...business should it. Three small to medium-sized enterprise (SME) case studies are presented, with a copy of their BSC, to illustrate how Hyde Park Electronics, Futura Industries, and Southern Gardens Citrus use a BSC to set strategy and align operations to achieve breakthrough results. Implications are, that like large businesses, SMEs can also benefit from using a BSC. Entrepreneurs of SMEs can use the case studies to develop their own BSC to improve performance. Implications for practice and research are discussed.

Introduction

The balanced scorecard (BSC) is one of the most highly touted management tools today (Staff 2002; Atkinson and Epstein 2000; Frigo and Krumwiede 2000), and Fortune 500 companies are increasingly using it. A survey found that approximately 50 percent of Fortune 1000 companies in North America and 40 percent in Europe use a version of the BSC (Kaplan and Norton 2001a). The editors of the Harvard Business Review (HBR) identified the BSC as one of the most significant management ideas of the past 75 years (PR 2003). The BSC is now being listed as a value methodology along with cost-benefit analysis and return on investment (Field 2000); it is being used to help change organizational culture (Simpson and Cacioppe 2001); and several companies have reported improved operational efficiency and profitability as a result of using the BSC (Atkinson and Epstein 2000; Gumbus, Bellhouse, and Lyons 2003).

Researchers have clearly stated that companies of all sizes are good at developing mission statements and strategies but poor at implementing operational strategies to achieve them, and that they are poor at measuring whether they are achieving their mission and strategy. The BSC addresses this problem by linking the mission to strategy and then translates the strategy into operational objectives and measures. The BSC can be used with five or 5,000 employees working toward the same goals (Gumbus and Johnson 2003; Green et al. 2002). However, a review of the literature, from January 2000 to September 2003, of the Journal of Small Business Management, Journal of Business Venturing, Entrepreneurship Theory and Practice, International Small Business Journal, and the Journal of Small Business Strategy resulted in no papers with BSC in the title. A general BSC search throughout entire articles also did not find any of these journals, nor any other small business/entrepreneurship journals, including the topic of the BSC. Thus, this empirical case study of three small to medium-sized enterprises (SMEs) using the BSC fills a gap in the literature while addressing management practices in small enterprises and entrepreneurship. Clearly, large businesses are benefiting from using a BSC, and small businesses can also benefit from using a BSC, as supported by three case studies presented in this paper.

Methodology

The primary methodology is case study. Research was conducted through personal interviews with executives at Hyde Park Electronics, Futura Industries, and Southern Gardens Citrus (SGC). The U.S. Small Business Administration defines small business as having fewer than 500 employees. In Europe the term small to medium-sized enterprise is frequently used to define both small firms, with a maximum of 50 employees and medium-sized companies with a maximum of 250 employees. All three case study firms have fewer than 250 employees and are therefore considered small in the United States and an SME in Europe.

Because of the lack of literature in the small business/entrepreneur journals, the paper begins with a discussion to explain what the BSC is and why small businesses should use it. Then, three SME case studies of firms using the BSC are presented to illustrate how entrepreneurs are currently using the BSC to improve performance. Each case study includes a copy of the firms' BSC as an aid for other SME to develop their own BSC.

What Is a BSC and Why Should Small Businesses Use It?

Kaplan and Norton first introduced the BSC in 1990 through a one-year study of 12 companies. The results were reported in the HBR in 1992 (Kaplan and Norton 1992). These researchers concluded that financial measures alone were not sufficient to measure performance. Other factors in the new economy such as competence and knowledge, customer focus, and operational efficiency and innovation were missing from traditional financial reporting. They reported the highly successful results of Rock-water and FMC Corporation's use of BSC (Kaplan and Norton 1993). In 1996, Kaplan and Norton published The Balanced Scorecard: Translating Strategy Into Action to explain how to develop and use the BSC (Kaplan and Norton 1996a) and two more papers in the HBR (Kaplan and Norton 1996b, 1996c).

Over the years, Kaplan and Norton and others have conducted research supporting their statement that financial measures are not enough. The BSC has been successfully used to increase performance in large organizations and reported in journal papers in the profit sector by the U.S.-based Pitney Bowes (Green et al. 2002), Coors Brewing Company (Walker 1996), and White Lodging Services (Denton and White 2000), as well as by European-based ABB Industrie A.G. (Ahn 2001), and in the nonprofit sector by the city of St. Charles, IL (Maholland and Muetz 2002) and a cardiology unit of a hospital (Oliveira 2001). By implementing the BSC model, Duke University's preoperative services department has "evaluated, balanced, and improved patient satisfaction by decreasing surgical delays, improving physician satisfaction, enhancing elective case minutes within the surgical block, and increasing volume while also decreasing overall cost per case" (McLean and Mahaffey 2000). The National Women's Health Quality Initiative Advisory Council commented on the contribution of the BSC, stating that it is the most effective tool that can be applied across the health-care industry. They credit the power of the card with organizing multiple stakeholders around a shared mission, communicating and managing outcomes, and most importantly for its unique balanced approach (Inamdar et al. 2000).

The BSC has evolved from management reporting to a strategic tool used by executive teams to set strategy, align operations, and communicate with internal and external stakeholders (Gumbus and Lyons 2002; Gumbus, Lyons, and Bellhouse 2002; Schatz 2000). The framework of the four perspectives of the BSC helps to translate strategy into objectives and measures. The four perspectives are financial, customer, internal process, and learning and growth (Kaplan and Norton 1996a). The critical success factors created in each of the four perspectives are balanced between long term and short term, as well as internal and external factors that contribute to the business strategy. The BSC not only translates the strategy to operational terms but also aligns the organization to the strategy by focusing employees on their role in accomplishing the company mission (Frigo and Krumwiede 2000).

The BSC is a management tool that provides a framework for translating strategy into action. It provides a set of metrics that track a firm's progress against goals and objectives to meet company strategic initiatives. Motivating managers and employees and measuring their performance are key challenges to any enterprise (Denton and White 2000). The organization as well as individuals can monitor progress and use the card as a map to achieve business success. Starting with strategic initiatives, a company cascades departmental and individual objectives that correspond to the strategy. Reporting on these measures allows the firm to monitor progress and easily course-correct if problems are identified. Many firms use a red, yellow, and green traffic light reporting system to indicate targets not met, in danger of not being met, and those met. Companies that have used the card for many years are applying it to compensation, employee performance appraisal, and capital budgeting as well.

The BSC enables a focus on long-term growth versus a short-term focus on quarterly results. It also expands the traditional...

NOTE: All illustrations and photos have been removed from this article.



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