A study on the impact of the balanced scorecard as a performance management system on performance and motivation in the retail industry.

Abstract

The retail industry is constantly changing due to changing customer expectations and profiles, as well as changes in the economy, technology, new products and innovation. These changes have created a need for new systems and strategies to better integrate and comprehend business processes in the retail industry. As such, the success of many organisations are mainly dependent upon performance which in turn, is dependent on strategy. The aim of this study is to examine the impact of the balanced scorecard (BSC) as a performance management tool in the retail industry, as well as its role on the motivation of employees. An explanatory mixed method approach was used, where a quantitative study was conducted to investigate the effect of the BSC as a performance management system, and its effect on motivation. The participants consisted of 64 store managers in the retail industry, and a sequential explanatory design was used in the study. A one-way ANOVA and standard multiple regression models were used to analyse the quantitative data. This was followed by a qualitative approach that examined managers’ perceptions on the implementation of the BSC, and its effect on their operating business and motivation. For the qualitative study a non-probability convenience sample of 10 store managers were interviewed using a semi-structured interview schedule. A thematic analysis process was used to analyse the qualitative data. The quantitative results indicated that the BSC has a significant impact on employee performance, but not on organisational performance. The BSC impact on employee performance led to an increase in the store managers Sales and Customer Services, and a decrease in their Inventory Loss and Manageable Expenses. The BSC impact on Stock Integrity was inconstant. Two possible reasons were postulated from the qualitative analysis as to why the BSC did not have an effect on organisational goals. These included the possibility of a lack of strategic alignment between the BSC and the organisations, as well as the possibility that other KPI’s, that may have had a more profound effect on organisational performance, were not include in the BSC financial and non-financial KPI measures. Finally, the quantitative results indicated that the BSC did not have an impact on motivation. However, the qualitative findings showed that some store managers were highly motivated by the BSC. Furthermore, the qualitative finding indicated that some of the interview participants felt that they had good support from management and that the BSC communication plan was adequate. This, in turn, enabled them to improve their business practices, processes and systems. However, an important finding from the qualitative analysis was that the BSC and employee performance goals were not aligned to the organisational performance goals. These finding seems to suggest that the BSC, as a performance management system, can be an effective tool in improving the performance of employees. However, the organisation needs to ensure that the BSC KPI’s are aligned, firstly to the employee performance goals, and secondly to the organisation’s performance goals. This strategic alignment will ensure that any increase in employee performance, will result in an increase in the organisations performance. While the quantitative results indicated that the BSC had no impact on motivation, the qualitative finding indicated that some managers experienced high levels of motivation. These managers highlighted the proper implementation of the BSC into their business as possible reasons for the increase in their motivation levels.