January 2005

Re-examining the cause-and-effect principle of the Balanced Scorecard*
Per Nikolaj Bukh, pnb@pnbukh.com, Aarhus School of Business Teemu Malmi, teemu.malmi@uts.edu.au, University of Technology, Sydney & Helsinki School of Economics

Abstract There seems to be a wide variety of methods in how organizations apply the Balanced Scorecard (BSC) concept in practice and how it is interpreted in the literature. Consequently, it is not quite clear what the core features of BSC, or its variants, are and if all its variants are equally effective in producing expected outcomes. Moreover, the usefulness of BSC as a practical theory has been questioned by referring to some of its assumptions, especially the cause-and-effect relationship (Norreklit, 2000, 2003). In this paper we re-examine the cause-and-effect principle, which can be seen as one of the corner-stones of the BSC. Further, we outline alternative ways to apply cause-and-effect in practice, both analytically and organizationally. To facilitate research on BSC, we discuss some of the contingencies that may limit or support the usefulness of the causeand-effect concept. These include strategy, organization, environment and communication related issues. Key Words: Balanced scorecard, cause-and-effect, non-financial measurement, performance management, strategy, strategy map.

* We wish to thank the editors, Sten Jönsson and Jan Mouritsen, for their guidance in the process of writing the paper. Further, we thank Fredrik Nilsson and Nils-Göran Olve for their encouraging and helpful comments. All remaining errors are of course the responsibility of the authors. The authors are listed in alphabetic order.

1 Introduction
Since the mid 1980’s accounting has attempted to turn strategic. In the area of strategically oriented performance measurement Balanced Scorecard (BSC) has been one of the most debated