The process methodology accompanying the implementation of a BSC developed by Kaplan and
involvement in group sessions (Biazzo & Garengo, 2012a). By employing a couple of group sessions
the BSC is developed. The process starts with identifying and formalising the organizational mission,
and future vision the organization strives for, as well as determining accompanying strategic
objectives for each BSC-perspective (Biazzo & Garengo, 2012a). Afterwards the objectives per
perspective are translated into critical success factors and performance indicators. Lastly, two group
sessions are held for discussing the results of each perspective and for the development of an
implementation plan (Biazzo & Garengo, 2012a). Periodically, the BSC has to be reviewed as part of
the strategic planning process (Kaplan & Norton, 1996).
22.214.171.124 Wisner & Fawcett’s nine PMS process steps
An alternative ‘typical’ (Wouters & Sportel, 2005; Wouters & Wilderom, 2008) coercive methodology
is developed by Wisner & Fawcett in Neely et al. (2005).
1. Clearly define the firm’s mission statement
2. Identify the firm’s strategic objectives using the mission statement as a guide (profitability, market share, quality, cost,
flexibility, dependability, and innovation)
Develop an understanding of each functional area’s role in achieving the various strategic objectives
4. For each functional area, develop global performance measures capable of defining the firm’s overall competitive
position to top-management
Communicate strategic objectives and performance goals to lower levels in the organization.
Establish more specific performance criteria at each level
6. Assure consistency with strategic objectives among the performance criteria used at each level
7. Assure the compatibility of performance measures used in all functional areas
8. Use the performance measurement system
9. Periodically re-evaluate the appropriateness of the established performance measurement system in view of the current
At the start the mission and strategic objectives of an organization are defined. Thereafter the role of
the role of every functional area, performance indicators can be developed. Of utmost importance
during the developmental process is accomplishing strategic alignment between strategic objectives
and performance perspectives (Wouters & Sportel, 2005).
126.96.36.199 Enabling developmental method
Groen, van de Belt and Wilderom (2012) outline a process approach for developing an enabling
performance measurement system. They took as basis the Balanced scorecard and the strategy
map. Together with employees of an organizational department they developed a PMS for said
organization. A bottom-up approach (Groen, 2012) was utilised. As part of developing and
explicating strategy the strategy map was applied (Groen et al., 2012). This was a necessary step
since the organization had no formalized strategy. Therefore, employees were not knowledgeable
about the organizational strategy or direction (Groen et al., 2012). An external facilitator guided the
project and handed it over to an employee who acted as a project champion from thereon (Groen et
This approach consists broadly of the following steps (Groen et al., 2012):
2. Identify the current work processes;
3. Identify currently applied control mechanisms;
4. Identify the organization’s characteristics;
5. Sort out which areas need improvement;
6. Identify operational activities’ priorities;
7. Develop aspects of the strategy map;
8. Develop performance indicators;
9. Share idea’s and futuristic actions;
10. Experiment with the developed method.
Differences between large enterprises and small and medium-sized enterprises (SMEs) are evident
(Baba, Deros, Yusof, Azhari & Salleh, 2006; Brem et al., 2008) in general organizational
characteristics and in relation to performance measurement systems (e.g. Garengo et al., 2005;
since models and frameworks are, implicitly (Brem et al., 2008; Chalmeta, Palomero & Matilla, 2012),
developed for large, mature manufacturing and service organisations (i.e. Bititci, Garengo, Dörfler &
Nudurupati, 2012; Groen et al., 2012; Mettänen, 2005; Pun & White, 2005; Yadav & Sagar, 2013).
These models and frameworks don’t take into account the characteristics of SMEs (Brem et al.,
2008; Garengo et al., 2005; Taticchi et al., 2008; Taticchi et al., 2010). Implementing such a model or
framework is hindered because a SME
(Garengo et al., 2005): lacks human resources; has little
managerial and financial capacity; adopts a reactive approach to strategic planning; has primarily
“tacit knowledge and little attention given to the formalization of processes (…) [and] misconception
of performance measurement”
(Garengo et al., 2005, p. 30).
Little research has been conducted on performance measurement in SMEs (Brem et al., 2008;
widely supported (Brem et al., 2008). Research that focuses on designing, implementing, and using
(Bourne et al., 2000) a PMS for SMEs (Brem et al., 2008) mainly contain guidelines and methods that
were developed by said authors and are predominantly based on single case studies (e.g. Biazzo &
Garengo, 2012a; Chalmeta et al., 2012; Fernandes et al., 2006). These methods are context specific
and whether they can be successfully applied to other SMEs is unclear. Therefore the organizational
context and characteristics has to be taken into consideration.
Garengo et al. (2005) recommends that a PMS should be: simple and efficient implementable (Sousa
throughout the process (Hudson-Smith & Smith, 2007); strategy and operational activities have to be
taken into consideration (Taticchi et al., 2008); existing IT-infrastructure must be utilised (Brem et al.,
2008; Taylor & Taylor, 2014); a structured approach for a dynamic system must be used (Hudson et
al., 2001; Taticchi et al., 2008). Next to, SMEs are in need of simple (Fernandes et al., 2006)
indicators who provide useful and meaningful information (Bititci, Firat & Garengo, 2013). SMEs
should focus on a limited number of indicators (Garengo et al., 2005) that encompass the entire
organization (Bititci et al., 2013; Taticchi et al., 2008).
2.5.1 Designing and implementing a performance measurement system for SMEs
Developing a PMS follows the same conceptual phases for SMEs and large enterprises (Bourne et
al., 2000). Though, the prescriptive design and implementation methods may not be suitable for
SMEs per se (Garengo et al., 2005; Taylor & Taylor, 2014) due to the characteristics of SMEs. This is
reflected the recommendations and requirements for a suitable SME PMS developmental process
(Chalmeta et al., 2012; Cocca & Alberti, 2010; Hudson et al., 2001; Hudson-Smith & Smith, 2007).
The characteristics of the developmental process for SMEs have to comply with are extensive and
Requirements of a effective developmental process according to Hudson et al. (2001) consists out
of: “need evaluation/existing PM audit; key user involvement
; strategic objective identification;
performance measure development; periodic maintenance structure; top management support; full
employee support; clear and explicit objectives; set timescales” (p. 1102). Effectively managing the
developmental process is dependent upon top management support; having clearly formulated
objectives; full employee-participation; having a project timeframe (Hudson et al., 2001). Cocca and
Alberti (2010) complements that the developmental process must aim at “periodically evaluation
existing PMS; strategy development; (…) long and short-term planning; information sharing and
communication; (…) facilitator; (…); linking performance to compensation process; procedures
clearly defined; IT infrastructure support”; systematically developing goals and targets; role
assignment and responsibilities sharing” (p. 194); and performance adjusting procedures.
Hudson et al. (2001) concludes that the developmental process must be resource effective, lead to
well as it must be iterative. The system should be easy to use; implementable in a short time period;
robust, valid and easy to maintain (Sousa & Aspinwall, 2010).
2.5.2 Design and implementation methodologies for SMEs
Derived from the demands a PMS (Garengo et al., 2005) and the developmental process for SMEs
(Chalmeta et al., 2012; Cocca & Alberti, 2010; Hudson et al., 2001; Hudson-Smith & Smith, 2007;
Sousa & Aspinwall, 2010) must comply with, several process methodology were developed. These
methods seek to be relevant for SMEs. Following the models and process methodologies specific
developed for SMEs it can be concluded that most of them are an adoption of the Balanced
Scorecard (Chalmeta et al., 2012; Taticchi et al., 2008): Balanced Scorecard in non-profit SMEs; The
Balanced Scorecard for SMEs: A Circular Approach (Biazzo & Garengo, 2012a); Adaptation of
Balanced Scorecard to SMEs; Application of Balanced Scorecard to Small Companies; Quality
Models in an SME Context (cf. Chalmeta et al., 2012; Taticchi et al., 2008). Since no model meets
the demands posed by academics (cf. Brem et al., 2008; Chalmeta et al., 2012; Taticchi et al., 2008),
it is recommended (Chalmeta et al., 2012; Sousa & Aspinwall, 2010) to use the Balanced Scorecard
as basis since: the BSC is easy to understand (Biazzo & Garengo, 2012c; Edberg, 1997; Sousa &
Aspinwall, 2010); is recognizable (Sousa & Aspinwall, 2010) and stands synonymous for PMS
(Wouters, 2009); is used widely and is perhaps the most applied model (Taticchi et al., 2010); is the
most well-known PMS-model (Biazzo & Garengo, 2012c), and there is plenty of evidence of
successful implementation in SMEs (Basuony, 2014; Biazzo & Garengo, 2012a; Fernandes et al.,
2006; Groen et al., 2012).
This sub-chapter will continue with developmental methodologies for SMEs based on the Balanced
188.8.131.52 The circular Balanced Scorecard
Biazzo and Garengo (2012b) developed a method for SMEs who haven’t formalized their strategy,
and thus cannot apply a top-down methodology. Biazzo and Garengo (2012b) assume that a SME
will develop their strategy both emergently as well as planned. Their methodology is based on the
strategy map (Kaplan & Norton, 2004) and Balanced Scorecard (Kaplan & Norton, 1996). Suggested
is to base the development of a PMS on executing a gap-analysis for the measures currently under
control, to identify the desired future state and strategy of the organization (Biazzo & Garengo,
2012b; Garengo & Biazzo, 2012). The methodology is called the ‘Circular Balanced Scorecard’ and
consists out of 4 stages, who altogether represent a cycle: 1. Identify existing performance
indicators, 2. Develop implicit strategy map based on identified indicators, 3. Develop desired
strategy map based on implicit strategy map; determine discrepancy between strategy and identified
critical success factors; and determine comprehensiveness of performance measures in line with
critical success factors, 4. Develop Balanced Scorecard based on the desired strategy map; develop
key performance measures, targets, goals and initiatives. Their methodology is graphically portrayed
below (figure 3).
Figure 3. A circular approach to the implementation of the BSC (Biazzo & Garengo, 2012a)
The PMS-IRIS process methodology (Chalmeta et al., 2012) can be regarded as a ‘typical’ (Lohman
et al., 2004; Wouters & Sportel, 2005; Wouters & Wilderom, 2008) process methodology and utilises
a top-down approach. The fundaments of their method are the strategy map (Kaplan & Norton,
2004) and the Balanced Scorecard (Kaplan & Norton, 1996). The method is developed for SMEs and
takes into consideration: decentralized decision making; limited resources; limited IT-infrastructure;
limit knowledge about performance measurement and data-analysis; limited strategic alignment and
little organizational formalisation; poor communication; and low commitment to a PMS development
See for the stages of the PMS-IRIS process methodology Chalmeta et al. (2012).
184.108.40.206 Enabling Balanced Scorecard
An alternative developmental method is defined by Groen et al. (2012). This method can be found in
Enabling developmental method
The circular Balanced Scorecard methodology (Biazzo & Garengo, 2012a) and the PMS-IRIS
methodology (Chalmeta et al., 2012) uses a top-down logic. A project team, mainly consisting out of
managers, is appointed to execute the project and develop the PMS. However, in the enabling
methodology end-users execute the project, thus develop the PMS (Groen, 2012; Groen et al.,
2012). It has been empirically found that the enabling approach leads to employee empowerment,
employee commitment to performance improvement, organisational learning and higher department
performances (Gravesteijn et al., 2011; Groen, 2012; Groen et al., 2015).
SMEs are recommended (Taticchi et al., 2012; Taticchi et al., 2008) to examine their ‘readiness’
(Brem et al., 2008) a priori designing, implementing and using the PMS (Bourne et al., 2000).
Examining readiness is crucial due to inherent resource limitations of SMEs (Garengo et al., 2005;
Hudson et al., 2001; Hudson-Smith & Smith, 2007). As a result, the development of a PMS must be
effective (Garengo et al., 2005). Effective implementation of a PMS is dependent on: strategy
implementation process; strategy formulation process; leadership; supporting IT-infrastructure;
quality management culture; organizational learning orientation (Taylor & Taylor, 2014); existence of a
cost accounting system; Enterprise Resource Planning (ERP) system; formal process structure; and
execution of customer focused market research (Brem et al., 2008).
A SMEs has to undertake actions when it does not comply with preconditions, i.e. by means of
existence of preconditions is, among other things, dependent on the organizational maturity
(Chalmeta et al., 2012; Sousa & Aspinwall, 2010; Taylor & Taylor, 2014).
2.5.4 Strategic alignment
A PMS is part of the management process (Kaplan & Norton, 2004). Where defining the mission,
vision, core values, and strategy precedes the development of a PMS (de Waal & Kourtit, 2013;
Doeleman et al., 2013; Kaplan & Norton, 2004). The PMS must be aligned with the organizational
mission, vision, and strategy (e.g. Franco-Santos et al., 2007; Kaplan & Norton, 2004, 2008;
McAdam, 2000; Taylor & Taylor, 2014) in order to link the system to organisational objectives
(Garengo et al., 2005). By means of achieving strategic alignment managers, employees and,
external stakeholders will be able to understand the direction of the organization (Doeleman et al.,
2013). The cascading of strategic alignment is portrayed below in figure 4.
Figure 4. Strategic alignment (Bauer, 2004)
Critical Success Factors
Key Performance Indicators
Key Action Initiatives
What do we want to be in the future?
How do we intend to accomplish our vision?
What must we complete to move forward?
What areas must we focus on
to achieve our vision?
What are our metric indicators
What action programs will
achieve our performance goals?
ision and Objectives
The mission is the raison d’être of the organisation. It is “a concise, internally focused statement of
the reason for the organization’s existence, the basic purpose towards which its activities are
directed and the values that guide employees’ activities” (Kaplan & Norton, 2004, p. 34).
The vision is the desired future state of the organization (Johnson, Scholes & Whittington, 2008). It is
“a concise statement that defines the mid- to long-term (three- to ten-years) goals of the
organization. The vision should be external and market-oriented and should express (…) how the
organization wants to be perceived by the world” (Kaplan & Norton, 2004, pp. 34-35).
Strategy is the direction and long-term organizational goal of an organization (Johnson et al., 2008).
It operationalizes the organizational mission and vision. Strategy “is about selecting the set of
activities in which an organization will excel to create a sustainable difference in the market place”
(Kaplan & Norton, 2004, p. 35). The strategy must be adapted in need of the external environment
and the organizational competences (Kaplan & Norton, 2004).
Organizational goals are targets by which the mission and strategy of an organization must be
achieved (Caralli et al., 2004). Goals are said to be specific, measurable, acceptable, realistic, and
timely (S.M.A.R.T.) defined (Caralli et al., 2004; de Waal & Kourtit, 2013). They should be quantitative
in order to be able to measure goal achievement (Caralli et al., 2004).
220.127.116.11 Critical success factors
Critical success factors are those factors that determine the success of an organization (Bullen &
Rockart, 1981; Caralli et al., 2004; Rockart, 1978). They must be monitored at all time and the link
between the mission, vision, and strategy of an organization and the critical performance indicators
(e.g. Biazzo & Garengo, 2012c; Kaplan & Norton, 1996, 2004; Mettänen, 2005).
18.104.22.168 (Key) performance indicators
A performance-indicator “can be defined as a metric used to quantify the efficiency and/or
effectiveness of an action” (Neely et al., 2005, p. 1229). Key performance indicators are financial and
non-financial metrics that can be applied at all organizational levels. They are used for measuring the
organizational ability of achieving goals, strategies, and plans (Ferreira & Otley, 2009). Key
performance indicators provide insight into those factors that determine organizational success
22.214.171.124 Critical activities & initiatives
defined (de Waal & Kourtit, 2013; Shahin & Mahbod, 2007) and provide guidance for activities and
actions an organization must execute in order to fulfil the targets (Kaplan & Norton, 1996). Targets
must be challenging but feasible (Ferreira & Otley, 2009).