A Dynamic Connection of Balanced Scorecard Applied for the Hotel

Summary

---

This study provides empirical evidence on the dynamic connection of BSC and we demonstrate strategy maps that linked measures and performance drivers together in a cause-and-effect diagram. We expand the relationship of framework from, two perspectives, developed by Banker et al. (2000) into four perspectives. The results indicate that a number of key hypotheses are consistent with the work of Heskett et al. (1997) and represent an important extension of conceptualization of service to profit. The financial outcomes can be achieved only if customers are satisfied. We did not find obvious evidence to support the hypotheses that employee's development that are related to price effect or volume effect, indirectly impact on contribution margins through the behavioral variables of customer satisfaction.

See the full content of this document

Extract

---

A Dynamic Connection of Balanced Scorecard Applied for the Hotel

INTRODUCTION

Kaplan and Norton (2004) have created a new tool that has turned out to be as an important innovation as the Balanced Scorecard itself: strategy maps which are a dynamic visual tool to describe and communicate organization's strategy. They show how to create customized strategy maps that allow organizations to: (1) clarify their strategies and communicate them to all employees, (2) identify the key internal processes that drive strategic success. We are interested in providing an empirical evidence of strategy maps that is applied for the hotel industry.

Since the 1980s, many scholars have relied more on non-financial measures for both managing and evaluating organizations (e.g., Johnson and Kaplan, 1987; Berliner and Brimson, 1988; Nanni et al., 1988; Dixon et al., 1990; Rappaport, 1999). Some of studies have sought to link specific non-financial measures to financial performance and the results often find significant relations (e.g., Banker et al., 2000; Behn and Riley, 1999; Foster and Gupta, 1999; Ittner and Larcker, 1998a). Lynch and Cross (1995) argue that performance measures should motivate behavior leading to continuous improvement in key areas of competition, such as customer satisfaction, flexibility, and productivity. That is, they should reflect cause and effect between operational behavior and strategic outcomes (Ittner and Larcker, 1998a). The objective of these studies is to examine the process and impact of management with non-financial performance measures, specifically in the context of the Balanced Scorecard (BSC), which is a comprehensive system of performance measurement.

The BSC, popularized by Kaplan and Norton (1992, 1993, 1996a, b, c) and adopted widely around the world, has been regarded as a superior integration of non-financial and financial measures of performance. Because the BSC obviously focuses on links among business decisions and outcomes, it is intended to guide strategy development, implementation, communication, and feedback. Kaplan and Norton (2000) note that employees' comprehension of strategy is critical to the success of the BSC. If employees understand firm strategy, they will be able to use strategically linked performance measures to guide their decisions and actions. An essential aspect o...

See the full content of this document

---