The Impact of strategy and causal links on the perceived effectiveness of the balanced scorecard

Many of the claimed benefits of the Balanced Scorecard (BSC) rely on the linkage of its measures to strategy (strategy link) and on an assumption of causal relations among the measures (causal link). However, little empirical research has examined (a) the extent to which organizations that purport to use a BSC design the BSC measures to accord with strategy, and to recognize the causal linkages among the measures; and (b) whether strategy and causal linkages result in more effective performance measurement systems. This study examines these issues using data obtained from a questionnaire survey of medium and large Australian manufacturing organizations. The findings suggest that varying forms of scorecards are used in practice and strategy and causal links are not always regarded as essential design features of the BSC. The study however found that managers who perceive that their scorecard measures are linked to strategy and affect each other in a causal manner also perceive a higher level of effectiveness of the BSC. Accordingly, managers should consider making a conscious effort to incorporate these features as they are likely to make the BSC a more effective performance measurement and management system.