The Paradigms of Business Administration and the Concepts of the Balanced Scorecard and the Strategy Map
76 Pages Posted: 4 Jul 2014
Date Written: July 2, 2014
In 1992 Kaplan and Norton introduced the balanced scorecard. They related this concept to the strategy map (2004) and a management system of strategy execution (2008). The balanced scorecard is an especially popular instrument with some managers, but is criticized and even abhorred by others. Kaplan and Norton have carefully explained the reasons and objectives behind the balanced scorecard, such as the need for balanced investments in both intangible and tangible assets, in view of the increasing economic importance of intangible assets compared with tangible assets in the economy, which implies a fundamental change in the institutional foundations underlying the operations and efficiency of firms and markets. For various reasons, society is not inclined to address the need to adapt institutions to the role of intangible assets. Therefore, adaptation and innovation for the tools of management must be achieved within the context of existing institutions.
Kaplan and Norton have defined their management system from the existing institutional context of firms and markets. The concepts for managing intangible assets published by Kaplan and Norton imply a fundamental change with respect to the paradigms of business administration which constitute modern management traditions of the twentieth century, as taught in business schools. In the U.S., the balanced scorecard was introduced from a political context to improve competitiveness, requiring more investment in intangible versus tangible assets. Such a context does not exist in Europe, which may explain why the BSC is less well received and applied, and why investment in intangible assets lags behind those in the U.S.
This paper argues that in the absence of a clear economic agenda for the competitiveness of the European economy, what is needed for an efficient application of Kaplan and Norton’s management system in the European context is an understanding of the fundamental aspects underlying it, in view of the economic role played by intangible assets in the twenty-first century.
Keywords: business administration, balanced scorecard, institutions, institutional change, management control, resource allocation, strategy execution
JEL Classification: M00, M10, M40
Suggested Citation: Suggested Citation