Strategic control: meshing critical success factors with the balanced scorecard

Companies operating in a fast-paced business climate must pay careful attention to non-financial performance indicators, which can be determined by both the Balanced Scorecard and Critical Success Factors. This paper analyses the relationship between the Balanced Scorecard and Critical Success Factors and devises a framework to bridge the two systems. The paper is based on a six-year research project of 15 companies in the Netherlands and some of the case studies illustrate how the integrated method can be employed across a variety of industries to provide a more adequate performance management system.     

The Management of Innovation in Project-Based Firms

How relevant are traditional innovation ideas for project-based firms? This paper asks if project-based firms provide a context supportive of innovation or indeed if they view it as useful. Based on research in firms from a variety of sectors, including telecommunications, information systems, computers, financial services and engineering, procurement and construction, the paper reveals that the very project control systems around which the firms operate serve to stifle innovation. Project-based firms—regardless of sector—prioritise efficient management of projects, tolerating the use of slack resources only when absolutely necessary. Finally innovation is not seen as universally useful, but primarily as costly and dangerous. It concludes that the space at which ‘innovation’ and ‘projects’ comes together is still dominated by ideas on how to correctly manage projects, rather than how to effectively manage innovation. Innovation of ideas on managing innovation projects may be merited.     

Deciding on ISO 14001: Economics, Institutions, and Context

ISO 14001 is an international standard for environmental management systems that was introduced in September 1996. It has gained wide recognition among businesses, much like its sister standard on quality management systems, ISO 9000. As a result, managers in almost every organization will evaluate whether the organization should become ISO 14001 certified. However, most analyses of ISO 14001 that are intended to guide managers in their evaluation have focused on the merits of ISO 14001, such as improved competitiveness, management control, and regulatory compliance. Very few articles provide a balanced picture of the costs and benefits of ISO 14001—including the conditions under which adoption will be most effective. This article redresses this gap by providing an analysis of not only why firms may choose to certify based on economic and institutional considerations, but also, when certification might be appropriate based on the firm’s context.In 1998, the Jutras division of Meridian Magnesium Inc., which manufactures magnesium automotive parts, reported that it saved almost $2 million soon after its $45,000 investment on an ISO 14001 certified environmental management system (EMS).¹ The company reduced its use of electricity, natural gas, and lubricants, while producing less solid waste and contaminated water. These were not just one-time savings; they were expected to continue into perpetuity. Not all their ISO 14001 projects were winners, however. Jutras implemented ten projects for their EMS in the first year with an initial goal of saving over $460,000 in costs. Four of the projects did not result in any savings and one had disappointing but positive results. The remaining projects, however, provided larger than expected returns. The cost savings increased the competitiveness of a firm that prides itself on being the low cost leader in an increasingly competitive automotive parts industry. The benefits to the environment were a bonus. And there was yet another bonus from ISO 14001 that had not been anticipated: the preference for ISO certified suppliers by its key customers, Ford and General Motors, and the social legitimacy earned from stakeholders pressuring for greener business practices. The company now posts its ISO 14001 certification on its web site as one of its main achievements.Although this type of vignette presents ISO 14001 in a positive light, not all firms have embraced the standard with enthusiasm. While over 22,000 facilities in 98 countries were ISO 14001 certified by December 31, 2000, many firms had decided to delay certification or reject it altogether.² The significant financial rewards realized by the Jutras Division of Meridian Magnesium have not been perceived by many of its peers, even though most analyses of ISO 14001 attempt to convince the reader that such a system is of significant strategic importance and a panacea of opportunity. Writers typically tout the potential for lower costs, increased competitiveness, market share growth, higher profits, and regulatory compliance, such as those experienced by Meridian Magnesium.³The costs of ISO 14001, however, are not trivial. Managers need to undertake a careful analysis of the relevance of ISO 14001 to their firm before they decide to jump on the ISO 14001 bandwagon. While managers can estimate the direct costs of certification with the help of good internal cost accounting, evaluating the intangible costs and benefits and the indirect impacts on the firm’s performance is more difficult. In this article, we provide background perspectives and evaluation criteria for those aspects of ISO 14001 certification, looking specifically at the marginal benefit of ISO 14001 certification over an in-house EMS. This article, then, identifies why firms may certify and in which contexts, based on economic and institutional considerations. Armed with relevant decision-making criteria, we present managers with an analytical tool to assist them in determining if ISO 14001 is appropriate for their firm.The insights provided here build on three studies:

1.

an investigation of the motivations of environmental responsiveness by interviewing members of 53 firms in the UK and Japan;⁴

2.

an investigation of the factors that influence the adoption of ISO 14001 based on a statistical analysis of 46 matched pairs of certified and non-certified firms and interviews with members of six firms in the US;⁵ and

3.

an investigation of the contexts that explain adoption based on interviews with 16 pulp and paper companies in Canada.⁶

Details of these studies are provided in text boxes later in this paper. While these studies form the foundation of this paper, many of the anecdotes provided here are based on published sources because the interviewees were promised complete confidentiality.     

Netchising: The Next Global Wave?

Companies have long taken ‘going global’ to mean having a physical presence at locations everywhere. It has meant executives in transit and bricks-and-mortar facilities on the ground. Based on extensive field interviews with executives at 35 different MNCs, our research shows that an increasing number of companies are succeeding overseas without massive foreign investment by adopting the global business model we call netchising. This new business model relies on the Internet for procurement, sales, and maintaining customer relationships, and non-equity partnership arrangements to provide direct customer interfaces and local adaptation and delivery of products and services. Netchising offers potentially huge benefits over traditional exporting or foreign direct investment approaches to globalization.     

The Effects of Cost and Asset Retrenchment on Firm Performance: The Overlooked Role of a Firm’s Competitive Environment

When firms face declining financial performance, research suggests that cost and asset retrenchment can lead to improved performance among poorly performing firms. However, previous studies have largely focused on firms operating in mature industries. This research develops and tests arguments that cost and/or asset retrenchment strategies will have different effects on firm performance in competitive environments characterized as growing and declining. In growth industries, asset retrenchment was positively related to performance improvement while cost retrenchment was unrelated. In declining industries, cost retrenchment was positively related to improved performance while asset retrenchment had a negative effect on firm performance. Implications of these findings for turnaround strategies are discussed.     

Venture Survival in a Transitional Economy

Many formerly controlled economies have undergone discontinuous transformations in their approach to markets, institutional environments, and the role of government in economic activity. We study the factors that affect venture survival in a transitional economy through a two-stage study of private ventures in Hungary. We find that ventures survive under uncertainty, even without significant government support. Industry experience, networking activities, and the strategic orientation of the firms predict survival. Contrary to our predictions, SOE experience, access to infrastructure, and differentiation strategies do not significantly differentiate survivors.     

Entrepreneurs’ Decisions to Exploit Opportunities

Opportunity exploitation is a necessary step in creating a successful business in the entrepreneurial process, yet there has been little conceptual and empirical development of this issue in the literature. This study examines the decisions of entrepreneurs to begin exploiting business opportunities from a resource-based view. Our analysis of a sample of entrepreneurs whose businesses are located in incubators suggests that entrepreneurs are more likely to exploit opportunities when they perceive more knowledge of customer demand for the new product, more fully developed necessary technologies, greater managerial capability, and greater stakeholder support. Moreover, the findings of this study shed a light on a less emphasized aspect of the resource-based view: the new product’s anticipated lead time acts as an enhancing moderator in entrepreneurs’ exploitation decision policies. Implications for future research on opportunity exploitation are discussed.     

Institutional forces and the written business plan

In this study, we examined factors that led nascent organizations to write business plans, following 396 nascent entrepreneurs during a two-year period. We examined both the production and the outcomes of written business plans produced in nascent organizations. Our findings show that institutional variables, such as coercion and mimetic forces, are important predictors influencing the propensity of new organizations to write business plans. Our results are contrary to rationalist predictions of planning-performance, and are more in line with institutional predictions. Interestingly there was no evidence to support positive outcomes, in terms of profitability, for those nascent organizations that produced business plans during a two-year initial period. We discuss the implications for institutional theory and studies of nascent businesses, as well as for the literature on business planning.