The Diffusion of a Balanced Scorecard in a divisionalized firm—Adoption and Implementation in a ...

286 Pages·2004·1.78 MB·English

The Diffusion of a Balanced Scorecard in a divisionalized firm
—Adoption and Implementation in a practical context—

Simone Wenisch
Department of Business Administration
Umeå School of Business and Economics
Umeå University
SE-90187 Umeå
To my mother
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Abstract
Diffusion studies are commonly associated with the dissemination of innovations
across legally and economically independent organizational units. Suggesting a new
perspective on the existing diffusion literature, this thesis argues that diffusion of
innovations is a relevant issue to study also on a (formally) micro–level of
investigation. Based on this reasoning, this thesis examines how and why a
contemporary management accounting tool diffuses within a group of
organizations belonging to a common corporate group.
The concept in focus is the Balanced Scorecard. A high number of adopters
worldwide combined with a shortage of empirically grounded scientific studies
dealing with the practical Scorecard application make it a relevant tool to study.
Against this background, this thesis also aims to enhance our knowledge on what it
means to adopt and to maintain a Balanced Scorecard in practice.
To address these aims, this study presents the results of an in-depth case study of a
large-sized multinational firm. The empirical data describes a five-year BSC
adoption and implementation process in five business divisions; all of them active
in the communications business. Diffusion of innovations studies, supplemented by
management accounting implementation studies form a first part of the theoretical
framework developed. In an effort to create an even richer understanding of the
data, a network perspective is additionally applied in a second analytical step.
The findings of this thesis indicate that applying theory of diffusion on a micro–
level requires using a process-approach of study. Under this pre-condition, the
study portrays the intra-firm Balanced Scorecard diffusion as a complex process—
unpredictable in its nature and highly dependent on groups of individuals and their
interests. The Balanced Scorecard is identified as a management fashion.
Confirming experiences made with established management accounting tools,
organizational resistance prolongs its implementation process. Parts of this
resistance are identified as being related to the Scorecard concept itself, while others
appear to be non-specific to the tool examined.
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Acknowledgements
From a “non-researcher’s” point of view, writing a PhD thesis might be considered
a rather lonely endeavor. That was at least my first impression when I initially
started the PhD program at the USBE Department of Business Administration in
Summer 2000. Encouraged by Sune Tjernström and Rune Andersson, two of the
most gifted teachers I experienced during undergraduate student life, I decided to
enter the PhD education and took the first courses. Over time, I gradually realized
that doing research is very much about networking. Individual work is undoubtedly
an important aspect, but to succeed with a PhD, one has to build a network of
contacts—professional and private contacts, department-internal and external
contacts. If these acknowledgements were a formal part of my thesis, I would say:
succeeding with a PhD means to create an alliance network around your thesis; to
convince allies of different kinds to join this network and to contribute with their
particular abilities. In this sense, I would like to thank all the “allies” that
volunteered to join my thesis network, resulting in the study that you are about to
read.
My particular gratitude goes first of all to my supervisors, Professor Lars G. Hassel
and Dr. Kerstin Nilsson, who supported me with their knowledge and advice
throughout the entire thesis. In addition to specialist accounting counseling, I
particularly appreciate Lars’ capacity to constantly keep up my motivation and his
support in my efforts to extend my network beyond the department’s borders.
Already in the early stages of my PhD he encouraged me to present papers at
international conferences and, most importantly, supported my wish to spend one
term as a visiting PhD student at the University of Alberta, Canada. Thanks to
financial support from Nordbankens Norrlandsstiftelse, this possible visit became
reality.
The research period at the U of A turned out to be one of the most decisive periods
in my PhD work, which is most of all thanks to Professor David Cooper. With his
enthusiasm for management accounting and his outstanding knowledge in the area,
he always gave me (and his own PhD students) the feeling of doing interesting
research. As an excellent teacher and researcher, he showed strong devotion to really
transferring parts of his knowledge to us PhD students—and this not only in regard
to accounting knowledge. I remember one particular discussion about my thesis
work over a coffee at “George’s coffee shop”. We had just spoken about the
possibility to use two rather contradictory theoretical perspectives in one —my—
thesis and I was still trying to figure out what this meant. Realizing that I was
obviously still a bit puzzled, David said: “You know, writing a PhD is sometimes
confusing. And a bit of confusion is good for the progress of your work —as long as
it doesn’t take over completely”.
Another mentor that I would like to thank especially is Dr. Tony Huzzard.
Without any formal obligation as a supervisor, he nonetheless reliably read the
papers that I sent to him and I do not remember one single time where he did not
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return an e-mail or letter with helpful comments and suggestions. I truly appreciate
all the time and effort he put into my work, helping to make it what it is today.
Likewise, I thank Dr. Juhani Vaivio, Dr. Henrik Linderoth, and Fil. Lic. Peter
Zackariasson, who contributed to this thesis with valuable comments and
suggestions in the final internal PhD seminar.
Throughout my PhD studies, I received competent and quick help from the
administrative staff at USBE. In particular, I would like to thank Susanne, Inger,
Gunilla, Katarina and Anna-Lisa for their support in all teaching and general
administration matters.
Furthermore, I would like to take the opportunity to thank Dr. Bernhard Güldner
and Dr. Ulrich Viethen of my case company. They helped me to obtain initial
access to the company and, Dr. Güldner in particular, always proved very
supportive during my field investigations. I appreciate the extra time and work that
he, together with other staff of his department, invested in me allowing me to
conduct my on-site research. Likewise, I would like to thank all interviewees in the
case company who spent time answering my questions. Without them, this study
would not have been possible.
A special thanks also to my friends at the Department of Business Administration
who made writing the thesis so much more enjoyable. Occasional lunch breaks
with Margareta Gällstedt at a Swedish fast food chain downtown Umeå, for
example, literally spiced up our PhD student’s workaday-life. Likewise, dinner
parties with a couple of fellow PhD students and a skiing adventure together with
Helena Åkerlund, Marlene Johansson and others made the experience of writing
this PhD memorable.
Finally, and most important of all, I would like to thank my family for supporting
me in my, sometimes unconventional, ideas to which I count moving to Sweden
and writing a PhD thesis there. I am grateful for the patience and understanding
that especially my mother showed even in times where I was impatient with myself.
And last but not least, a grateful thought to a special person who volunteered to
check the quality of English in this thesis.

Umeå, Sweden, June 2004

IV
Table of contents
List of figures IX
List of tables X
Chapter 1: Introduction 1
Background to the study 1
The phenomenon of organizational change in accounting 1
The rise of multi–dimensional performance management tools 4
Purpose of the study 6
Disposition 10
Chapter 2: The Balanced Scorecard 12
Management Control Systems 12
Issues about the Balanced Scorecard 13
A solution to the management control problems of the 1980s? 13
A tool superior to other recent performance measurement systems? 17
A product of a smart marketing campaign? 19
A homogenous concept? 21
A tool of interest to researchers? 25
Chapter 3: Literature review 29
Structuring the field of organizational change 29
Diffusion of innovations 32
Innovation adoption — an effect of institutional pressures 33
Classical theory of diffusion 34
Implementation studies in management accounting 50
Analytical framework of this study — a diffusion perspective 60
A network perspective as a supplement to diffusion theory 63
Chapter 4: Research methodology 71
Research philosophy 71
A case study in management accounting 73
Studying organizational change 73
Theory and data 75
Research design 78
Working in the field 80
Getting access 80
V
The first investigation period in the field (June to September 2001) 81
The second investigation period in the field (June to September 2002) 83
Data management 84
Data collection 84
Data interpretation and analysis 88
Credibility 90
Chapter 5: Introduction to the case 93
Business Group “Communication” — a part of a global player 93
Recent economic development 94
Structural development 1997–2002 94
The five business divisions 96
Cultural background of case company and business group 97
An engineering legacy 97
Moving towards the end-customer 97
Moving towards the shareholder 99
… but also considering the “soft” factors 100
Some reflections 100
Chapter 6: Adoption and initial development of the BSC concept on business
division level (1997–2001) 102
Viewpoint of company’s top management 102
Towards a stronger shareholder orientation with the corporate toolbox program 102
BSC pilot projects and an internal guidebook 103
Viewpoint of Department X 104
Department X — a BSC advisor to the divisions 104
A BSC for Department X? 104
Viewpoint of the business divisions 106
Variations in introducing the Scorecard 106
Common problems 107
Summary 130
Chapter 7: Development of the BSC over time 132
Viewpoint of company’s top management and Department X 132
Background to the High Impact Project Balanced Scorecard 132
Conducting the High Impact Project 134
Effects and reactions 137
Viewpoint of the business divisions 139
VI
Division “Mobile” 139
Division “Cordless” 142
Division “Networks” 147
Division “Solutions” 150
Division “Wireless” 154
Summary 156
Chapter 8: Analysis from a diffusion perspective 159
Motives for BSC adoption and implementation 159
Viewpoint from top management and business group level 160
Viewpoint from business division level 163
An S–shaped diffusion curve but still not a “typical” diffusion 170
Organizational determinants of diffusion 172
Individuals in the change process 175
Structural/organizational factors 179
Discussion 187
Preliminary findings 190
Propositions about the BSC diffusion process 190
The limits of theory of diffusion 192
Chapter 9: Analysis from a network perspective 196
Actors in the BSC context 196
Corporate group-level BSC adoption 196
Division-level BSC adoption … and implementation 198
Groups of interest 200
Constructing a BSC alliance network 203
The BSC experimenting phase 203
The BSC as an obligation 206
The alliance is created 210
Stabilizing the network 212
Reactions of business divisions to further mobilization attempts 218
The network disintegrates again 220
Some reflections 222
Chapter 10: Discussion of the findings 226
A synopsis 226
The particularities of micro–level diffusion 226
VII
Organizational change in accounting 228
The Balanced Scorecard in a practical context 236
A representative of accounting tools 236
Experiences with the tool in practice 237
Concluding reflections on the BSC and other accounting innovations 242
Contributions of this study 246
Theoretical and methodological contribution 246
Empirical contribution 249
References 250
Appendix 271

VIII
List of figures
Figure 1: Logistic diffusion curves 35
Figure 2: The seven roles of a change agent 38
Figure 3: Accounting change model 54
Figure 4: Revised accounting change model 56
Figure 5: Analytical framework from a diffusion perspective 63
Figure 6: Analytical framework from a network perspective 68
Figure 7: Analytical procedure 70
Figure 8: Organizational structure of the case business group 79
Figure 9: The data analysis spiral 88
Figure 10: Organizational development of Business Group “Communication”,
1997–2002 95
Figure 11: Business Principles of Business Group “Communication” 98
Figure 12: Diffusion of the BSC in Business Group “Communication”, 1997–2001
130
Figure 13: Diffusion of the BSC in Business Group “Communication”, 1997–2002
157
Figure 14: Diffusion of the BSC under consideration of underlying motives and
number of adopting divisions 168
Figure 15: Revised accounting change model for top-down implementation 190
Figure 16: Network context of firm-level BSC adoption 198
Figure 17: Network context of division-level BSC adoption and implementation
199
Figure 18: Formal relationship between main actors in the BSC context 201
IX