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BALANCED SCORECARD AS A PERFORMANCE MEASUREMENT MODEL: CHALLENGES AND PROSPECTSJohn Ikponwosa OTALORMatric Number: PG/MGS 1313955Being a Seminar Paper presented to the Department of Accounting, Faculty of Management Sciences, University of Benin, in Partial Fulfilment of the Requirements for the Award of Doctor of Philosophy Degree in AccountingCourse Title: SeminarCourse Code: ACC 930SupervisorsProf (Mrs) P. A. IsenmilaDr K. O. OgieduJanuary, 2016BALANCED SCORECARD AS A PERFORMANCE MEASUREMENT MODEL: CHALLENGES AND PROSPECTSAbstractThis study examines the challenges and prospects of using the balanced scorecard as a performance measurement technique.The paper reviewed existing literature relating to the use of balanced scorecard for performance measurement and observed that though these studies agrees that the model has gained wide acceptance among firms as it is capable of helping to overcome the deficiencies of the traditional accounting-based performance measures which includes arbitrariness of earnings as a component of accounting measures , easy manipulation, accounting profits exclude investment, earnings ignore the time value of money and, profits lead to short term focus, it however, has some inherent limitations or weaknesses. Some of these weaknesses are: the assumption of cause-and–effect relationship; using the model for multiple purposes promote multiple objectives; subjectivity in assigning weight to the measures and the inherent flaws associated with the four perspectives — absence of a clear link between the measures.The paper advocates that as some banks in Nigeria have adopted the model, the management of such banks should be conscious of its limitation and consider adaptation of the model to take into cognizance the impact of competition, technology and other peculiar environmental factors which tends to define the Nigerian business landscape. 1.0 INTRODUCTIONThe traditional performance measurement systems primarily reported financial results (such as costs, profits, return on investment, residual income, earnings per share and so on) against the budget. Generally, financial results tell the story about past performance and hardly provide any clue into the future direction of the entity. According to Atkinson, Kaplan, Matsumura and Young (2012), financial measures on their own do not provide incentive for the desired result; they are important but may not guide performance in creating value. In the views of Maher (2005), companies in the past, relied heavily on financial performance measures to evaluate employee performance because one can easily quantify them and they motivate employees to improve the company’s accounting profits, but in recent years, companies now use non-financial measures such as customers satisfaction and product quality measures because they discover that non-financial measures helps employees focus attention on things within their control. No doubt, non-financial performance measures offer some distinct benefits. Kaplan and Norton (1992) found that senior executives do not rely on one set of measures at the expense of others as they realize that there is no single measure capable of providing a clear performance target or focus attention on the critical areas of the business. Thus, they desire a balanced presentation of both financial and operational measures. (p.72)Ittner, Larcker and Meyer (2000) suggests that non-financial measures help organisations focus on long-term organisational strategies including providing indirect quantitative information about firm’s intangible assets; serving as good indicator of future financial performance; and may enhance a managers’ performance by offering more transparent evaluation of their actions. The balanced scorecard (BSC) offers a superb blend of financial and non-financial measures of performance and provides executives with comprehensive framework that translates a company’s strategic objectives into a coherent set of performance measures and enables them to see the breadth and totality of company operation (Kaplan & Norton, 1993, 2001). However, the principles enunciated in the balanced scorecard metrics appears to be time consuming and costly to implement (Ittner, et al., 2000).In 2007, Union Bank of Nigeria Plc in the October to December issue of The Stallion (The staff magazine of the bank) reported the introduction of an Enterprise Transformation Project. The project consists of eight initiatives which include the Enterprise Performance Management system built around the balanced scorecard metrics. Similarly, the United Bank for Africa in its 2008 Annual Report and Accounts announced that it had implemented a new performance management system driven by the principles of the balanced score card approach. This paper highlights existing gaps in literature with respect to the use of the balanced scorecard in the Nigerian context. The adoption of the balanced scorecard by some Nigerian banks calls for concern in view of the expensive nature of the model as a management system and the difficulties associated with the implementation of its principles. Another cause for concern is that apart from Etim and Agara (2011) who asserted that there are indications that United Bank for Africa may have implemented the balanced scorecard, Ibrahim (2015) who investigated the use of BSC as a technique for assessing performance by Nigerian banks, and Ibrahim and Murtala (2015) who examined the relevance of balanced scorecard as a technique for assessing performance in the Nigerian banking industry, the researcher is unaware of any other study that has examined the adoption of BSC by Nigerian banks. The various criticisms that have trailed the use of the BSC and the dearth of literature on the adoption of BSC by banks in Nigeria justify the contribution to knowledge of this study. The rest of this paper is divided into sections: (2) a review of extant literature, (3) use of BSC in Nigerian Banking Industry (4) challenges and prospects of the use of BSC in the Banking industry and, (5) summary and conclusion.2.0 LITERATURE REVIEW2.1 The concept of balanced scorecard as performance measurement techniqueKaplan and Norton (2000) described balanced scorecards as the skills, knowledge, and systems required by employees (learning and growth) to innovate and create the appropriate strategic capabilities and efficiencies (internal business processes) to enable them render valuable service to the market (customers) and enhance shareholders’ value (financial). The Balanced Scorecard Institute (2011) on its part defined balanced scorecard as a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organisations worldwide to align business activities to the vision and strategy of the organisation, improve internal and external communication, and monitor organisation performance against strategic goals.The balanced scorecard as a sophisticated tool for tying compensation system to performance helps to measure employee’s success including serving as a basis for awarding bonuses (Snapka & Copikova, 2011). Performance measures are key components of an effective management control system. Management control system in any organization involves gathering, summarizing, and analyzing information to facilitate and organise the process of planning, control and decision making throughout the organisation and to guide employee behavior (Bhimani, Hongren, Datar& Foster, 2008; Gernon & Meek, 2001).Performance measurement is used primarily in making decisions about employees’ reward or compensation (salaries and bonuses), future assignments and career advancement. While performance measurement enables organisations turn assumptions into well-understood facts and shows the way to improve their business models, reward or compensation management tends to tie pay and other benefits on the attainment of objectives (Price, 2004; Wolk, Dholakia & Kreitz, 2009). Performance management involves the management of all elements of the organisational process which impacts on employee’s performance (Mohrman Jr. & Albers-Mormon, 1995) and encompasses goal setting, worker selection and placement, performance appraisal/evaluation, compensation, training and development, and career management (Dessler, 2003). Performance evaluation which serves as an instrument for reporting on the success or failure of an operation involves the periodic review of activities or operations of an individual, group or enterprise to ensure that its objectives are being met (Mueller, Gernon & Meek, 1997). The balanced scorecard (BSC) relies on four processes to bind short-term activities to long-term objectives: Translating the vision, communicating and linking, business planning and feedback and learning and helps to communicate corporate objectives to people and teams performing the work. Because the BSC explicitly focuses on links among business decisions and outcomes, it is intended to guide strategy development, implementation, and communication (Malina & Selto, 2001).Although the phrase “balanced scorecard” was coined in the early 1990s, it’s origin dates back to the pioneering work of some French process engineers at General Electric who in the 1950’s created the “Tableau de Board”?(literally translated, a "dashboard" of performance measures) for use in performance measurement reporting (Epstein & Manzoni, 1997, 1998; Bourguignon, Malleret & N?rreklit,2004; Sim?es & Rodrigues, 2013). In the views of Wolk, Dholakia and Kreitz (2009), A dashboard includes a focused selection of indicators to provide periodic snapshots of the organisation’s overall progress in relation to past results and future goals. All performance measurement systems should include a management dashboard, which enables an organisation’s leadership team to track overall organisational performance. Many organisations also choose to create program-level dashboards to track individual programmes or internal areas, such as marketing or human resources, at a more detailed level. (p.6)Moreover, as admitted by Kaplan (2010, p.4), “the Balanced Scorecard(BSC) was not original for advocating that non-financial measures be used to motivate, measure, and evaluate company performance”. Kaplan (2010) further asserted that the term “scorecard” was first introduced into the performance management discussion by Herb Simon and several of his colleagues at about the same time as the GE project, at the newly-formed Graduate School of Industrial Administration, Carnegie Institute of Technology (later Carnegie-Mellon University). They identified several purposes for accounting information in organizations to include: Scorecard questions: “Am I doing well or badly?” Attention-directing questions: “What problems should I look into?” and Problem-solving questions: “Of the several ways of doing the job, which is the best? The three questions were based on an exploration of the role of non-financial and financial information. (p.5)According to Lewis (1955) a General Electric corporate staff group had in the 1950s, embarked on a project to develop performance measures for General Electric’s decentralized business segments. The project team recommended that in measuring the performance of divisions, one financial and seven non-financial metrics should be adopted: (1) Profitability (measured by residual income);(2) market share; (3) productivity; (4) product leadership; (5) public responsibility {measured by legal and ethical conduct, and responsibility to stakeholders (namely: vendors, dealers, distributors, communities and so on)}; (6) personnel development; (7) employee attitudes and (8) balancing the short-range and long-range objectives. Maher (2005) opines that the essential elements of the balanced scorecard are ingrained in the eight objectives identified above. While the first metric is represented by the financial perspective, metric 2 captures the philosophy of the customer perspective, metrics 3, 4 and 5 underscores the goals of the internal business perspective, and the 6th and 7th metrics typifies the learning and innovation perspective. The last metric essentially summarizes the basic ideas of the balanced scorecard which centres on the achievement of balance between long-range and short-range goals of the organization. Regrettably, the noble ideas of the 1950s General Electric corporate project never had a deep-seated root in the management system and compensation scheme of the company’s business units. Apart from metrics 5 and 8 in the list above, many General Electric business units were subsequently convicted of price-fixing schemes, with many of the managers claiming that they compelled to compromise long-term objectives and public responsibilities by corporate pressure for short-term profits. (Maher, 2005) The BSC retains financial metrics as the utmost outcome measure for organisations success, in addition to the metrics from three other perspectives namely: customers, internal business process, and learning and growth. Thus, both non-financial and financial performance measures captured in the four perspectives are integrated to produce a “blend” (balanced approach) which organizations can use in monitoring their performance (Bhagwat & Sharma, 2007; Zin, Sulaiman, Ramli & Nawawi, 2013). The scorecard enables companies’ measure their performance from four important perspectives and provides answers to four questions (Kaplan & Norton, 1992; Kaplan & Norton, 1996a)):How do customers see us? (Customer perspective); what must we excel at? (Internal perspective); can we continue to improve and create value? (Innovation and learning perspective); how do we look to shareholders? (Financial perspective)Most organizations use these four categories of performance measures, or perspectives. Exhibits 1, 2, 3 and 4 depicts typical or generic objectives and measures. The financial perspective shows whether the strategies and operations of the organization create value for shareholders or how the strategy and operations contribute to enhancing the organisation’s overall financial health in the case of organization that do not have shareholders. The customer perspective demonstrates how the firm’s strategy and operations creates value for customers. The internal business and production process perspective shows how best the internal business process can add value to customers and enhance shareholders’ wealth. The learning and growth perspective depicts the strength of the infrastructural facilities for innovation and long-term growth. (Kaplan & Norton, 1996). The learning and innovation perspective presents the source of the organisation’s future value, while taking the balanced scorecard concept to its logical conclusion will enable management show each person in the organisation how his or her job contributes to the organisation’s ultimate goals (Maher, 2005). 2.1.1 The Customer PerspectiveThe customer perspective enables the organisation deal with the important concerns of the customers in order to build continued patronage (Iralia, 2007). Customer’ concern relates to issues of time, quality, performance and service, and cost. In addition to measures of time, quality, and performance and service, companies must remain sensitive to the cost of their products (Kaplan & Norton, 1992). Companies use the following performance measures, among others, when considering the customer perspective: customer satisfaction; customer retention; market share, and customer profitability (Drury, 2008).Exhibit 1 Customer perspective objectives and measuresObjectives MeasuresCore:Increase in market shareIncrease customer retentionIncrease customer acquisitionIncrease customer satisfactionIncrease customer profitabilityCustomer value proposition:Improve product functionalityDecrease price relative to competitorsImprove product/service qualityImprove delivery time Percentage market share Percentage growth in business from existing customer Total sales to new customers Customer survey satisfaction rating Customer profitability analysis Customer survey product functionality rating Price relative to competitors Percentage return from customers Percentage on-time deliveriesAdapted from Drury (2008). Management and Cost Accounting 2.1.2 The Internal Business process PerspectiveThe aim of the internal business perspective is the identification and improvement of critical internal business processes that yield competitive edge and result in greater customer satisfaction. However, the processes need to be decomposed into measureable components and linked to employee actions and skills (Iralia, 2007). Thus, as noted by Maher, (2005), a cause-and effect relation exists between the learning and growth perspective and internal business and production process perspective. This is because employees who do the work provide the best source of new ideas for better business processes (Kaplan & Norton, 2001)Exhibit 2 Internal Business perspective objectives and measuresObjectives MeasuresInnovation:Increase the number of new productsDevelop new market and customer Decrease the time taken to develop new products Operations:Increase process efficiencyIncrease process qualityDecrease process costDecrease process timePost- sales service:Increase service qualityIncrease service efficiencyDecrease service timeDecrease service cost Percentage of sales from new products New product introduced to various customers Percentage of sales from new markets Development cycle time(time to the markets) Output/input ratios Total quality cost as a percentage of sales Percentage of defective output Unit cost trend Manufacturing cycle efficiency Percentage of customer requests that are handled with a single call Output/input ratios Cycle time in resolving customer problem Unit cost trendsAdapted from Drury (2008). Management and Cost Accounting 2.1.3 The Learning and Growth PerspectiveKaplan and Norton (1992), asserts that a company innovative ability, learning and improvement skills can enhance the company's value and enable growth. The learning and growth perspective places emphasis on the capabilities of people and managers are held responsible for developing employee capabilities (Maher, 2005). Measures for evaluating managers’ performance are employee satisfaction, employee retention, employee productivity and so on.Exhibit 3 Learning and growth perspective objectives and measuresObjectives MeasuresIncrease employee capabilityIncrease information system capabilityIncrease motivation, empowerment and alignment Employee satisfaction survey rating Annual percentage of key staff leaving Sales revenue per employee Percentage of process with real time feedback capabilities Percentage of customer-facing employee having on-line access to customer and product information Number of suggested improvement per employee Number of suggestions implemented per employee Percentage of employee with personal goals aligned to the balanced scorecard Percentage of employees who achieve personal goals Adapted from Drury (2008). Management and Cost Accounting 2.1.4 The Financial PerspectiveThe financial perspective tends to capture the more direct relationship between actions and results. Financial performance measures primarily signal whether the implementation of the company’s strategy has assisted in improving its earnings (Iralia, 2007). Properly designed financial measures are capable of providing aggregate view of organisation’s success. Financial performance measures provide a common language for analyzing and making comparison between firms. Funds providers such as financial institutions and shareholders, rely heavily on financial performance measures in deciding whether to lend to the firm or invest in its shares (Maher, 2005). A well designed financial measure can provide an aggregate view of the organisation’s success.Exhibit 4 Financial perspective objectives and measureObjectives MeasuresRevenue growth:Increase the number of new productsDevelop new customers and marketChange to a more profitable product (or service) mixCost reduction:Reduce product/service cost per unitReduce selling/general administrationcostsAsset utilization:Improve asset utilization Percentage of revenue from new products Percentage revenue from new customers/markets Sales growth percentage to targeted segments Percentage reduction in cost per unit Percentage to total revenues of selling and administration costs Return on investment Economic value-addedAdapted from Drury (2008). Management and Cost Accounting 2.2 Limitations of the balanced scorecard modelThe BSC has helped different organisations in many ways and has gained wide acceptance and successful implementation in many companies since inception. Malgwi and Dahiru (2014) reviewed extant literature on the balanced scorecard and concluded that the model has a lot of benefits including assisting firms and their managers to evaluate themselves accurately and place them in better position to compete. In 2000 the Balanced Scorecard Collaborative created the Balanced Scorecard Hall of Fame to recognize companies who apply one or more of the five principles of BSC listed below to create a strategy focused organisation: mobilize change through executive leadership; translate strategy into operational terms; align the organisation around its strategy; make strategy everyone’s job; and make strategy a continuous process (Horngren, Sundem, Stratton, Burgstahler & Schatzberg, 2008). At inception, only very few companies embraced the use of BSC. The initial list of organisations in the BSC Hall of Fame was dominated by not-for-profit organisations and some government departments. Presently, the BSC Hall of Fame is awarded annually by Balanced Scorecard Collaborative to organisation both large and small from the public and private sector who satisfy the following criteria: Be an enterprise, or the leading strategic business unit within it (for example, largest market leader and/or revenue generator), that has implemented the balanced scorecard as defined by Kaplan/Norton methodology; and who exemplify the 5 principle of a strategy-focused organisation; earn media recognition for implementing BSC as well as present its BSC case at a public conference; achieve breakthrough resuls over a period of 24 months or longer; have significant financial or market share gains ( privately or publicly quoted firms); demonstrate the measurable achievement of mission or customer objectives ( public or non-profit organisations); hold respected position within its industry sector; and provode a testimonial from a senior executive attributing the organisation’s results in part to its BSC implementation (Balanced Scorecard Hall of Fame, n.d; Strategy Execution Champions, 2013).However, the several criticisms of the balanced scorecard show that the model has proved to be inadequate in many ways despite its wide acceptance and usage (Maltz, Shenhar & Reilly, 2003). One of the most fundamental criticisms of the BSC is the assumed causal relationship between the lead and indicators and between the elements in the four perspectives— learning and growth, internal business processes, customers and financial perspectives (Madsen & Stenheim, 2015; N?rreklit, 2000, 2003). The model has also been criticized on the following grounds: Subjectivity in setting target and assigning weight to various measures: Banker, Chang and Pizzini (2004, 2011) argues that because Kaplan and Norton did not specify exactly how evaluators should combine the various performance measures in their scorecard to determine an overall assessment of individual performance, rather they advocated subjective assessment in performance evaluation, as according to them, subjective reward system is “easier and more defensible to administer and also less susceptible to game playing, most evaluators use their own judgment in assigning weights to various measures by simply relying on measures common to each Strategic Business Unit (SBU). Previous studies have suggested that weights should not be driven by just the importance of each measure with regard to each SBU’s strategy; rather consideration should be given to the unique strategy of each SBU (Lipe & Salterio, 2000). Ittner, Larcker and Randall (2003) observed that in the implementation of BSC by a bank’s subjectivity led to both the BSC having very little benefit to the bank and the bank’s reversion to short-term financial measures of performance. This problem of subjectivity arises because the BSC promotes multiple objectives (Irala, 2007)Ittner, Larcker, and Meyer (2003) find that managers who lack understanding of the connection between their actions and strategic goals, systematically overweigh financial measures relative to non-financial measures while Ittner and Larcker, (2003) posits that failure on the part of the organisation to explicitly identify the causal relations between managers’ immediate actions and goals and firm-wide strategic objectives (i.e., strategic linkages) deprives them from reaping the rewards of performance system which include non-financial measures, such as the balanced scorecard. The balanced scorecard fails to provide measures for assessing the contribution of stakeholders. It ignores both the contribution of employee and suppliers towards helping the organization achieve its objectives and the role the community plays in providing a favourable environment for its operations (Atkinson, Waterhouse & Wells, 1997). Waruhiu (2014) argues that the cause-and-effect relationship in BSC may not necessarily be beneficial under the conditions of environmental uncertainty and rapid changes.Other studies that investigated the limitations of the balanced scorecard and their findings are chronicled below: Thompson and Mathys (2008) identified lack of understanding of organizational processes, difficulties in measurement of what the firm plan to measure and inability to understand the linkages or alignment between the various elements of the balanced scorecard as some of the limitations of the model; Etim and Agara (2011) observed that the BSC omit the effect which some critical factors such as culture and environment has on organisational performance; Hsu-Feng (2011) documented that implementation of BSC may be quite expensive as it requires adequate communication procedures and means to enhance interaction through different level of organization that affects its operational perspectives; Kanji & Sa (2002) posits that the BSC is predominantly a lagging indicator with too much emphasis on final results; Kasurinen (2002) observed that lack of time and resources are potential problems that could hinder the implementation of BSC in organisations; Kureshi (2013) is of the view that the BSC lacks the inherent ability to address risk factors that tends to threaten the achievement of strategic objectives and that managers often face the dilemma of trying to strike a balance between comprehensive scorecards, time and resource constraints ; Madsen and Stenheim (2014) on their part found that organizations encounter some problems which ranges from conceptual/technical to social/political while implementing the BSC; In the views of N?rreklit, Jacobsen and Mitchell (2008), the BSC ignores the complexity of organization as it sees the organization simply as being rational and able to implement strategic plan in a top-down manner. They opined that this could have dysfunctional consequences. In the views of Yahaya (2009), although there is no comprehensive data on the usage of BSC by banks in Ghana, implementation of the concept will improve their performance bottom line by enabling them stay more focused on their core strategies. The study while concluding that banks in Ghana must endeavour to avoid the criticisms heighted by studies in other climes in order to reap the full benefit from the use of BSC, recommended that BSC should be used as a strategic tool. N?rreklit, N?rreklit, Mitchell and Bj?rnenak, (2012) argues that the causal relationship between non-financial and financial measures are not clearly defined and hence may not necessarily be valid; Oriot and Misiaszek (2004) contends that culture tends to impede the effective implementation of BSC especially in organizations dominated by professional engineers; Antonsen (2014) investigated the implementation of BSC in a bank in Norway and found that excessive control and undue emphasis on result may hinder interaction and organisational learning. 3.0 Use of Balanced Scorecard in Nigerian banking industryThe original intension of the designer of the balanced scorecard was to enable management of organisations enhance strategic control. Thus, the financial Perspectives aimed at assisting firms evaluate the profitability of the strategy; customer perspective sought to help management identify customer groups and segments and the firm’s share of the market including evaluating the firm’s strengths and weaknesses in those segments; internal business process perspective was intended to measures the effect of internal operations on value creation, such as innovation, services and efficiency; and learning and growth perspective was concerned with the capabilities that leads to process efficiency, especially, the preservation and enhancement of both employees’ capabilities and morale (Kaplan & Norton, 2007)Ibrahim and Murtala (2015) investigated the relevance of BSC as a technique for assessing performance in the Nigerian banking industry and found that management of Nigerian banks agrees that BSC is useful for performance evaluation as it has the tendency to increase employee satisfaction and overall firm’s performance. Another study conducted by Ibrahim (2015) on banks operating in Gombe State, Nigeria, shows that banks focus more on financial perspective followed by customer perspective and learning and growth while less emphasis is placed on the internal process perspective. The study recommended a balance of performance measures within the four perspectives of the BSC.The researcher is aware by virtue of his personal experience in the Nigerian banking industry that in Union Bank of Nigeria plc, management controls are design around the balanced scorecard concept. The management control system contains the non-financial and financial information captured in each of the four perspectives of the balanced scorecard. Ibrahim and Murtala (2015) asserted that Union Bank of Nigeria plc has firm belief in the BSC as depicted by her strong support on the extent of the relevance of the BSC. While strategic control focuses on how an organisation can compete with other firms in the same industry taking cognizance of its strengths, weaknesses and limitations; the main aim of management control is to influence employee behaviours in a predetermined or desirable way to ensure that the organisation’s objectives are achieved (Drury, 2008). Thus, strategic control focuses on factors external to the organisation, while management control has internal focus. An effective management control tool, which is capable of promoting desired organizational results, should have the following observable management control qualities to attain strategic alignment and promote positive motivation: a comprehensive but carefully selected set of measures of critical performance variables, linked with strategy and to valued organisational outcomes; effective (accurate, objective, and verifiable) performance measures; performance measures that reflect managers’ controllable actions e.g., measured by relative performance; performance targets or appropriate benchmarks that is challenging but attainable, and performance measures that are related to meaningful rewards (Antle & Demski, 1988; Locke & Latham, 1990; Malina & Selto, 2001). The management of Union Banks uses the BSC model primarily as a management control tool and places much premium on result or output control. The practice involves defining results (performance); establishing performance targets, measuring/evaluating performance and providing rewards or punishment. The software driving the use of the BSC by Union bank produces a report called dashboard which is used for the evaluation of each business unit and employees at the monthly performance review (MPR) and quarterly performance review (QPR). The dashboard highlights the expected/budgeted output (targets), actual performance and the variance between actual and expected performance. The balanced scorecard model is used by Union bank for both target setting and performance evaluation and there are no clear cut rules for combining the various performance measures in the scorecard to determine the overall assessment of individual performance. Moreover, at the monthly performance reviews several parameters are used in evaluating staff, including those within their control and those that are not. For example, managers are held accountable for performing credit which suddenly goes bad and are made to take responsibility for the recovery of such bad loans. This problem is not unconnected with management inability to understand the link between cause-and-effect phenomenon associated with the application of the balanced scorecard.In the four perspective of the balanced scorecard used by the banks, the following are the measures emphasized:Financial perspective: net income, ratio of non-interest income to total income, ratio of non-performing loans to total loans, ratio of loans and advances to total deposits, volume of deposits, deposit mix- ratio of current deposit to time /term deposit, ratio of current to savings deposit, ratio of term deposit to savings deposit, loan recovery ratio, cost per employee, profit per employee etc.Customer perspective: customer’s satisfaction, time taken to respond to customer’s request, market share, customer acquisition rate, customer retention rate, frequency of customer complaints, number of new products sold to customers and so on.Internal business process perspective: turnaround time, quality of service, number of errors in processing transactions etcLearning and growth perspective: number of e-lessons taken and passedThere are so many inconsistencies in the measures adopted by Union bank for evaluating the performance of sub-units and individual employees. For example, it is not sufficient that a manager has grown his branch deposit; the mix of the deposit is also a crucial factor in judging his performance. Much emphasis is placed on current deposit account which attracts little or no cost. While firms in developed economies rely on survey to assess the level of their customers’ satisfaction, in the customers’ perspective, the banks depends on complaints from customers and the subjective report from mystery shoppers and quality assurance staff. Moreover, while the standard BSC model measures learning and growth perspective by employee satisfaction, Union bank measures learning and growth by the number of e-lessons taken and passed. In the internal business perspective, Union bank measures staff performance by number of errors in processing transactionsWe espouse that the BSC fails to consider the impact of competition and other environmental factors on businesses. Competition in the Nigerian banking industry is very stiff and cannot be ignored by any bank that desires to remain a relevant player in the industry. Exhibit 5 is a typical strategy map of objectives and measure commonly adopted by banks.Exhibit 5 A Simple Balanced Scorecard of Linked Objectives and Measures for banksStrategy map of objectives Objective Measures Financial Increase shareholder value Return on equity Loan recovery Outstanding loan balances Grow deposits Deposit balances Grow commissions Non-interest incomeCustomer Retain customers Percentage of repeat customers Customer acquisition Number of new customers Market new product Number of product per customer Delivery time Face time spent between loan officers and customers(turnaround time) Internal operating efficiency Improve process quality Sales call to potential customers Thank you calls or card to new and existing customers Cross selling statistics Learning and growth Employee job satisfaction Employees satisfaction survey Employee skill level training Test results from training knowledge availability of product offerings, sales and serviceAdapted from Atkinson et al. (2012), Management Accounting: Information for Decision Making and Strategy Execution and Drury (2008), Management and Cost Accounting.4.0 Challenges and prospect of the use of BSC in the Banking industryThe four perspectives of the balanced scorecard presented and the numerous performance measures highlighted are not devoid of issues. Management of institutions in the banking industry must remember that each performance measure has a cost for data collection and too many performance measures can confuse employees, particularly if some seem contradictory, therefore they need to use the performance measures that provide the right incentives taking into account the tradeoff that exists between the costs and benefits of additional performance measures (Maher, 2005). The Balanced Scorecard appears simple in terms of principles, but it is an expensive management system whose maintenance, operation and implementation involve a lot of complexities. In most cases the strategic objectives of the firm fail to meet the need of people working in the organization as they are based on the result-driven centralized goals of management resulting into setting of unrealistic targets, manipulation of performance, bad targets and tunnel vision (Kanji & Sa, 2002). Thus, managers are tempted to manipulate performance to avoid sanctions. Moreover, it fails to account for a very important issue in the service sector— the role of motivated employees (Smith, 1999) and does not consider the human resources dimension of organisations (Maltz, et al., 2003). Below are some of the limitations the model which Nigerian banks should carefully consider as they embrace the BSC model:Subjectivity in setting target and assigning weight to various measures: the target- driven quest of management of Nigerian banks is not unlikely to compel management to set unreasonably high targets (targets that are often independent of the employee’s performance as compared to those of peers).Peculiar environment factors affecting each branch and using common measures to assess all branches: Bank management may be tempted to set targets for the various branches arbitrarily without taking into account the specific environmental factors affecting the operations of each branch. The role of motivated employees: This no doubt constitutes a very important issue in the service sector and should be given adequate attention.The researcher believes that the balanced scorecard if properly implemented by Nigerian banks will enable them gain more confidence from customers while motivating employees to show greater committment to achieving the goals of the organisation.5.0 Summary and ConclusionUsing the balanced scorecard as a management control tool may not enable achievement of the strategic goals of the organisation unless it contain objective, accurate and verifiable performance measures capable of enhancing organisational results. Furthermore, to promote positive motivation, the management control system should possess the following attributes: (a) performance measures that reflect those actions within the managers’ control and/or actions within their sphere of influence, for example, measured by relative performance which entails comparing employees with their peers; (b) appropriate benchmarks or targets that are challenging but attainable, and (c) performance measures that can be related to significant rewards.Therefore, we suggest that management of banks in Nigeria should embrace balanced scorecard measures that are accurate, objective, and verifiable and describe the organization’s critical performance variables as these reflect performance and are not amenable to manipulation. However the number of measures ad opted should be reduced to the barest minimum to keep the measurement system reasonably simple and easy to administer. It should be noted that a comprehensive set of performance measures may accurately reflect the complexity of the organisation’s tasks, but too many measures may be confusing, distracting and costly to manage. 5.1 Suggestion for further studiesWe propose empirical investigation of the impact of the use of balanced scorecard for performance evaluation on customers’ satisfaction and whether it leads to improvement in performance of Nigerian banks for further studies.ReferencesAntle, R., & Demski, J. S. (1988). The controllability principle in responsibility accounting. The Accounting Review, 63(4), 700-718. Antonsen, Y. (2014). The downside of balanced scorecard: A case study from Norway. Scandinavian Journal of Management, 30(1), 40-50Atkinson, A. A., Kaplan, R. S., Matsumura, E. M., & Young, S. M. (2012). Management Accounting: Information for decision making and strategy execution (6th ed.). Upper Saddle River, New Jersey: Pearson Education.Atkinson, A. A., Waterhouse, J. 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