main aim of carrying out this thesis study is to: To examine the effect of Balanced Scorecard on Decision Making in the Oil & Gas
Industry.
Sub objectives:
 To examine the effect of the Financial Perspective of BSC on Decision Making in the Oil
& Gas Industry.
 To examine the effect of the Customer Perspective of BSC on Decision Making in the Oil
& Gas Industry.
 To examine the effect of the Internal Processes Perspective of BSC on Decision Making
in the Oil & Gas Industry.
 To examine the effect of the Learning & Growth Perspective of BSC on Decision Making
in the Oil & Gas Industry.
1.5 Research contribution
It can be said that this is the first study conducted in oil & gas industry. It focuses upon
identifying the effects of BSC so that it helps decision makers to enhance the performance of
employees and make crucial decision to attain success. As mentioned above, this study would
contributed to the body of the knowledge since this is the first study to be conducted in oil & gas.
Also, the quality and significance of research will highly depend upon the contribution that
research will help in adding it as a value. A research work could be justified thoroughly through
assessing the results and importance of study based on these considerations.
Through carrying out the present research it results in helping different individuals such
as companies, people and other related parties. The research study assists in helping the decision
makers of different sectors to identify the significance of BSC in order to implement that results
that can be attained. Also the finding of this study would contributed to the field by influencing
the regulators and policy makers to implement BSC as enhancements of decision making.
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1.6 Limitation of the study
In identifying the sample size from the oil and gas industry at the time of study is crucial
so that the thesis can be carried out effectively. Small sample size affects the thesis and thus it is
essential for researcher to enhance the target sample so that different opinion can be viewed from
them in order to enhance the results of study. Identified limitations need to be overcomed so that
success can be attained in an effective way. Another issue identified is measuring instruments in
order to improve the validity of the study.
Also, within the study of the results which assesses that outcomes identified should not
be general either they should be specific. So, limitation of variables helps firms to obtain and
bring positive results so that success can be attained.
Time is limited also to the returns of feedback in a limited period to complete the thesis in the
demanded time.
1.7 Definition of terms
For this study, the below definitions of terms are used
Decision Making: “the procedure of reducing the gap between the existing situation and the
desired situation through solving problems and making use of opportunities” (Rizun &
Taranenko, 2014).
Balanced Scorecard: This refers to a strategic planning as well as management system used in
organizations to align their business activities with their strategy and vision. defined Balanced
Scorecard is a management tool that supports the successful implementation of corporate
strategies (Figge, Frank, 2002). Balanced scorecard refers to a system by which an organization
assesses key performance measures from perspectives of performance in the financial, customer,
internal business processes, learning and growth. These are means by which each member of
staff performing key functions are expected to measure their performances on the job especially
their contribution to organization goals of increasing organization’s wealth and profitability. The
application of the balanced scorecard involves strategizing in the use of available resources such
as human manpower, finances and other resources to attain set goals. A very pertinent link to
maximizing organization wealth is profitability. Profit making is essential because it is the
measure of performance on production of goods or services and it is the means by which the
future of the firm is assured (Ester, 2013).
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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. 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. Through overcoming different limitations positive
results can be attained to obtain best results (Chalmeta & Palomero, 2011).
1.8 Significance of the study
The present investigation is suitable in making assessment regarding the effects of
balance score card on the decision making in oil and gas sector. Moreover it assist in attaining
deeper knowledge with respect to need of balance scorecard. The importance of the present
thesis has been enumerated in the manner stated as below:
 It facilitates the academicians in carry out PH.D. In addition to this the present thesis
offers greater deal of knowledge regarding the feasibility of balance score card in the
process of decision making.
 There is presence of huge significance of present thesis for the organization that carrying
out operations in oil and gas sector. Such firms can get knowledge with respect to
feasibility in incorporating such tool for the measurement of organizational performance.
 The present investigation is of greater benefit for other investigators who are conducting
the research on particular subject. Through this, they are able to attain adequate amount
of knowledge with respect to effectiveness of using the particular tool in oil and gas
sector.
 The present investigation also possess huge significance for the thinkers as it
demonstrates innovative knowledge with respect to the tools which can be incorporated
within the investigation.
 The present research has importance as it is by nature complex for the organization.
Through the assistance of this investigation attention can be given over addressing the
operational issues that are associated with the firm.
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 Along with this the investigation is significant for the researcher and intellectuals as
through this they can make generalization of the new theories with respect to
phenomenon under subject matter.
Thus present thesis is regarded fountain of knowledge and further it is regarded as
important source that provide guidelines towards resolving the various social and issues relating
with the business. It is considered as the formal training that act as an aid in gaining insight to the
new developments within the sector in an appropriate way.
1.9 Research organizing
This thesis is composed of five major chapters. Chapter one of the thesis deals with the
introduction in which the definition of the BSC is given. Chapter one also deals with the
background of the study, problem statement, research objectives, research questions, research
contribution, 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 thesis is the literature review and it presents previous studies
regarding the issue of BSC and offers a discussion on why there is need for organizations to have
Balanced Scorecards. In addition to that, the second chapter of the thesis also offers a discussion
on the various types of the Balanced Scorecards and also offers a discussion on the perspectives
of the balanced scorecards. Decision making process in organizations among other aspects have
also been discussed in the second chapter.
The third chapter is the Research Methodology part the research design, population and
sampling, data collection and data analysis. The fourth chapter mostly deals with statistics and
frequencies. It continued to advanced analysis. Finally, the fifth chapter presents the
introduction, discussion, recommendations, future research and conclusion.
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CHAPTER- 2 LITERATURE REVIEW AND HYPOTHESIS
DEVELOPMENT
2.1 Introduction
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 Making in the oil and gas industry.
Literature review is regarded as the text that is scholarly paper which involves the present
knowledge which includes substantive findings and theoretical and methodological contribution
towards specific subject. Literature review are based upon the investigation which is nearly every
academic field. It is based on previous studies, decision making processes, and the effect of BSC
on decision making. By having an improved focus on overall literature documents the experts
can attain diverse benefits. This section is one of the most significant part of the report has it
helps the researcher to assess the research outcomes of the report. Critical analysis was
conducted of all those studies and researches which are similar to the subject matter of this
report. Considering on the research questions and objectives of the report, sources which were
reviewed in this section are effect of Balanced Scorecard on Decision Making in the Oil & Gas
Industry. The particular is effective in reflecting the view points of several authors who are
carried out investigation on similar subject. This act as an aid for the researcher in conducting the
investigation in an effective manner. The gap among the investigation that have been carried out
in past and what the study will includes is determined so that research aim and objectives can be
met with effectiveness. It has been examined that review of literature assist in gathering immense
among the information that helps in carrying out the research in proper direction. In this section
various themes are developed on the basis of research and secondary information associated with
that has been collected in order to attain the objectives in an appropriate manner.
2.2 Previous Studies on Dependent Variable:
2.2.1 Decision Making
Decision Making is the Dependent Variable (DV). Decision is to achieve some result or
to solve some problem. The outcome of a process that is influenced by many forces (Gibson,
Ivancovich, Donnely & Konopaske, 2012). At organizational level, minor decisions that are
embraced today are capable of having disproportionately and unforeseen major consequences on
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