How does the Balanced Scorecard work for SMEs? An explorative study

Abstract

Despite widely appreciated by academia and practitioners as a leading strategic management and performance measurement tool as well as being highly diffused within large companies worldwide, the Balanced Scorecard is rarely used in small and medium-sized enterprises (SMEs), which represent 99% of all companies in the European Union. The study was motivated by the research question to explore the reasons for non-usage of the Balanced Scorecard in SMEs in more detail and to gain a clearer understanding regarding methodologies (on the how) this leading tool can be successfully implemented and used in SMEs. After elaborating on why SMEs should use a Balanced Scorecard, using an inductive research design including semi-structured interviews with consultants and SME managers, the study proposes three aggregate dimensions based on Cultural Change, Educational Empowerment and Payoff found to be of high relevance for SMEs. The findings on these three distinct dimensions have implications for practitioners and theory, as they add insights to the existing literature up to today on how to implement the Balanced Scorecard successfully in an SME, ensuring top-management commitment, employee education, organisational buy-in and on using a suited implementation methodology to obtain a positive return on investment. Finally, propositions that will guide future research are presented.