A Strategy Map of Balanced Scorecard

in Academic Institutions
for Performance Improvement
Umayal Karpagam P L* and Suganthi L**

Traditional ways of measuring an institutions performance have given way to more broad and
comprehensive models like the balanced scorecard. The need for balancing short-term compulsions with
long-term survival made organizations commit themselves to more pervasive and comprehensive models
that captured among others the financial, customer, internal process and learning perspectives. In doing
so, the traditional disregard for intangible processes and outcomes was overcome and the notion that value
lay in intangible resources was reinforced yet again. Traditionally, the balanced scorecard has been used
in performance evaluation of an organizations strategy. It is observed overtime that its applicability to
nonbusiness situations has gained ground. In this study, we discuss the importance of the balanced
scorecard using strategy maps. These maps describe how the four perspectives: financial, customer, internal
process, learning and growth are linked and how they create a balance between the more tangible
outcomes through intangible resources. Lists of objectives in each perspective were identified using past
literature and linkages between each perspective were illustrated to indicate a strategy map for an
educational institution. Although the number of objectives in each perspective cited in this paper is not
conclusive, we believe the model is a beginning of a change in thinking in that direction.

Introduction
New methods of evaluating the performance of an organization have emerged by replacing
traditional methods that placed emphasis on short-term measures such as financial and
operational outcomes. This approach of relying on short-term measures resulted in
overlooking other important dimensions of performance which also contributed to a firms
success or failure. Given the need to balance the short-term measures with long-term goals,
researchers and consultants were in search for measures that took care of both short- and
long-term requirements. The emergence of different models to measure an organizations
performance created a whole new paradigm of accountability. Not to take the credit away
from the earlier attempts of creating a framework for performance measurement, it may be
noted that it was in the year 1987 that Art Schneiderman at analog devices1 created the first
generation Balanced Scorecard (BSC). This was followed by another research by Kaplan and
* Assistant Professor, Department of Chemical Engineering, Sri Venkateswara College of Engineering, Sriperumbadur
602105, Tamil Nadu, India; and is the corresponding author. E-mail: umayalpl@gmail.com
* * Professor, Department of Management Studies, Anna University, Chennai 600025, India.
E-mail: suganthi_au@yahoo.com
1

http://en.wikipedia.org/wiki/Balanced_scorecard. Accessed on July 15, 2010.

Strategy
2012 IUPMap
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A
Balanced
Scorecard in Academic Institutions for Performance Improvement

Norton (1992) which resulted in a more comprehensive model that widely became famous as
the BSC. Though many other models were designed subsequently, the model created by
Kaplan and Norton remains the most popular. An article in the Fortune by Kurtzman2 reported
that 64% of the companies questioned in a survey were measuring performance from a number
of perspectives in a way similar to the BSC. The BSC received widespread recognition with its
adoption in different forms of organizations like non-government agencies, military and
schools. A strategy map describes the logic of the strategy showing clearly the objectives for
critical internal processes that create value and intangible assets required to support them
(Kaplan and Norton). The objective of this paper is to highlight the significance and
importance of the BSC and its role in evaluating the performance of academic institutions.
We are all aware that educationboth at the primary and higher levellays the actual
foundation for a nations future and educational institutions play a crucial role in this
transformation. In such a scenario, it is but evident that there is a need for a comprehensive
measure to assess the institutional performance. The BSC, due to its broad scope, can be used
in a variety of settings and not just restricted to business organizations. In the following
sections, we begin with a review of selected literature on the subject and follow it up by listing
a set of objectives that fit each of the four perspectivesfinancial, customer, internal process
and learning. This is then followed by suggesting how each of these perspectives can be
connected and be meaningful to an educational institution. The model is just a prescription
and makes no comparison to any existing models or scorecards already available.

Review of Literature
Kaplan and Norton (1992) devised a BSC, suggested at least four perspectives by which a firm
may evaluate its performance, in other words, the success of its strategy implementation.
They are: (a) the customer perspective; (b) the financial perspective; (c) internal process
perspective; and (d) learning and growth perspective. They came to a conclusion that
traditional performance measures, having a financial bias and being centered on issues of
control, ignored the key issue of linking operational performance to strategic objectives and
communicating these objectives and performance results to all levels of the organization
(Ilyoun et al., 2006). Over the last few years, it has been realized that financial indicators
alone are not sufficient. An organization needs additional measures of current performance
so that decisions on the future can be taken. These measures, needless to say, must focus on
financial issues but also should relate to items such as customer satisfaction, product and
process quality, innovation and growth (Kaplan and Norton, 2007) The application of BSC
(Marc and Jean, 1998; and Kaplan and Norton, 2004) explains how aligning the objectives on
the four perspectives are the key to value creation. Other works of Kaplan and Norton (1996,
2001a, and 2000b) emphasized on strategy maps and the cause-and-effect relationship, all of
which play an important role in assessing performance. Although originally designed for
commercial and business organizations, the model is flexible enough for all types of
organizations and we believe that academic institutions are no exception.
2

Ibid.
The IUP Journal of Business Strategy, Vol. IX, No. 3, 2012

The BSC originally was conceived as a tool for improving performance measurement.
However, it soon became evident that it could be used as a management system to implement
strategy at all levels of the organization by facilitating the following functions like clarifying
strategy, communicating strategic objectives, planning, setting targets, aligning strategic and
strategic feedback and learning These functions have made the BSC an effective management
system for the implementation of strategy (www.quickmba.com). It is evident from the
literature that the BSC has been applied successfully to private-sector companies, nonprofit organizations, government agencies, etc.
Unlike performance measurement approaches that focus on controlling behavior, the
BSC affords opportunities to motivate organizational members to achieve their goals that
support the long-term vision. The scorecard can play a central role in integrating strategic
management systems by long-term strategic objectives with short-term actions (Kaplan and
Norton, 2001a and 2001b).

Implementation of the Scorecard in Academic Institutions

The BSC is a strategic planning and management system that is used extensively in business
and industry, government, and nonprofit organizations worldwide to align business activities
to the vision and strategy of the organization, improve internal and external communications,
and monitor organization performance against strategic goals. The BSC suggests that one
must view the organization from the above-mentioned four perspectives, and to develop
metrics, collect data and analyze it relative to each of the four perspectives. The process calls
for setting objectives, devising measures, communicating targets and initiatives for each of
the four perspectives and finally evaluating the performance on each dimension against the
set parameters.
The success of implementation of BSC for business organizations generated a lot of interest
by noncommercial and nonbusiness institutions. Academic institutions too were part of this
new group. Here, for instance, the word customer was replaced with student, and academic
interpretation of the other three perspectives enabled the adaptation of the BSC to the
university/academic institution (Vernon and Mehenna, 2005). Past authors have identified
performance indicators like, quality of service from customer perspective and service efficiency
under internal business perspective, faculty development and internal facilities under learning
and growth perspective, fund raising, investment and financial management under financial
perspective. We can consider this phase as a beginning.
Rather than just look at financial measures, higher education has historically emphasized
academic measures also (Ruben, 1999). The author identified cluster measures for a higher
education dashboard which are quite similar to what other authors had discussed. Sutherland
(2000) suggested from the perspective of central administration an instrument like BSC
should make it easier for the university to accomplish its strategic goals. The scorecard is
attractive because it offers a format within which to establish common measures across
academic units that have shared characteristics. The research has discussed measures like
A Strategy Map of Balanced Scorecard in Academic Institutions for Performance Improvement

school climate, publications, retention, quality of teachers, etc., for measuring the performance
of the institute.
To illustrate the idea of the BSC, let us take a business school imparting business
management education. Business schools, like business organizations are facing increasing
pressure to sustain their performance. To overcome this challenge, business schools need to
undergo fundamental changes in the way they operate and continuously seek ways to create
future value. Bailey et al. (1999) reported that 38 business school deans gave out diversified
opinions about the BSC and were instrumental in identifying nearly 500 measures. A similar
model was developed by Papenhausen and Einstein (2006) and Venkatesh and Kirti (2007),
for assessing higher education institutions. In all these studies, the authors have discussed
measures like external ratings, alumni evaluation, student satisfaction survey under customer
perspective, internships, number of new courses offered under internal business perspective,
faculty growth and academic excellence under learning and growth perspective, grants and
enrollment trend under financial perspective and many others.
In a study by Andra (2005), student generated measures were compared with actual university
metrics in an exercise. The identified metrics were budget and fund raising under financial
perspective, rankings under customer perspective, faculty performance and under learning and
growth perspective and other ones were similar to the ones already discussed. The comparison
showed that students can very easily determine metrics in the customer quadrant because it
reflects their personal experience as the customer to the university. They were also familiar
with employee metrics since their familiarity with faculty evaluations and affiliations with the
university. They were less familiar with the financials of the university and the operational
metrics were the most difficult to determine. The limitation of this study was that it mainly
focused on the student understanding and not on the implementation of BSC.
The operating position of the best business schools in the Islamic Republic of Iran was
assessed using the BSC. Nayeri et al. (2008) administered a questionnaire to 282 participants.
Reliability and validity were assessed and b schools were ranked.
There are reports of colleges using the BSC to develop frameworks for measuring
institutional effectiveness at the macro level (Karathanos and Karathanos, 2005). Such
adaptations provide university administrators with a measurement system that is not only
linked to mission and strategy, but is also a learning model that supports continuous
improvement and environmental responsiveness.

Strategic Objectives for an Academic Institution

Traditional financial reporting systems provide an indication of how a firm has performed in
the past, but offer little information about how it might perform in the future. The BSC
translates the organizations strategy into four perspectives, with a balance between the
following:
10

The IUP Journal of Business Strategy, Vol. IX, No. 3, 2012

 Between internal and external measures;

Between objective measures and subjective measures; and
Between performance results and the drivers of future results.
Replicating and borrowing from the past studies, the authors put together a framework
consisting of four generic perspectives that are designed for assessing the performance of an
academic institution. Table 1 puts them in greater detail.
Table 1: Objectives and Measures for an Academic Institution
Perspectives
Financial

Objectives

Measures

Fund raising

Alumni/business funds generated

Endowments

Size and number of endowments per year

Increased grants

No. and amount of grants from external

funding

Customer

Investment in people

Human capital investment

Customer satisfaction

Student, employers, faculty, parents

Teaching innovation
Faculty reputation, quality of service

Internal process

Business community
satisfaction

Employers rating of graduates

effectiveness

Transfer of learning

Teaching excellence
Quality of faculty
Service efficiency and effectiveness

Curriculum excellence

No. of new courses developed

Degree to which curriculum is updated

Innovation and learning

Faculty development

Money spent for faculty development

No. of faculties sponsored for higher studies

Environment

Quality of facilities, reward systems

Teaching, learning innovation
Program and curriculum innovation and
improvements

A Strategy Map of Balanced Scorecard in Academic Institutions for Performance Improvement

11

With the objectives and measures in hand for each perspective, the next task is to link the
four perspectives depicting cause and effect relationships. This linkage is what Kaplan and
Norton (2004) term as an illustration of converting intangible assets into tangible outcomes.

Generic Strategy Map of BSC for Academic Institutions

A strategy map is a diagram that is used to document the primary strategic goals being
pursued by an organization or management team. It is an element of the documentation
associated with the BSC, and in particular is characteristic of the second generation of BSC
designs that first appeared during the mid 1990s. The first diagram of this type appeared in
the early 1990s, and the idea of using this type of diagram to help document BSC was discussed
by Kaplan and Norton in 1996 (Wikipedia, accessed on March 24, 2012).
According to Kaplan and Norton3, a strategy map converts intangible assets into tangible
outcomes (Kaplan and Norton, 2004). The creation of the strategy map for an organization is
the key first step in the BSC methodology. A vital prerequisite to building a coherent and
realistic strategy map is a proper understanding of the hierarchical interdependencies between
the four perspectives of the BSC. One of the big challenges faced in the design of BSC-based
performance management systems is deciding what activities and outcomes to monitor. By
Figure 1: The Proposed Strategy Map Framework for an Academic Institution
Financial
Perspective
Fund Raising

Endowments
Student Fee

Endowment

Increased Grants

Customer
Perspective
Student Satisfaction

Business Community
Satisfaction

Internal Process
Perspective
Transfer of Learning
(Teaching and Pedagogy)

Curriculum Excellence
(Updated Syllabi)

Learning and Growth

Perspective
Faculty Development

12

Quality of Faculty

http://en.wikipedia.org/wiki/Strategy_map. Accessed on March 24, 2012.

The IUP Journal of Business Strategy, Vol. IX, No. 3, 2012

providing a simple visual representation of the strategic objectives to be focused on, along
with additional visual cues in the form of the perspectives and causal arrows, the strategy map
has been found useful in enabling discussion within a management team about what objectives
to choose, and subsequently to support discussion of the actual performance achieved.
Figure 1 is a suggestive generic strategy map for an academic institutionlet us consider a
business school.
The financial perspective defines the chain of logic by which intangible assets will be
transformed to tangible value. Financial performance measures indicate whether a companys
strategy, including its implementation and execution are contributing to bottom line
improvement (Kaplan and Norton, 2004a and 2004b).
The customer perspective describes how the organization will create differentiated
sustainable value to targeted segments. Here managers have to identify targeted segments in
which their institution competes and evolve measures of the institutions performance for
customers in these targeted segments. Once the organization understands who its targeted
customers are, it can identify the objectives and measures for the value proposition it intends
to offer. Customer value can be created by being the lowest cost alternative, the most premium
offer, service/product innovation/delivery and by being a complete solution provider (Kaplan
and Norton, 2004a and 2004b).
Once the organization has clarity about its financial and customer perspective it then has
to look at the objectives in internal process and learning and growth perspectives. They
describe how the strategy will be accomplished (Kaplan and Norton, 2004a and 2004b).
The internal process perspective defines the process that will transform intangible assets
into customer and financial outcomes. The learning and growth perspective describes how
the organizations intangible assets play a role in strategy. They can be broadly categorized
into three categorieshuman capital-consisting of skills, talent and know how required to
support the strategy; information capitalthat looks at the information systems, networks
and infrastructure required to support the strategy ; and organization capitalthe ability of
the organization to mobilize and sustain the process of change required to execute the strategy
(Kaplan and Norton, 2004a and 2004b).
In Figure 1, we can see that the objectives in the four perspectives are linked together to
form a cause and effect relationship. The hypothesis proposed by Kaplan and Norton is that
financial outcomes can be achieved only if targeted customers are satisfied. From Figure 1, we
observe that higher endowments, fee and fund raising are linked to student satisfaction while
increased grants are linked to the satisfaction derived by the business community which in
this case is a key stakeholder. The two internal perspectives (internal process and learning
and growth) lead to higher customer satisfaction and financial outcomes. It is observed from
Figure 1, that teaching and pedagogy have been linked to student satisfaction through an
updated curriculum. An updated curriculum also has an impact on the business community.
Industry wants ready to deploy manpower without further learning and development
investments. In the learning and growth perspective, we have suggested that faculty
A Strategy Map of Balanced Scorecard in Academic Institutions for Performance Improvement

13

development and quality of faculty as the human capital required to execute the strategy.
There is also a need to look at the organization capital for successful execution.
By looking at Figure 1, the educational institution now has more clarity on the role of
each of these perspectives, how objectives can be defined under each perspective and the
kind of measures required to translate objectives to tangible outcomes using intangible
resources.

Conclusion and Limitations

This paper highlights the necessity of enhancing the accountability of academic institutions
by instituting an easy to understand strategy implementation measurement framework.
Available literature was referred to arrive at a set of objectives and measures for an academic
institution. It can be inferred from the literature that a customized BSC makes it easier for
the academic institution to accomplish its strategic goals. An attempt is made to suggest a set
of measures under each perspective. It is however, suggested that each of the institutions that
wishes to have a framework for itself needs to brainstorm as to which measures best suit it and
how is it going to implement them. Much of the responsibility for this rests with the top
management of an organization.
Though past studies have provided guidance to academic administrators to improve
institutional effectiveness, the limitation is that these studies do not provide an exhaustive
list of goals and associated measures for evaluation. Even in this paper, the list of objectives
that were proposed are limited and indicative. We have also not put together any
comprehensive set of measures under each perspective. For instance, in the internal process
perspective (Figure 1)we have proposed onethe objectives must be curriculum excellence,
but we have given only one key measure by which we will be assessing this objective realization.
We have also not suggested any specific targets or time horizons.
We suggest that future studies can look at Academic institutions and create maps for
specific strategic groups4. Such maps can act as dashboards for an academic institution. In
order to do this, further research has to be carried outfirst in terms of identifying measures
and then following it up with creating generic maps and then narrowing them down to
different groups of institutions. A lot will depend, however, on the individual institution and
the governing body that runs these institutions (for e.g., a University) to motivate the
organization and its members to begin the journey in that direction. Education is too big a
responsibility to be left to individuals and performance and accountability must be measured
the BSC and strategy maps can be a good starting point in that direction.

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14

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The IUP Journal of Business Strategy, Vol. IX, No. 3, 2012

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