Does BSC Represent an Organizational Development? Evidence from Indonesian Manufacturing Firms

Abstract

The competition and dynamics of the macro-economy have certainly pushed companies to pay attention into their survival rates. Businesses have to maintain focus on multiple issues instantaneously, from shaping visionary management, skills improvement, quality excellence, and better efficiency rate, for instance, to externalities beyond firms’ control (Indra & Anantadjaya, 2011). It is, undoubtedly, aside from the sign toward better governance (Bank Negara Malaysia, 2013; Clarke & dela Rama, 2008), a major task to simultaneously maintain and balance these requirements.

Historically, focusing only on financial performance was considered sufficient. At that time, it was understood that superb financial performance was the key success factor toward survivability. As time passes, combinations of measurements may have to be incorporated to provide a much clearer picture of the firms’ performance (Kaplan & Norton, 2008). Though financial performance may guarantee some level of viability, however, those measurements may actually ignore the longer-term implications on the movement toward intangible assets (Colombo & Grilli, 2005; Sampurno, 2006) as the new drivers in cash flow generation (Carroll & Hunter, 2005; Colombo & Grilli, 2005; Stancic, Todorovic, & Cupic, 2012; Starovic, Cooper, & Davis, 2004). The new "guidelines" on intangible assets and the intellectual assets of companies (Capasso, 2004), which may include high quality of services, effective internal business processes, customer satisfaction, customer loyalty, employees’ skills, employees’ motivational level and employees’ talents and experiences (Council Positive People Kerala, 2010), may have to be included in the firms’ performance indicators (Kaplan & Norton, 2005).

Using the perspective of Balanced Scorecards ("BSC"), with a consideration also on the "extended" version of BSC, which includes the environmental issues toward sustainability, and focusing on publicly-listed manufacturing firms in Bursa Efek Indonesia ("BEI"), this study attempts to note the performance of firms in such an industry sector. It is expected that the BSC (Kaplan, 2010) is able to provide an overview on firms’ performance, not only from the financial perspective, but also from other relatively intangible perspectives. Also, it is expected that such combinations represent better governance, which depends on proper corporate culture (Nooteboom, 2002), and eventually becomes the evidence on organizational development.

Keywords: Balanced Scorecard, performance, intangible assets, financial indicators, non-financial indicators, organizational development, manufacturing firms, governance

JEL Classification: A10, E44, G30, L20, L60, M10, M20, O10, O30, O31, M00