The Balanced Scorecard and long-term profitability

The Balanced Scorecard (BSC) is a popular strategic management tool in today's business environment. There is an abundance of popular literature citing its benefits to organizations, as it is one of the first performance models to combine financial and non-financial measures into a theoretically simple framework. However, there has been little observed research conducted to determine if the BSC truly contributes to the bottom-line profitability of an organization. Through a review of recent literature, and identification of companies that have implemented a balanced scorecard, a quantitative and qualitative analysis was conducted to determine if there was a marked change in the profitability of an organization before and after scorecard implementation. An economic index of market value, Tobin's q, was calculated for 16 organizations with a Balanced Scorecard, and compared against the Tobin's q of control groups comprised of organizations competing in the same industry. Regression analysis was used to determine the impact, if any, of external events on the organization. A qualitative survey was administered to 44 companies that were identified as having implemented a scorecard. The study indicates that there is no conclusive evidence that a company with a balanced scorecard experiences increased market value (increased profitability), either before or after implementation, when compared with performance of other organizations in the industry group.