-First steps towards the development of a BSC at TIP GE-

What you measure is what you get

-First steps towards the development of a BSC at TIP GE-

TIP GE

University of Groningen

Faculty of Business Adminstration

What you measure is what you get

-First steps in the development of a BSC at TIP GE-

J. Smit 1283383

Amsterdam Feburari 2006

Rijksuniversiteit Groningen Faculty of Business Administration

Financial Value Management

Rijksuniversiteit Groningen Drs A. Smeenge

Dr. B. Emans

TIP GE, Amsterdam

Ruben van den Herik

Executive summary

The initial management question was to develop a digitized scorecard for TIP GE. This means that the scorecard should be connected to the IT-infrastructure, more precise to Safari, a system that is currently used to develop reports.

There were several problems surrounding Safari (information overload, large spread in information request) which could be solved by a Balanced Scorecard (BSC). A BSC minimizes information overload by working with only a limited number of critical success factors in 4 perspectives. A well-developed BSC should also structure the information request of the managers. The goal of the study is therefore to provide information to TIP about the development of an automated balanced scorecard. This information should provide TIP information that allows TIP to make decisions about the actions needed for the development of an automated balanced scorecard.

A BSC can only be developed if there is a common perception about the strategy. The first main question therefore was ‘’what is the degree of common perception about the strategy of TIP?’’ A questionnaire used to answer this question. In the questionnaire the managers were asked to indicate the importance of strategic statements for success of TIP. The SD was calculated to indicate the degree of common perception. 63 percent of the variables had a SD above 2. (scores could range from 1 –10), indicating a low common perception about the strategy. An additional factor-analysis was conducted to assess whether there were underlying dimensions to be recognized. After 6 rotations only 14 out of 52 variables

remained and the factors were not sensible again indicating a low common perception of the strategy. It was concluded that the development of the BSC was not possible yet because of the low common perception of strategy

The second main question ‘’ what should be the design of the automated balanced

scorecard?’’ is only partly answered because a complete BSC was not possible because of the lack of common perception about the strategy. The questionnaire however did deliver some high-scoring variables, which could be considered as CSFs. A KCV-template (requesting measures) was handed out to the managers and they were requested to hand in their top ten most important business metrics. These metrics were discussed in a meeting resulting in a top 20 list. The key control variables (KCVs) on the list which are possible in Safari and which rated high on the questionnaire are together the pilot. These KCVs are implemented in Safari in a scorecard. The objective of the pilot is to learn from it so that an eventual BSC can be implemented quickly. The pilot should be used by IT to gain an understanding about how to develop metrics in Safari and should provide information about the format in which the users want their numbers.

The other recommendation is a discussion about the strategy of TIP. The outcomes of the questionnaire can be used as an input for the discussion. Variables which were very high rated should be the center of the discussion and the discussion should be focused on

answering questions as ‘why is this variable so important’’ and ‘’which other variables does it influence or is it influenced by’’. This to discover CSFs and to establish relationships between those CSFs. Another input for this discussion are the variables with high SD. Managers with high scores on this variable should start the discussion with managers with low scores. This discussion should improve the common perception of strategy and therefore making room for the actual development of the BSC.

Preface

On September the first I started my internship at TIP with little knowledge about the BSC and with absolutely no knowledge about developing information systems. This would rapidly change during the next months. During these six months I tried to develop a BSC, but most of all I developed myself.

This thesis would not have been written without the help of several people at TIP and I’d like to use this preface to thank those people. First of all I’d like to thank everybody at TIP who provided me with information. Special thanks goes out to Ruben van den Herik and Julia van Ittersum who gave me advice about my thesis whenever I needed it. I would also like to thank Zsolt Kopacsi who explained Safari in detail to me and who tried to help me with my thesis as much as possible.

I’d also like to thank some people from the university. First of al Drs. A. Smeenge who provided me with information and literature whenever I needed it. I would also like to thank Dr. B. Emans for his remarks about my methodology and for providing some guidelines for writing a thesis, which helped me with the writing. And last but not least I would like to thank Erik Sloot who wrote his own thesis in the same months as I did and just seeing someone else struggle with the same things as I was helped me with writing my thesis (and of course the numerous discussions about diverse subjects and his advice helped me while writing my thesis),

Jan Smit

Amsterdam, februari 2006

Table of contents

Executive summary ... 2

1. Introduction... 6

1.1 The Management Question ... 6

1.2 TIP GE ... 6

1.3 The Safari project ... 8

1.4 Overview of the report... 9

2. Problem analysis... 11

2.1 Functions of performance management... 11

2.2 The problems identified... 12

2.3 Comparing the problems identified with the functions of performance management... 14

3. Theoretical framework and conceptual model ... 16

3.1 Demands for performance management ... 16

3.1.1 Strategy

... 20

3.2 The Balanced Scorecard ... 22

3.3 The development process for the BSC... 24

3.3.1 Participation

... 24

3.3.2 The use of Critical Success Factors

... 25

3.4 Conceptual model... 25

4. Problem statement... 27

4.1 Goal of the research... 27

4.2 Main Questions... 27

4.3 Limitations... 27

5. Methodology ... 28

5.1 Study of corporate documents... 28

5.2 KCV-template... 28

5.3 The Questionnaire ... 29

5.3.1 The factor-analysis

... 29

5.3.2 Information about the knowledge about strategy

... 30

5.3.3 Information about the CSFs

... 30

5.4 Interviews ... 30

5.5 Research Plan ... 30

6. Results... 32

6.1 The intended strategy ... 32

6.2 The factor analysis... 32

6.3 Comparison between the factor-analysis and the intended strategy... 33

6.4 The spread analysis ... 34

6.4.1 The spread in the KCVs requested

... 34

6.4.2 The spread in the ratings on the statements in the questionnaire

... 34

6.5 Variables in the questionnaire with a mean > 7.5 ... 35

6.6 The top 20 KCVs ... 36

7. Discussion of the results and recommendations... 38

7.1 Results regarding the knowledge of strategy and their implications for the recommendations. ... 38

7.2 Results regarding the development of a scorecard... 39

7.3 Recommendations ... 39

7.3.1 A discussion about intended strategy

... 40

7.3.2 A pilot in AF and Safari

... 40

8. Discussion... 45

8.1 Limitations... 45

8.2 Weaknesses of theoretical constructs... 45

8.3 Directions for further research... 46

Literature ... 47

1. Introduction

In this first chapter I will briefly describe the initial management question, which led to this thesis. Than I will describe the organization, which is subject of the research: TIP GE (from here on called TIP). The structure of the organization, some key numbers and the production process. The research was conducted within a department of the organization called Business Intelligence as part of a project called Safari. This Safari project will be described in section 3.

Finally an overview of the remaining of the thesis will be given.

1.1 The Management Question The management question¹ is:

‘’To develop a digitized scorecard for TIP GE with possibilities to drill down from high level information to very detailed level information’’

Three very important features of this management question can be distinguished:

1. The fact that a scorecard is needed, implying the need for a performance measurement system of some kind.

2. And that the scorecard needs to be digitized (using the existing IT- and IS- infrastructure) and therefore restricting the possibilities.

3. The scorecard in itself is just the starting point for the analysis, which should make it possible to drill down to detailed information.

The management question will be further analyzed in chapter 2. First TIP and their products will be described to give an introduction into TIP.

1.2 TIP GE

TIP trailer services Europe is one of 5 business units within Equipment Services Europe (ESE).

TIP delivers financing and asset management solutions giving customers transportation possibilities, rental and maintenance solutions that keep freight on the move all over Europe.

There are over 100 locations in 19 countries and the European headquarters is situated in Amsterdam. The functional managers and the CEO and CFO are situated at headquarters in Amsterdam. TIP is divided in the following regions:

• Benelux

• Central

• UK trailer

• UK tanker

• Southern

• Nordic

• Eastern Europe

The regions are more or less modeled as the headquarters. General managers (GM) lead the regions and several functions are as well in the region (except asset management). Sales is

1The terms management questions and management problem have the same meaning in this report. A management problem is a problem of management: the belief of management about a (model of a) system (a defined part of reality), which ought to be improved (De Leeuw, 2000: 289). A problem is an unwanted difference between the existing and the desired system (De Leeuw, 2000: 280). The

management question is about changing a system and represents an unwanted difference.

only situated at a regional level. There are two lines of hierarchy within the company. One is from the GM to the functional leaders and from the GM to the CEO. The other one is a line from the functional leaders at headquarters to the functional managers at a regional level. The organization therefore is somewhat a matrix organization. Functional managers at corporate level are also connected to the functional managers at ESE.

TIP offers four products related to trailers:

• Lease (operational and financial)

• Rent

• Sale and Leaseback

• Buy

The lease and sale and leaseback options are more long term (over a year), whereas the rental is more short term focused (for as little as one day). The market for long-term lease (LTL) is much bigger and growing at a faster pace than the market for short-term rental (STR). Core products for TIP are the leasing and rental products. The buy-portion (selling trailers) is the defleeting of that part of the fleet that is either not attractive for leasing anymore or is too costly to hang on to (depreciation and interest costs are high because of the short life cycle of a trailer).

There are several ways a customer can lease equipment from TIP, most used ways are:

• Capex: a new unit is purchased by TIP and put on lease

• Infleet: A unit which is already been out on lease goes out on lease to a different customer

• Renewal: The customer renews its contract

• Evergreen: the contract is expired, but the customer still uses its lease equipment The process for LTL is described in figure 1.1.

End of contract/Expiree²

Fig. 1.1 Order process for LTL

TIP delivers several sorts of equipment to meet every freight need. Equipment types are:

• Curtainsider: Strong side curtains hold load securely, can be unlocked and pulled along to allow access to load space for the full length of the unit.

• Van: Available with solid sidewalls and secure rear loading access. Units can also have side doors or sliding wall sides.

• Double Decker: Bars provide adjustable loading platforms. In some units decks can be moved up or down to change load heights.

• Reefer: Insulated van with fixed refrigeration to transport frozen or temperature sensitive goods.

2 From now on end of contract will be called an expiree.

Capex Customer A

LTL

Renewal Evergreen

Customer A

Sitting Infleet

Customer B Defleet Customer C

• Skeletal: Built only as a chassis without flooring. Equipped with twist locks to receive ISO containers.

• Flat: Chassis with a wooden floor, for carrying heavy goods associated with bulk haulage and construction.

• Tilt: Body is made up of a dismountable superstructure covered with strength fitted tarpaulin. Customs sealed for cross-border operations.

• Swap body: Box unit for intermodal and small or split load use. Fold down legs allow stand along positioning once removed from vehicle chassis.

• Truck: Standard truck for long distances

• Tanker: A full range of tankers (including liquid and foodstuff, tipping and non- tipping powder silos, vacuum waste).

Besides these types of equipment and the different types of lease-options, TIP also offers a range of service, including:

• International break down support.

• Damage protection (including insurance).

• Fleet advice to drive down operating costs for the customer.

• Moving billboards.

• Pan European account management.

• Storage.

• Testing for roadworthiness (making sure equipment is MOT-compliant).

• Veriwise: satellite asset tracking.

It can be concluded that TIP is a fairly complex organization. It has the likes of a matrix- organization with various hierarchies and dotted lines between functions as well as cross- functional. Furthermore there are a lot of transactions and customer contacts on a yearly basis (recall that STR can last for less than a day). This in combination with the wide variety of products and services also adds to the complexity of the business. Furthermore the environment is competitive and offering financing solutions is in itself an ambiguous and complex product. This complexity triggers a great need for data and information about the process of the business. TIP uses various databases and date warehouses and the system used for reporting and analysis is Safari (although more traditional ways of reporting, like in Excel are also still present in the organization). The management question is related to these information requirements and to Safari. Therefore in the next section Safari will be discussed.

1.3 The Safari project

The Safari-project started on October 2004. Safari is the name of an information system, which is used to construct reports for all the functional areas and the regions to track performance or run analyses. In Safari there are several objects, which a user can connect to each other to construct the report of their wishes. There is a possibility to make the requested reports corporate documents. This means that they will be automatically constructed for a given time period (weekly, monthly etc.). Objects for instance are utilization, country and type of trailer.

If you construct a report with this objects you will receive a report with this kind of information (see table 1.1).

STR 500 Netherlands

LTL 600 Netherlands

LTL 400 Belgium

Table 1.1: An example of the output of Safari

This is the simplest example, but there are many more options in Safari. You could for instance use a filter. This means that you don’t get all the information the system normally would give. To extend on the earlier example: you could filter the information by country and by type (this is called running the query), you could filter it for information about only Belgium and the LTL. This would mean that your report would consist of the bottom row of table 1. Furthermore there is the possibility of benchmarking (in time, by country, by region, by salesperson etc.). This benchmarking makes the system suitable for performance

measurement (there should be standards in a performance measurement system to compare, (Fitzgerald & Moon, 1996)). What is important to bear in mind is that Safari never changes the data. It only rearranges it. Safari collects the data from databases and data warehouses (see figure 1.2). Then Safari puts the data into objects and the objects are placed into classes, which are placed into universes.

Safari is now a static system and is continually updated with new reports and new objects.

Safari runs on Business Objects-software (BO). This BO also has more applications. One of them being Application Foundation (AF), which is a system with dash boarding and scorecarding capabilities (numerous graphical options). A metric (numerical value) can be directly linked to reports in Safari, which gives the possibilities to analyze the numeric value.

AF is the focus of this study and the to be developed scorecard. It should be noted that Both Safari and AF run on so called universes and that the universe already created in Safari is not transferable to AF, so the universe of AF needs no be created from the data warehouse (see figure 1.2. This is has to be done in such a way that the data in AF can be connected in a sensible way with the reports in Safari³.

Fig.1.2: data flow diagram

In the last section of this chapter an overview of the remaining of the thesis will be given which is conducted within the areas described above.

1.4 Overview of the report

This report is structured as follows. In chapter 2 the management problem will be analyzed.

The management question is a request for a development; but before the development stage there should be a diagnostic phase. In this analysis (diagnostic phase) I will compare the functions of performance measurement with the problems identified at TIP. This represents in fact a go or no-go decision. Only if the proposed form of design (BSC) has the features to solve the problems than the development will take place. This choice will be made in chapter

3 Kaplan and Norton (1992) state that information systems play an invaluable role on helping managers to disaggregate the summary measures in the scorecard. When an unexpected signal appears in the scorecard the managers should query their information system to find the source of the trouble (drill down to individual customer for instance). This drilling down capability is exactly the reason why the scorecard in AF should be tied to the reports in Safari.

Databases Data warehouse Safari

AF

Reports

Scorecard

2 . In chapter three the theoretical framework is being developed, resulting in the conceptual model in § 3.4. The conceptual model is the input for the problem statement in chapter 4. In this chapter the goal of the study is given, along with the main questions and the limitations.

How the main questions are answered will be explained in chapter 5. The methods are being discussed resulting in a research plan in § 5.5.

The results are presented in chapter 6. Chapter 7 is divided into two important sections. In the first part of the chapter the results are being discussed and their implications for the

recommendations are given. In the second section the actual recommendations are given.

Chapter 8 is the discussion, which will address the limitations of the research and indications for further research.

2. Problem analysis

The management problem will be further analyzed in this chapter.

First of all the functions of performance management will be described in §1. Then an analysis of the problems⁴ at TIP will be performed in § 2. These problems are compared with the functions of performance management. If the problems can be solved by a performance system, than the management problem is indeed judged as an organization problem and than the focus of the research will be on the development of the BSC (see figure 2.1).

The development will start with an overview of the features of an effective performance management system (and BSC) in the theoretical framework in chapter 3.

Fig 2.1 the process of problem analysis 2.1 Functions of performance management

Performance management⁵ includes all the devices or systems managers use to ensure that the behaviors and decisions of their employees are consistent with the organizations

objectives and strategies (Merchant & van der Stede, 2003). The central theme of performance management involves helping ensure that an organization achieves its objectives (Otley, 2003), this is done by influencing behavior. A performance management system influence behavior in three ways:

1. The performance management system gives direction.

2. The performance management system solves motivational issues.

3. The performance management system addresses personal limitations.

Ad 1) a proper designed performance management system gives direction.

When a lack of direction exists the likelihood of the desired behavior occurring is obviously small (Merchant & van der Stede, 2003). To put it in another way: the performance

management system coordinates the effort of all those who work within it (Goold & Quinn, 1990: 44) and should secure better coordination between different sections of the

organizations (Khandwalla, 1971).

Ad 2) a proper designed performance management system solves motivational problems.

Motivational problems are common because individual and organizational objectives do not naturally coincide⁶. Employees, particularly managers are prone to making decisions that serve their interests, but not those of the organization (Merchant & van der Stede, 2003:8).

Otley (2003) calls this the central problem of management control: ensuring that managers

4These identified problems are usually called the problem mess. Ackoff (1978) defined the problem mess as a system of problems and people who are having these problems. Usually this problem mess is connected to the management problem, but this is not always the case (De Leeuw, 2001: 178).

Comparing the functions of performance management with the problem mess will clarify whether or not the problem mess is connected to the management problem and hence whether or not the management problem can be an organizational problem.

5 The BSC is also more than a mere performance measurement system. It has evolved to a strategic management system (Kaplan and Norton, 1996). Therefore the focus lies on performance management and not on mere performance measurement.

6 This is called the agency problem (see for instance Eisenhardt, 1989). Hollstrom & Milgrom (1991) show that items that are indeed included in their performance evaluation affect agents’ decisions.

Functions of performance management

Problems identified

FIT

Development BSC

(and workers) act in the organizational interest. Performance management can be used to align personal and organizational objectives.

Giving direction in itself (by setting performance standards) also provides for motivation to act in the organizations interest. Research indicates that increased goal clarity and decreased role ambiguity increases effectiveness and satisfaction of employees (see for instance House, 1971; Mintzberg, 1978)⁷.

Ad 3) A proper designed performance management system addresses the problem of personal limitations

Managers neither have the time nor the capacity to process all available information (Simons, 1990). This results from a combination of too many activities for them and a concept called bounded rationality, which views the mind as a scarce resource. Only limited subsets of the organizations formal management control process can have the attention of managers (Simons, 1990). The management control system should provide information on which the managers can base their decisions and protect them from overload⁸. Sometimes the sheer volume of information prevents the measures in the organization to be used effectively to drive the business (Butler & Letza, 1997). This all means that the information system should provide reasonably good information about operations that facilitates prompt management action because even the best plans fail (Khandwalla, 1971; Goold & Quinn, 1990: 44, Hayes, 1977).

So concluded a performance management system should provide direction, solve motivational problems and address the problem of personal limitations. Obviously these functions interact. Giving direction has its influence on motivational issues (providing goal clarity and aligning organization and employee objectives) and it addresses personal limitations.

2.2 The problems identified

The identified problems can roughly be divided into two categories:

• The generic problems, which are not directly linked to performance management.

This does not mean that they cannot be influence by performance management.

• The problems related directly to the performance management system.

These problems were identified in different ways. The generic problems were identified by means of unstructured interviews and desk research (corporate documents). The problems related to the performance management system were analyzed in two ways. The first way in which the performance management system was analyzed was by analyzing the reports in Safari. Second method was an analysis of the information requests of functional and regional managers (who are the target users of the BSC). They were asked to give their top ten measures, which they thought were necessary to run the business.

Analysis yielded the following problems:

1. Performance of the business.

2. Problems with strategy formulation and communication.

7 Locke & Latham (1979) for instance found relations between goals setting and productivity.

8 De Leeuw (2000) states that information about the condition of the system (and the organization is a system) is one of the five prerequisites for effective steering. Because of bounded rationality, or as De Leeuw (2000) calls it ‘’limited information processing capabilities’’, the performance management system should provide the manager with the information he needs for achieving the objectives of the organization.

3. Information request overload.

4. User acceptance of Safari is low.

5. Information overload.

These problems will be discussed in more detail below.

Ad 1) Performance of the business.

In the past years TIP is losing ground in some markets they compete in and profit performance is slipping.

Ad 2) Problems with strategy formulation and communication.

Because of relatively poor performance TIP is changing things around. In 2005 there was for the first time a strategic planning session and for the first time there is actually a formulated strategy (as someone from finance states: ‘’the problem of TIP was no consistent planning and execution’’). What strategy was formulated is not of importance for this section, but what it is important is that this was the first time a strategy was formulated. Because it’s the first time a strategy is formulated it is also the first time a strategy will have to be communicated. It’s questionable that the strategy is well known throughout the company. The strategy will be well known at certain departments in headquarters and by the regional managers, but at lower levels in the regions the knowledge of the strategy will be smaller. It has been shown that managements’ ability to communicate effectively its strategy is one of the most critical factors for successful implementation of the strategy (Ernst & Young, 1992).

Ad 3) Information request overload.

Connected to this supposed low knowledge of the strategy is the information request overload. An unclear strategy is supposed to lead to a more differentiated information request. This manifests itself in different forms. First of all there is a huge request from mostly detailed and fragmented reports. There are also different definitions in place for some

measures, creating more confusion.

The information request was also analyzed by looking at the spread of the metrics⁹ handed in by the functional and regional managers. There are 52 different KCVs mentioned by the managers on a total number of 116 KCVs. The minimum amount possible was 14 KCVs.

Although 14 is utopian and hardly achievable (total agreement), 52 is a wide spread. But this spread should be further analyzed. The metrics were requested by regional managers and by functional managers. It can be expected that the functions show a wider spread than the regions because a function generally represents an important process, whereas the regions incorporate all those processes and thus should have a more overall view. The difference in KCVs mentioned by the regions and functions are shown in figure 2.2.

Total measures Total different measures

Regions 63 36

Functions 53 37

Fig 2.2 spread in KCVs mentioned

There is more spread in the KCVs mentioned by the functions. The spread for the regions however is quite large (36, on a minimum of 14 and a maximum of 63) and the difference between functions and regions is also smaller than can be expected. This indicates a lack of

9 Metrics are from now on called Key Control Variables (KCVs). A definition and purpose of these KCVs will be given in the theoretical framework.

knowledge of the strategy. Another explanation for this spread is the existence of emergent strategies at the regional level, because the spread can also be an indication of the presence of several emergent strategies at regional level. But effective emergent strategies should also be shared with the other regions, because if effective it should become intended. So either the intended strategy is not clear or emergent strategies are not recognized. Either way it leads to a very fragmented information request for Safari.

Ad 4) User acceptance of Safari is low.

One of the major problems with Safari is the user acceptance of the system. The new system is more or less forced upon the users and replaced another system, which everybody was used to work with. Employees find it hard to understand were they can find information and also how to use Safari to convert data into information by creating reports. This low user

acceptance leads to reporting in different systems (like Excel), because they don’t feel comfortable with Safari. There are only a few users at regional level who themselves can create usable reports in Safari.

Ad 5) Information overload

Another problem with Safari is the enormous amount of data it contains. Safari provides information, but essentially too much to handle. Safari now contains 227 reports, which are mostly very detailed. It should be noted however that these reports are all requested in some way, so the problem of information overload seems to originate in the lack of knowledge about the strategy or the spread in information requirements.

2.3 Comparing the problems identified with the functions of performance management

In this sections the problems indentified in § 2.2 will be compared with the functions of performance management identified in § 2.1.

First step in comparing the problems identified with the functions of performance

management is adopting an open systems view. An organization can be viewed as a system with various partial systems. Functional problems relate to the outcome of a system.

Functional problems are the unwanted consequences in terms of desired performance (De Leeuw, 200:288) and only functional problems can be organizational problems. The

performance management system is a subsystem of the organization. The systems and their respective functional problems are shown in figure 2.3.

TIP

Fig 2.3: a systems view of the problems identified.

Performance management system

Regions

Functions

Customers

The performance of the organization is slipping (see § 2.2, ad 1), delivering lower

performance than before to the customer (outcome of TIP for customer). The central theme of performance management involves helping ensure that an organization achieves its

objectives (Otley, 2003), this is done by influencing behavior. So a performance management system should have an influence on this problem. This means that this problem is a functional problem (relates to the output of the system) and that it can be solved by a performance management system.

The current performance system provides too much information (§ 2.2, ad 5), which is an output of the performance management system the regions and functions. One of the functions of performance management is addressing personal limitations by reducing information overload (§ 2.1, ad 3). So this functional problem can also be solved by a performance management system.

Another problem is the knowledge of strategy (§ 2,2, ad 2) , which has its influence on effective strategy implementation and hence on performance (Ernst & Young, 1992). The managers base their information requests on what they think is important and hence a low knowledge of the strategy will lead to a large spread in information requested (§ 2.2, ad 4) because there is no common frame of reference on which the managers base their information request. This should be improved by the direction a proper designed performance

management system gives (§ 2.1, ad 1).

The only problem which seems not be connected to the design of a performance management system is the low user acceptance of Safari, although a system which provides more direction and less overload should help improving acceptance¹⁰. All in all the demand for a new designed performance management system seems justified when looking at the identified functional problems.

10 The user acceptance still remains an important problem and will be adressed in this report. The process of developing a performance management system can help a great deal in improving user acceptance as will come forward later on in the description of the theoretical framework.

3. Theoretical framework and conceptual model

Kaplan and Norton developed the Balanced Scorecard and their ideas were first published in 1992. The Balanced scorecard can be seen as a critique on traditional performance

management. These systems were primarily focused on financial accounting numbers and reflecting past performance. These systems do not fulfill the function proposed in the former paragraph, in a sense that they don’t measure essential (non-financial) metrics and thereby don’t give information about these metrics and there is no need shown for corrective action.

Improvements on traditional performance managements and features of modern

performance management (and of the BSC) are explained in § 3.1. The BSC incorporates these features in 4 perspectives. § 3.2 will give an overview of BSC-format and additional functions of the BSC (additional to the functions of performance management discussed in chapter 2).

The development process of the BSC will be discussed in 3.3. The conceptual framework will be given in 3.4

3.1 Demands for performance management

Traditional performance management was primarily focused on financial accounting

numbers and reflecting past performance. These systems do not fulfill the function proposed in the former paragraph, in a sense that they don’t measure essential (non-financial) metrics and thereby don’t give information about these metrics and there is no need shown for corrective action. It also does not address the agency problem in a proper way because it does not address certain important features of the organization.

Improvements on traditional performance management and therefore features of modern performance measurement are:

1. More focus on non-financial measures (NFMs).

2. A contingency approach to performance management.

3. Causality or relations between the measures¹¹ in the performance management system.

These 3 features will be discussed in more detail.

Ad 1) more focus on non-financial measures.

Non-financial measures should support the main functions of the performance management system (giving information and diminishing the agency problem). Financial measures are considered lagging (Kanji, 2001). They give historic information (Brown & Goldstein, 1995). It is generally accepted that a performance management system should provide a mix of leading and lagging indicators and that NFMs generally reflect those leading indicators¹². Kaplan and Norton (1996) do notice that not all NFMs are leading. Customer satisfaction for instance can also be considered lagging. Although customer satisfaction can also be

11 Performance measurement is the most important feature of performance management. Atkinson &

Waterhouse (1997: 30) call it the heart of performance management. Otley (2003) states that the specific measures of performance emphasized in the performance management system are of central

importance. This in combination with the fact that the BSC is a coherent collection of measures (Kaplan and Norton, 1996) is why the emphasis of this discussion about performance management is about performance measurement.

12 See for instance Birchard (1995), Eccles (1991), Butler & Letza (1997), Kaplan and Norton (1992, 1993, 1996), Youngblood (2002), Goold & Quinn (1990), Kanji (2001), Brown & Goldstein (1995), Venkatraman (1986).

considered leading, especially when product life cycles are long¹³. NFMs are also important because they are usually the measures oriented at the long-term, whereas financial measures are more short-term oriented (Eccles, 1991; Brown & Goldstein, 1995; Goold & Quinn, 1990, Hemmer, 1996; Smits, 1994). NFMs should be mixed with financial measures and not replace them. This because improved performance should always be reflected at the bottom line:

financial performance (Kaplan & Norton, 1996). So there is a need for a mix between financial and non-financial measures, which reflects a need for a mix between leading and lagging measures and a mix for measures reflecting the short-term and the long-term established.

So theorists indicate that NFMs give vital information about the (future) state of the system.

Therefore NFMs should help giving direction, motivating and diminishing the agency problem and so ensuring that the organization achieves its objectives. Several authors have investigated the relationship between NFMs and financial performance (see figure 2.2)

There are some difficulties in determining the relationship between non-financial measures and financial measures, which could explain some of the negative relationships:

• Non-financial measures are leading and the financial measures are lagging. The lag, however could be very long (depending on the product life cycle), it could be, therefore, very difficult to establish relationships between non-financial and financial measures.

• There is evidence that some non-financial measures only influence some of the financial measures at high levels (like for instance customer satisfaction; Heskett, 1994), it is therefore no linear relationship and simple correlational analyses can’t locate the relationship.

• There is also some evidence that certain non-financial measures have a diminishing point of return (when the cost of improving the measure does not outweigh the extra benefit), these seems the case for customer satisfaction (Ittner & Larcker, 1998).

• Ittner et al (2003) found a negative relationship between BSC usage and financial performance. At the same time they found that while 20 percent of the respondents used the BSC, over 75% of these respondents reported not relying on business models that causally link performance drivers to performance outcomes. A relationship between non-financial measures and financial ones (one being leading and the other one the resultant of the leading measure) implies a certain form of causality.

Therefore the results of this study can be explained by a wrong usage of non-financial measures.

13The need for leading measures becomes even more important when the product life cycles are long (as is LTL with TIP), this because the effects of actions taken in diminished revenues or accounting income will become evident after a long period, when it may be to late to intervene.

Bryant, Jones & Widener (2004) If each outcome measure in a BSC is connected to all outcome measures in higher levels of the BSC captures the value creation process better.

Banker, Potter & Srinivasan (2000) NFMs of customer satisfaction are significantly associated with future financial performance and contains additional information not reflected in the past financial measures.

Hoque & James (2000) Significantly positive relationship between the usage of typical BSC measures and superior performance (typical measures being the non- financial ones).

Malina & Selto (2001) Evidence of an indirect relationship between BSC’s control function and improved performance on the measures. Managers perceived improved performance on the BSC would lead to improved profitability.

Ittner & Larcker (1998) Relation between customer satisfaction measures and future accounting performance are generally positive and statistically significant.

Ittner et al (2003) Negative association between BSC usage (non financials) and financial performance (ROA).

Said et al (2003) Firms that employ a combination of financial and non-financial performance measures have significantly higher mean levels of return on assets and higher levels of market returns.

Fig 3.1: Research on the influence of non-financial measures on financial performance.

Based on the advantages of non-financial measures put forward in literature and the

confirmation of the theories in several studies it seems that non-financial measures should be incorporated in performance management system.

Ad 2) a contingency approach to performance management.

There is a substantial body of opinion that holds that there is no universally best design for a performance management system, but that it all depends on situational factors (Otley, 1980).

The most important situational factor being the unique strategy of the organization. This is based on the view that performance is a test of strategy (Venkatraman, 1986) and hence the strategy should be the major contingency for the development of performance measures¹⁴. Simons (1987, 1990) shows that organizations do in fact adapt their performance management systems to their strategy. Govindarajan & Gupta (1995) concluded that perceived

organizational performance was higher when renumeration procedures were correctly matched to organizational strategies. This means that the content of the performance

14 See Birchard, 1995; Brewer & Speh, 2000; Simons, 1990; Bruggeman & van der Stede, 1993; Eccles, 1991; Crosby & Johnson, 2003; Kanji, 2001; Kaplan & Norton, 1992, 1993, 1996; Brown & Goldstein, 1995;

Youngblood, 2002; Neely et al, 1994).

management system will have to based on the unique strategy of the organization (see also figure (3.2)

Ad 3) Causality or relations between the measures in the performance management system.

Venkatraman (1986) states (as a criticism on the use of financial measures) that a

unidimensional composite of a multidimensional concept such as business performance tends to mask the underlying relationships among the different sub dimensions. Venkatraman (1986) thus implicitly states that a performance management system should identify these underlying relationships. Eccles (1991) states also that enhanced competiveness comes from knowing how the different measures in a performance management system relate to each other. These relations should increase the coordination of activities (Khandwalla, 1971), and should guard the organization from sub-optimization (Kanji, 2002; Hepworth, 1998) by making clear if and where improvement in one area may be achieved at the expense of another (Hepworth, 1998). These relations can be in the form of cause and effect, advocated by BSC theorists¹⁵. Consideration of cause and effect relations can clarify how measures flow from strategy (Butler & Letza, 1997)¹⁶.

Causality can be used to test whether or not the strategy is still valid¹⁷. This testing of the strategy is called double loop learning. It is already established that the performance management system should provide information to intervene. This is called single loop learning (Argyris & Schon, 1978). Argyris & Schon (1978) clarify the concept of learning by starting with the concept of theory of action. A theory of action is a theory of deliberate human behavior which is for the agent a theory of control but which, when attributed to the agent, also serves to explain or predict his behavior (Argyris & Schon, 1978). This means that deliberate action has a cognitive basis and that is reflecting norms or strategies. Reflecting on the actions they undertake (which are based on the theory of action in use) will trigger learning. This theory of action is made explicit by establishing relationships between the measures in a performance management system. Single-loop learning occurs when members of the organization respond to changes in the internal and external environments of the organization by detecting errors, which they then correct so as to maintain the central features of organizational theory in use. This is a single feedback loop, which connects detected outcomes of action to organizational strategies and assumptions, which are modified so as to keep organizational performance within the range set by organizational norms (Argyris &

Schon, 1978: 18). Double-loop learning consists of a double feedback loop. The feedback loop does not connect the detection of error only to strategies and assumptions for effective performance but to the very norms, which define effective performance (Argyris & Schon, 1978: 22). So double loop learning should be a process of inquiry about the validity of the strategy.

15See for instance Kaplan & Norton (1992, 1993, 1996, 2000); Butler & Letza (1997); Hepworth (1998);

Kanji (2001).

16 The distinction between leading and lagging measures (see the discussion about NFMs) also implies some sort of causality. Why else measure leading measures if they don’t affect the bottom line (financial) results, typically the lagging measures?

17Kaplan and Norton give this example in explaining the double-loop learning possibilities of the BSC.

Kaplan and Norton (1996: 85): ‘if the unit’s employees and managers have delivered on the performance drivers (retraining of employees, availability of information systems and new financial products and services, for instance), then their failure to achieve the expected outcomes (higher sales to targeted customers, for example) signals that the theory underlying the strategy may not be valid’’.

Based on the discussion in chapter 2 and § 3.1 some important features and objectives are identified leading to the following conclusions:

• Performance management (and especially the measures chosen) should be contingent on the unique strategy of the organization.

• There should be a mix of non-financial and financial measures.

• There should be a mix of leading and lagging measures.

• There should be a mix of measures focusing on short-term measures and measures focusing on long-term measures.

• The performance management system should provide information to give direction, diminish the agency problem and to decide when to intervene.

• The performance management system should provide information about causality to facilitate double-loop learning

This al can be seen in figure 2.3

I

Fig. 3.2 The performance management system (1)

The strategy provides the information (the input) to develop the performance management system. The performance management system than provides the information to intervene and gives direction (and thereby diminishing the agency problem).

The major contingency strategy will be discussed in more depth in § 3.1.1

3.1.1 Strategy

There are two important discussions about strategy:

1. Emergent versus intended strategy.

2. Outside-in versus inside-out perspective.

Ad 1) Emergent versus intended strategy

The term strategy has been defined in a variety of ways, but always with a common theme, that of a deliberate conscious set of guidelines that determines decisions in the future (Mintzberg, 1978). Various definitions have been used, but the most often used and also as it seems the most accepted one is the definition by Chandler (1962:13): ‘’the determination of the long term goals and objectives of an enterprise and the adoptation of courses of action and the allocation of resources necessary for carrying out these goals’’. This also treats strategy as explicit, developed consciously and with purpose, and made in advance

(Mintzberg, 1978: 935). This kind of definition is coined intended strategy by Mintzberg (1978:

935). He defines strategy in general as a pattern in a stream of decisions (and hence Performance measurement system:

• Mix short term / long term

• Mix financial / non-financial

• Causality

• Mix leading / lagging Strategy

• Direction

• Intervention

• Diminish agency problem

• Facilitate double-loop learning

recognizable after a period of time). This definition takes into account the strategy that formed gradually, perhaps unintentionally (what Mintzberg calls emerged strategy).

These two strategies can be combined in three ways (see figure 3.3):

1. Intended strategies that get realized: these are called deliberate strategies.

2. Intended strategies that not get realized, perhaps because of unrealistic expectations, misjudgments about the environment, or changes during implementation; these are called unrealized strategies.

3. Realized strategies that were never intended perhaps because no strategy was

intended, or the intended strategy was replaced. These are called emergent strategies.

(Mintzberg, 1978: 945).

Deliberate strategy

Fig. 3.3: Types of strategy (Minztberg, 1978)

Some opponents of modern performance management claim that a performance management system is too rigid and has a blind spot for emergent strategy. It is true that too much rigor and inflexibility may be counterproductive. But vague goals and loose linkage to strategy undermine much of the purposes of performance management (Goold & Quinn, 1990). It is for this reason that the input of the performance management system is the intended strategy.

This is used to develop measures. Besides the measures emphasized there is another feature of performance management of central importance, namely the ways in which such

performance management systems are used (Otley, 2003). This relates to the sorts of control used and the processes of learning. Double-loop learning can pick up the spot for emergent strategy¹⁸.

Ad 2) Outside-in versus inside-out perspective.

Some theorists define strategy as the fundamental characteristics of the match that an organization achieves among its skills and resources and the opportunities and threats in its external environment (Chrisman et al, 1988: 414). This definition holds two characteristics of strategy: the outside perspective (predominant view on environment and competitors) and the internal or resource-based view (skills and resources). Porter (1985) defined competitive weapons as the primary ways the organization applies its skills and resources to create competitive advantage. This implies that that a performance measurement system should

18 Consider the following example. Measure A is leading of measure B. Measure A is performing outstanding, but B is performing poorly for ages. This should be an indicator that the intended strategy isn’t valid. Another example is the other way around. Measure B is performing very well, but measure A (the leading measure) is performing badly for ages. So the relationship isn’t valid and the

performance of B is the result of some kind of emerged strategy. So double-loop learning can pick up the blind spot for emergent strategy in performance measurement.

Intended strategy

Realized strategy

Unrealized strategy

Emergent strategy

measure the competitivity of the organization. Another outside-in influence for the

performance measurement system is the customer. Kaplan & Norton (1993) call this the value proposition of the customer and it is an input for the performance measurement system. Olve et al (1999) state that what is needed (so the customer value proposition and the competitive pressure) is not the only important question, but that also the ‘why us’ question should be posed. The answer depends on what organizations can do: this is based on the competences and the capabilities (Olve et al, 1999: 32). If these aspects of strategy are important they should be measured (to give direction and diminish the agency problem). So a performance measurement system should have a mix of externally focused (customer and competitive measures) and internally focused (competences and capabilities) measures.

This discussion about the strategy concept leads to this conclusion:

• The input for the performance management system is the intended strategy.

• The performance management system should entail a mix of internal and external measures.

• Double-loop learning should discover emergent strategies. This does not mean however that there is every time an emergent strategy present when the intended strategy is no longer valid

This leads to the following model of performance management.

Fig. 3.4: The performance management system (2)

These features are all incorporated in the BSC. Then uniqueness of the BSC lies in the way it organizes the measures.

3.2 The Balanced Scorecard

The BSC s a concept developed by Kaplan and Norton (1992, 1993, 1996, 2000). They developed a new kind of performance measurement system based on the following ideas:

• What you measure is what you get (Otley, 2003; Merchant & van der Stede, 2003) and what is not measured suffers in comparison (Otley, 2003). Focusing on financial measures like ROI and EPS can give misleading signals for continuous improvement.

• No single target can provide a clear performance target or focus attention on the critical areas of the business. Managers want a balanced presentation of both financial and operational measures.

Performance measurement system:

• Mix short term / long term

• Mix financial / non-financial

• Causality

• Mix leading / lagging

• Mix internal and external Intended

strategy

• Direction

• Intervention

• Diminish agency problem

• Facilitate double-loop learning Emergent strategy

They developed a new performance measurement system called the Balanced Scorecard, which should give managers a fast, but comprehensive view of the business and should direct the behavior of employees in the right direction. The Balanced Scorecard includes financial measurements that tell the results of actions already been taken. And it

complements the financial measures with operational (non-financial) measures on customer satisfaction, internal processes and the organization’s innovation and improvement activities, operational measures that are the drivers of future financial performance (Kaplan and Norton, 1992).

A combination of these operational and financial measures lead to the following four perspectives in a Balanced Scorecard (Kaplan and Norton, 1993):

1. Customer perspective: how should we look to our customers?

2. Internal business perspective. Customer based measures are important, but they must be translated into measures of what the organization must do internally to meet its customer expectations. After all, excellent customer performance derives from processes, decisions and actions occurring throughout an organization. Managers need to focus on those critical internal operations that enable them to satisfy customer needs.

3. Innovation and learning perspective. The customer based and internal business processes measures on the Balanced Scorecard identify the parameters that the company considers most important for competitive success. But the targets for success keep changing. Intense global competition requires that companies make continuous improvements to their existing products and processes and have the ability to introduce entirely new products with expanded capabilities.

4. Financial perspective. These measures indicate whether the company’s strategy, implementation, and execution are contributing to the bottom-line improvement.

Typical financial goals have to do with profitability, growth and shareholder value.

The best Balanced Scorecards are much more than collections of critical indicators or key success factors organized into different perspectives (Kaplan and Norton, 1996). The multiple measures on a properly constructed Balanced Scorecard should consist of a linked series of objectives and measures that are both consistent and mutually reinforcing. The metaphor should be a flight simulator, not a dashboard (Kaplan and Norton (1996). A properly constructed scorecard should tell the story of business unit’s strategy (Kaplan and Norton, 1996: 65). The strategy (or vision) should be based in the centre of the scorecard (see figure 2.8). This in based on the idea that you get what you measure, the company wants to achieve its strategy, and hence you should measure the progress of the strategy (all activities should fit the overall strategy, this is called simple consistency or first order fit (Porter, 1996: 71)). A strategy can be viewed as a set of hypotheses about cause and effect (Kaplan and Norton, 1996: 65). Cause and effect relationships can be expressed by a sequence of if-then statements.

An example (as given in Kaplan and Norton, 1996: 66) will clarify this:

‘’If we increase employee training about products (learning and growth perspective), then they will become more knowledgeable about the products they sell. If they are more knowledgeable about the products they sell, then their sales effectiveness (internal perspective) will improve and if their sales effectiveness improves, then the average margins of the products they sell will increase (customer and financial)’’

Figure 3.5 will clarify the main characteristics of the Balanced Scorecard: the four

perspectives, the chain of cause and effect throughout the perspectives and strategy in the centre.

Fig. 3.5: Translating vision and strategy: four perspectives (Kaplan and Norton, 1996: 54) .

3.3 The development process for the BSC

In this section two important aspects of the development process of the BSC will be discussed. These aspects are participation and the use of critical success factors (CSFs).

3.3.1 Participation

A scorecard is not that easy to implement successfully. Almost every author on the subject agrees that the process of development should be both iterative and participation enhancing.

Butler et al. (1997) and Kaplan and Norton (1993) suggest the following process:

1. Familiarization, review 2. Interviews

3. 1^st proposal 4. 2^nd proposal 5. Acceptance 6. Implementation

Between the proposals there will be follow up interviews and workshops with the managers.

This research process will enhance participation. Every research process is different, but the key for developing a successful scorecard is participation. Although broad participation takes more time, it has several advantages:

- Information from a large number of managers is incorporated into the internal objectives (which will enhance the forming of clear definitions)

- The managers gain a better understanding of the company’s long-term goals - It builds a stronger commitment towards achieving such goals.

Financial

Objectives Measures Targets

Learning and growth Objectives Measures Targets

Customer

Objectives Measures Targets

Internal processes Objectives Measures Targets

Strategy / Vision

Quite similar development processes are used in other cases. Normally they incorporate multiple interviews and feedback to a) increase the amount of information on which the scorecard can be developed and b) to increase understanding, commitment, acceptance¹⁹ and motivation. These are also generally the advantages of participation described in literature:

cognitive and motivational advantages of participation (Locke & Schweiger, 1979).

The need for participation highlights one important issue. Underlying this need is the essential condition that the strategy is widely understood and accepted among those responsible for devising the BSC (Butler & Letza, 1997). A better understanding of the firm’s strategy by the employees would lead to the right choice of strategically linked performance measures for guiding their decisions and actions (Kaplan & Norton, 2000). The strategy should be clear for the participants (Lewy & Du Mee, 1998). A common perception should exist among the participants regarding the firm’s strategy (Brewer & Speh, 2000). The participants will develop incoherent measures when they have no common perception and understanding about the strategy. This leads to an inferior BSC. The BSC cannot be uses as a performance management system if there is no common perception about the strategy.

3.3.2 The use of Critical Success Factors

A typical BSC consist out of measures that are placed in the four perspectives. A problem with using just measures is that the measures will prompt behavior that is likely to affect the performance of that measure and not the underlying intention of that measure. Kaplan &

Norton (2000) also recognize the need for a step between strategy/vision and measures as they developed the strategy map: a BSC consisting out of critical success factors (CSFs).

Hepworth (1998) even states that a BSC defines the critical success factors considered necessary to fulfill the corporate goals to ensure future success. There are also numerous examples where the CSF-method was used for the development of a BSC²⁰. CSFs are for any business those limited number of areas in which results if they are satisfactory will ensure successful competitive performance for the organization (Rockart, 1979) and determine success (Munro & Wheeler, 1980). Leidecker (1984) states that CSFs are those variables that when properly managed can have a significant impact on the success of the firm. This means that CSFs should de manageable by the company.

CSFs are in themselves not measurable and should be translated into Key Control Variables (KCVs) which measure the progress of the CSFs (Schreuder, 1995; Mensink, 1997; Hoogers, 1996; Dekker, 1996; De Bruijn, 1994)

3.4 Conceptual model

The discussion in the preceding paragraphs of chapter 3 is the input for the conceptual model. The actual BSC will consist out of CSFs and KCVs. The CSFs should be causally linked and there should be a balance between non-financial and financial measures, leading and lagging measures, external and internal measures. There should also be a balance between

19 One of the problems of TIP was not directly adressed by the development of a BSC. This was the problem of low user acceptance. A participative process is claimed to improve the acceptance of the BSC. The BSC is grounded in AF and Safari and therefore a high acceptance of the BSC could also have some side effects on the user acceptance of Safari.

20 See for instance Schreuder, 1995; Mensink, 1997; Hoogers, 1996; Dekker, 1996; De Bruijn, 1994).

these types of measures. The degree of balance and the degree of causality largely determine the theoretical quality of the BSC (quality 1). Causality and balance are important throughout the development of the BSC. As shown in the example Kaplan and Norton gave about causality (see § 3.2, page 23) the CSFs in the perspectives should be causally linked. The same holds for the leading-lagging CSFs and KCVs and non-financial and financial CSFs and KCVs. The early warning function of NFMs and leading measures are useless if there are not linked to eventual bottom line results (lagging, financial and external CSFs and KCVs). Major determinant of the theoretical quality of the scorecard is the degree of knowledge about the strategy. The BSC cannot be developed if there is not enough knowledge about the strategy, resulting in no common perception. Important is also that the CSFs can be managed²¹. The development process (participative or not participative) has its influence on the theoretical quality (1), but also on the practical quality (quality 2). This because a BSC with high theoretical quality can be worthless (low practical quality) because of low acceptance and understanding resulting from low participation. The conceptual model is presented in figure 3.6

Degree of balance CSFs Degree of causality CSF

Fig 3.6: The conceptual model

21 Succes factors like economic growth are maybe important, but not manageable and therefore should not be in the BSC.

Internal → external Leading → lagging Learning → internal → customer → financial

Non-financial → financial The 4 perspectives

Leading - lagging Internal - external

Financial – non-financial

Method of development / implementation:

- Amount of participation - Iterative?

- Non-imposing

Quality of scorecard (1) Quality of scorecard (2)

Manageable CSFs Knowledge of

strategy

Common perception of strategy

4. Problem statement

The problem statement is a reproduction of the questions, which you are trying to answer, and the reasons why the answers are of importance and the limitations of the research (De Leeuw, 2001: 82). The why question is answered in the goal of the research along with the who question. This part of the problem statement tries to indicate the relevance of the study (De Leeuw, 2001: 89). The ‘’why’’ question is answered by looking at the problems identified in the problem mess and how they relate to the BSC. The ‘’who’’ question is answered by looking at the identified system.

4.1 Goal of the research

The goal of the research is to provide information to TIP about the development of an automated balanced scorecard. This information should provide TIP information that allows TIP to make decisions about the actions needed for the development of an automated balanced scorecard.

4.2 Main Questions

The main questions are deducted from the conceptual model. TIP can make decisions about the actions needed for the development of an automated balanced scorecard when they have information about the state of the concepts in the conceptual model.

The first main question is about the knowledge, or common perception, of the strategy. This is the first question because the answer on this main question is important for the progress of the research, since the BSC cannot be created without a common perception about strategy.

If the answer on the first question is unsatisfactory (no common perception), than the other main questions become less important. The development of a BSC of high quality is out of the question when the answer on the first question is negative. This however does not mean that no information about the other question will be gathered, but while keeping in mind whether the answer on main question 1 is negative or positive.

The main questions are:

1. What is the degree of common perception about the strategy of TIP?

2. What should be the design of the automated balanced scorecard?

4.3 Limitations

Limitations of the research:

• The KCVs in the BSC have to be possible to create in Safari and AF.

• The boundaries set by IT are treated as given. The development of an automated BSC will always depend on the technological possibilities.

• The project will go on after this research and thesis is finished. It will be therefore impossible to obtain results about the performance of the BSC

• The research takes place from the 1^st of September until the 1^st of March.

• Results that are confidential will not be publicized