African Journal of Business Management Vol. 6(23), pp.

6818-6831, 13 June, 2012

Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.645
ISSN 1993-8233 2012 Academic Journals

Full Length Research Paper

Problems and perspectives of balanced scorecard

implementation in Serbia
Violeta Domanovic*, Jasmina Bogievic and Sladjana Savovic
Faculty of Economics, University of Kragujevac, Djure Pucara Starog 3, 34000 Kragujevac, Serbia.
Accepted 4 July, 2011

Modern business environment imposes the need for the continued finding and defining of new
concepts and tools that support strategic management. The aim of introducing new concepts is
certainly raising the overall efficiency of the enterprise. The recession and related economic and
production difficulties that enterprises face today, require a deep re-consideration of the business
models and managerial approaches adopted to increase the enterprises growth and value-creation.
The effort of the modern management, along the twentieth century, had been aimed to develop a wide
range of models to allow managers to control, understand and coordinate the functions of enterprises
value chain as well as their integration in accordance with a strategic perspective like the balanced
scorecard model. The question is, if the Serbian managers are aware of the necessity of introducing
and implementing balanced scorecard, what are the implications of its implementation?

Key words: Performance measurement, balanced scorecard, economic effects.

INTRODUCTION

The problem of performance measurement has more
than two decades been actual in academic domestic and
foreign literature, and the subject of numerous
discussions among researchers and scientists at the
scientific meetings. Strategic performance measurement
enables enterprises to fit their business activities with the
strategy and realise performance monitoring moving
toward strategic aim realisation (Kennerley and Neely,
2003). Strategic performance measurement may be
defined as a system of measurement and reporting,
which quantifies the degree at which managers achieve
their aims (Domanovic, 2010). This provides the
enterprise funds for the process management, so it could
realise determined aims, defining the key indicators of the
organisational performances and customer satisfaction.
Performance measurement is necessary so the mission
and vision of the enterprise could be clarified and the
strategy could be translated into measurable aims, which
*Corresponding author. E-mail: vterzic@kg.ac.rs. Tel: +381 64
22 55 996. Fax: +381 34 303 516.
JEL classification code: M21.
enables enterprise not just to measure the progress in
the aim realisation, but also to understand what leads to
the results improvement. The other benefits involve
fortifying the responsibilities and making decision
improvement, fitting the operation activities and
resources with the strategic aims, understanding the
planned activities and clear communication of the
expectations at all organisational levels.
There is a survey of the various performance
measurement definitions. Pun and White (2005)
accentuate the opinions of several authors about the
performance measurement process, among of which is
Zari (1994), who defines performance measurement as a
systematic determination of the numerous activities and
points out that the aim of the measurement is to get the
information which will be useful for numerous problems
and situations and Buxton and Ward (1998), who
accentuate that performance measurement
encompasses different measures which are connected
with the performance management through setting the
aims, standards and targets for the enterprise
performance improvement. Neely et al. (1995)
accentuates that performance measurement is a process
of quantifying the efficiency and effectiveness of the

actions that lead to the performances. According to
Sinclair and Zair (1995), performance measurement is
directed to the determination how much enterprises are
successful in achieving their aims, while the performance
measures are numerical or quantitative indicators which
show at what extent each aim is realised.
A successful performance system is a set of
performance measures (that is, a metric used to quantify
the efficiency and effectiveness of action) that provides
an enterprise with useful information that helps to
manage, control, plan and perform the activities
undertaken in the enterprise. The information retrieved
from the performance measurement systems must in turn
be accurate, relevant, timely (provided at the right time)
and easily accessible for the persons who need it.
Furthermore, performance measures must also be
designed to reflect the most important factors influencing
the productivity of the different processes that can be
found in the enterprise. Designing such a performance
measurement system is a difficult task and what can be
considered to be the optimal performance measurement
system will also differ from case to case (Tangen, 2005).
Performance measurement systems would differ from
one enterprise to the other one depending on its specific
and unique needs. Also, performance measurement has
been evolved throughout its history, as well as specific
enterprises needs have been changed, so the specific
features of the business environment have changed. The
question is, what are the challenges of measuring
business excellence in the twenty-first century business
landscape and which meaning, contents and modalities
the measurement of business excellence has to have in
the emergent new complex competitive scenario?
It is crucial to understand how the performance
measurement systems have to evolve and to be
integrated in the management models of the
organizations. The most prominent model in the last
decade is a balanced scorecard model. The success and
the excellence of an enterprise is the result not only from
the performance management in the four balance
scorecards perspectives, but from measuring and
managing the intangible resources. Recognizing that in
the twenty-first century intellectual capital, as a set of
organizational intangible and knowledge asset value
drivers, affect enterprises value creation processes, it is
necessary to find out how to measure the intellectual
assets (Taticchi et al., 2010).
BACKGROUND
Dissatisfaction with traditional systems for measuring the
efficiency of companies increases significantly.
Traditional efficiency measures are those based on
accounting data (such as return on investment, return on
equity, return on sale, CFROI cash flow return on
investment, economic value added, return on added
Domanovic et al. 6819
value, etc.) and those based on market share price (such
as market value added, earnings per share, price/earning
ratio, dividend per share/earnings per share, dividends
per share/market price per share). Upon the conducted
research, it could be conducted that many companies,
perhaps most, suspect that it does not work well. State of
uncertainty and confusion in measuring the efficiency of
enterprises is not surprising in the modern business
conditions. The newly established companies that are
struggling for capital and market share must continually
adapt their metrics. Hence, it is understandable for large
companies to take annual review of their efficiency
measurement systems.
This raises the question of where the state of confusion
and dissatisfaction comes from. One reason is the
ongoing search for non-financial predictors of the
financial results. Yesterday's accounting results say
nothing about the factors that lead to increased market
share and profits - something such as innovations in
service delivery to customers, the effectiveness of
research and development, the percentage of initial
quality and staff development (Birchard, 1995). Another
reason, ironically, is the plethora of traditional standards.
In fact, many managers cite many burdens, which impose
the need for ''modern performance standards''.
Regardless of whether the problem is too few or too
many criteria, many accountants believe that corporate
performance measurement systems do not support
sufficiently the implementation of the defined tasks of
management. Changes from year to year are small and
do not show a trend, but research by the institute for
managerial accounting suggests that, despite the fact
that the efficiency measures have rapidly been changed,
management accountants have not still perceived them
as an improvement.
Nevertheless, although there are good reasons for
measuring the multiple dimensions of efficiency, there are
also strong pressures to assess the efficiency along one
dimension. These pressures are strongest when the
compensation systems and employees rewards are
related to their effects, but are also there when managers
make the investment decision. Whenever executives
pose the question whether a company A operates better
than company B, whether the division C operates better
than the D division, or, what is the most sensitive, if the
employee E is a better performer and therefore should
receive more generous compensation than staff F, G,
and H, they tacitly if not explicitly, try to reduce the
efficiency on a single dimension.
The pressure of reporting on corporate performance
based on non-financial and financial measures has been
intensified over the past few years. Increased competition
and the need to implement corporate strategies are two
important reasons to consider a new model of reporting
that goes beyond traditional metrics and collect
information on the observed value causes in the new
economy (Stefanovic et al., 2004). For example, the
6820 Afr. J. Bus. Manage.
negotiation committee (the conference board) of the
Canadian Institute of Chartered Accountants (CICA) has
reported that traditional accounting-based measures of
efficiency are too historical, they lack a predictive power
and reward the wrong behaviour and do not take key
business changes until it is too late.
The negotiation committee also concludes that these
measures provide inadequate consideration of such
resources such as intellectual capital (Waterhouse,
1999). Consequently, the committee proposes that
strategically oriented performance measurement systems
should measure non-financial as well as financial
performance. Similarly, the report of the American
Institute of Certified Public Accountants (AICPA)
recommended that companies should expose the
leading, non-financial measures of critical business
processes such as product quality, reproduction cycle,
innovation and employee satisfaction (American Institute
of Certified Public Accountants,1994).
At the same time, the research conducted by the
Institute for Managerial Accounting in the United States
provided support for the recommendations made by
CICA and the AICPA (Institute of Management
Accountants-IMA, 1996). For example, the research
showed that only 15% of respondents said that their
measurement systems very well supported the
management's business objectives, while 43% of
respondents rated their measurement systems as less
than adequate to poor. On the other hand, 60% of
respondents said that they undertook a major overhaul or
were planning to replace their current systems for
measuring effectiveness.
It is generally believed that the best measures of
efficiency are those measures that are connected with
business strategy. In addition, efficiency measures
should be focused and should reward behaviour that
contributes to business success (Kaplan and Norton,
1992, 1996a, b; Atkinson and Epstein, 2000). Starting
from the increasingly rich literature in the field of
enterprise efficiency measurement, many entrepreneurs
around the world have wondered whether their
performance measurement systems are adequate. In
addition, there is an interest in the question of whether
non-financial criteria such as customer satisfaction,
employee satisfaction and innovation, are useful
indicators of future enterprise performance.
Long-term survival of an enterprise depends on the
fulfilment of market requirements through the process of
creating long-term value. Traditional systems for
measuring efficiency were subjected to criticism because
they are closely linked to financial data and efficiency on
the functional level so they often fail to capture
organizational long-term business success. Historically,
business processes, and business excellence, are in the
focus of a long-term value creation process. On the
contrary, the studies in the literature call for a change of
emphasis on ''innovation process'' (Kaplan and Norton
1996a; Simons, 2000).
In the last decade, discussions about enterprise
efficiency measurement were connected with the concept
- developed by Robert Kaplan, the Harvard Business
School, and David Norton, President of the
Massachusetts consulting firm - a balanced scorecard in
the early 1990s. This concept is built on the premise that
companies are no longer able to gain a sustainable
competitive advantage by developing only tangible
assets. In other words, the company's ability to build
''intangible assets'' or ''intellectual capital'' has become a
critical success factor in creating and maintaining
competitive advantage. Balanced scorecard calls
managers to introduce firstly, a wide range of criteria or
the score cards. These score cards serve as the dials on
the dashboard and enable greater profitability as
managers are better positioned to serve mostly their
employees, customers and shareholders.
Many books, articles and case studies on this topic
appeared in this period. Harvard business review called
the balanced scorecard idea the most significant
management idea in the past 75 years, and the
organization called the balanced scorecard collaborative
serves as a central clearing house for what is called
'balanced scorecard evolution' (Kaplan and Norton, 1996,
2000; Nils-Gran et al., 1999).
Observing a large number of companies and their
business units it can be concluded that profitability,
market share, customer satisfaction and production
efficiency are in positive correlation. Namely, if customers
are satisfied, an enterprise has greater market share and
higher profit that will later lead to investments in
production efficiency and finally to even higher profit.
Representatives of social sciences were aware of this for
years and have derived two conclusions. First, enterprise
efficiency measurement is difficult (because it is unclear
that the efficiency is a synthesized term). Second, the
selection of criteria for measuring the efficiency of an
enterprise is often arbitrary (since it is difficult to prove
that one measure is better than others). Since none of
these conclusions is particularly useful, then they would
not surprise the managers.
The basic premise of balanced scorecard is simple.
Financial measures are, and always will be important, but
must be supplemented with other indicators that predict
future financial success. Starting from this as a primary
objective, Kaplan and Norton developed a balanced
scorecard framework.
Four perspectives of balanced scorecard will allow
companies to record financial results and at the same
time, supervise the process of building skills that are
necessary for obtaining the ''intellectual capital'' or
''invisible assets'', which is necessary for future growth
and to provide keen competition. Unlike the traditional
efficiency measurement system based on financial
control as a core, balanced scorecard starts with an
organizational vision and strategy. The attempt is to

Table 1. The basic principles of the balanced scorecard explained with the concepts of natural sciences.
Postulate 1: The collision between the irresistible force to build long-term competitiveness and retain historical-cost financial-
accounting model created a new synthesis: a balanced scorecard.
Postulate 2: A balanced scorecard complements the financial measures of past results with the criteria that cause future results and
business success.
Postulate 3: Through a series of cause-effect relationships involved in the concept of balanced scorecard, long-term competitiveness
in the end is translated into superior financial results.
Postulate 4: Focus on cause and effect in the construction of the balanced scorecard introduces dynamic systems thinking.
Source: Nrreklit (2003).
translate vision and strategy into performance measures
that can be followed and used to measure success in the
process of their implementation. This is achieved firstly
by defining set goals and measures in each of the four
interrelated perspectives: financial, customer, internal
processes and learning and growth of employees. The
basic principles of a balanced scorecard could be
explained with the concepts known in the field of natural
sciences (Table 1).
RESEARCH METHODOLOGY
The effects of the balanced scorecard implementation in
enterprises in Serbia
In order to study the implications of the introduction and use of
balanced scorecard in Serbian companies, there were surveyed
mostly financial and supervision directors of reputable companies in
Serbia, which were believed to have introduced a balanced
scorecard, given the level of economic growth and development.
Specifically, the intention was to determine whether these
companies actually introduced this concept, as long as they arrived
in the implementation of the same and what the effects are, that is,
the consequences of the introduction and implementation on
enterprise efficiency. The efforts were made to derive appropriate
conclusions in direct contact and conversation with these directors,
although, there were cases where the contact has been established
electronically and just by telephone. A questionnaire was made,
which was divided into three parts. The first one was devoted to
general information about the enterprise and surveyed persons.
The second one was devoted to the balanced scorecard concept
and contained 11 questions about its implementation and effects on
efficiency. Managers ought to describe the state in the process of
balanced scorecard implementation, to circle the perspectives
(finance, customers, internal business processes, learning and
growth and others), components (strategic tasks or strategic
measures, target values or action plans, causal-consequential
relations) which their balanced scorecard contain, then which type
of balanced scorecard they use (type 1 contains strategic measures
grouped into perspectives; type 2 contains type 1 plus cause and
consequences chains; type 3 contains type 2 plus action
plans/target values connected with the employee compensations
and managers first). Then, managers ought to choose some of the
offered answers in respect to the compatibility of their managers
compensation programs with the performance measures given in
the balanced scorecard and in respect to the expected effects of
Domanovic et al. 6821
the balanced scorecard implementation. Also, managers should
describe concrete effects of the balanced scorecard implementation
at the enterprise level, business unit level and individual level and
to evaluate balanced scorecard comparing its costs and benefits.
Managers are also expected to give the concrete reasons why they
are not interested in balanced scorecard introduction and
implementation. The third part of the questionnaire was devoted to
the activity-based management and contained 28 questions about
activity-based costing and activity-based management
implementation and its effects on enterprise efficiency, which will
not be considered in this paper.
Hypotheses setting
In the research on implications of the introduction and use of
balanced scorecard in enterprises in Serbia, it has been stated from
the following hypotheses:
H1: If a company has a greater economic force in the market, it is
more likely to have introduced the balanced scorecard,
H2: If an enterprise has a foreign owner, it is more likely to have
introduced and implemented the balanced scorecard,
H3: If board members are the university employees who follow the
latest theoretical developments in business administration and
management, it is more likely that the enterprise introduced the
balanced scorecard,
H4: If the enterprise introduced the Balanced Scorecard, it operates
more efficiently.
RESULTS
The general conclusion is that very little or no company
has implemented the concept of balanced scorecard in
the way the literature explains and the way it is
implemented by companies in other countries.
Generally, all surveyed companies will be grouped
according to the industry branch or type of business
(water production, pharmaceutical industry, food industry,
chemical industry), approximate size of market (large,
medium and small), stakeholders (privately owned by
foreign or domestic stakeholders), structure of board
(university professors or not).
Food industry, with large market share, privately
owned by foreign stakeholders and no university
6822 Afr. J. Bus. Manage.
professors in the board - Has no balanced scorecard as
it was described in the literature. Instead, it is monitored
the efficiency and economy quality control in certain
sectors of the enterprise: procurement, production, sales
and so on. The goals and objectives of each sector are
defined, likewise the performance indicators of individual
sectors and target values (the plan) for each performance
indicator, and the implementation of the plan is monitored
in identifying deviations from the plan, presented to the
authorities, which will identify the corrective measures to
eliminate them and improve the quality of the enterprise
economy as a whole. As to the information system, the
question is, is it economically feasible to introduce SAP to
support a balanced scorecard? It has an information
system for managing all ENTRY business processes and
COGNOS interactive reporting system that is for creating
reports. The company has developed and operated the
software to record production. This software enables the
automated issuing of documentation related to production
(work orders, requisition and delivery of finished products
in storage) and monitoring of physical data on realized
effects.
Water production with large market share, privately
owned by foreign stakeholders and no university
professors in the board belongs to a group of large
manufacturing companies in Serbia Has no balanced
scorecard. Even more, director of finance said that they
made more operating, not strategic decisions. The
foreign owner is aware of going into a loss because he
calculated that, with 2 to 3 years investment in
restructuring the company, the value of the company
would significantly increase. The reason for this is the
optimal number of employees and relatively young and
professional people. The most important indicator of the
company is net profit, and added economic value is not
calculated. Sources of value in this company are just
young and professional people and exploitation rights
over natural resources.
Given that this is a water production company and is
exposed to fierce competition and price competition, it is
desirable that this company intensively follows,
introduces and implements new mechanisms of control.
Nevertheless, at the moment, the control is still
traditional, budget, but the quality system ISO 9000 was
introduced. As to the balanced scorecard, the director is
partially informed.
Cookware production, with large market share,
privately owned by domestic stakeholders and with
university professors in the board - implemented one of
the most modern information systems for planning and
management processes and developed a chain of stores
in all major Serbian towns building a strong partnership
network with sales outlets that are dedicated to customer
and product in the same way the company does.
As to the balanced scorecard, there might be
concluded that balanced scorecard is introduced, but has
not been implemented yet. It has for many years had
partially measurable parameters (EBIT, EBITDA). It
formulated specific strategy for each job and has made a
strategy draft by 2012, in which the balanced scorecard
has been set in the following four perspectives:
i. Financial perspective: strategy should provide growth,
profitability and risk control from the shareholder
perspective.
ii. Customer perspective: strategy should provide value
for customer on the differentiation basis.
iii. Internal process perspective: determining the strategic
priorities for various business processes that ensure
customer and owners satisfaction.
iv. Learning and growth perspective: determining the
priorities which create climate for organizational changes,
innovation and growth.
Basic elements of each perspective are: goals,
performance measures, objectives and initiatives (Table
2 and Figure 1).
Chemical industry, with large market share, privately
owned by foreign stakeholders and no university
professors in the board - Implemented a balanced
scorecard in a way that it is theoretically intended. This
means that the balanced scorecard includes all
perspectives, and all components (strategic tasks and
strategic measures, target values or plans of actions and
causal relations). It used type 3 of the balanced
scorecard, which means it contains the stated
components that are associated with the incentives of
employees, especially managers. Unfortunately, the
effects of implementation for the company as a whole,
that is, holding level, CFO could not comment because
the balanced scorecard is made abroad, where the
headquarter of foreign owner is. At the level of business
units, balanced scorecard facilitates the tracking of costs
and implementation strategies, and facilitates the work of
the individual.
Pharmacy, industry, with large market share, privately
owned by foreign stakeholders and no university
professors in the board - During the process of
developing a balanced scorecard and connecting
adopted strategy with the balanced scorecard indicators,
based on data obtained from companies with similar
experiences in the process of creating the required
developmental environment, programming its own
environment using Microsoft Net technology was one of
the conceptual solutions. That meant, own programming
all tools for developmental environment, which would be
quite limited, on basis of obtained data and own results,
in comparison with some basic principles of balanced
scorecard, transparency and comprehensiveness of data.
Software market research related to structure of the
balanced scorecard within the share point portal, and
taking into account the existing software database of
company, showed that the best is the balanced scorecard
accelerator, Microsoft's tool in the Microsoft Business
 Domanovic et al. 6823

Table 2. The balanced scorecard in cookware production in Serbia.

Objectives
Perspectives Goals Performance measures Initiatives
07. 08. 09. 10. 11. 12.
Maintain or increase i. EBIT 9% 9% 8% 9% 10% 12%
the profit rate of
enterprise ii. EBITDA 9% 9% 9% 9% 11% 13%
Finance Total revenue i. Operating revenue in mil.
26 28 29 31 33 37
increase. euro
i. An average salary per
Labour cost control 525 550 580 608 638 670
employee in euros
i. Product user satisfaction. 0.9
ii. Customer satisfaction
with business relationship 0.85
Increase customer and service
satisfaction on
domestic market. iii. Customer satisfaction
0.85
with product
iv. Average customer
0.85
satisfaction
Marketing Number of i. Complaints in export 0.05%
complaints from ii. Complaints in domestic
customers. 0.18%
sale
i. Number of introduced new
10
decors in Russia - annually
Provide steadily new
ii. Number of adopted new
products for our 10
articles annually
customers.
iii. Share of new products in
20%
total realization.
i. Decrease of number of
Investment in necessary people per MOL 100
process automation. productive plant.
ii. Number of realised
Twice in a year
automotive lines.
i. Realization per employee
42 000
Productivity annually in euros.
increase. ii. Productivity in production 100%
iii. Employee absence 10%
i. Difference between time
Shortening the time 0
of acquiring from the plan
to acquire new
Processes products. ii. Average acquiring time
per article group
Shortening the time i. Processing time of query
3 working day
of processing the in days
customer query ii. Time of sample making 0.85
i. Undesirable articles in
enamelled and non-stick 4
Decrease of items cooking dishes.
number, which are
of non-standard ii. Refused items in
quality. enamelled and non-stick 1
cooking dishes.
iii. Refused items in inox
1.5
dishes
Improve employee i. Number of education
Learning and growth 64
skills. hours per employee.
 6824 Afr. J. Bus. Manage.

Table 2. Continued.

Employee ii. Average management 4.2

evaluation. rate.
iii. Average specialist rate. 3.7
iv. Average workers rate. 3.2
Introduction of line of i. Acquiring time must be plan
exclusive enamelled less than 9 months.
dishes with chrome
rim.

CAUSAL-CONSEQUENTIAL CHAIN STRATEGY DESCRIPTION

Maintain or increase the

FINANCE

enterprise profit rate The aim of the strategy is that the subsidiary is to
Increase the total operating
revenue increase its realization over the next five years, and keep the
Labor costs control profit rate at the current level or increase. The key requirement
to achieve this is cost control, especially labour costs, for
which the strategic analysis showed that are the critical ones.
MARKETING

Increase customer satisfaction Provide constantly new From the point of customer, it is necessary to support
in domestic market products for our customers key enterprise competence that provide sale. Assortment and
always new offers are that what distinguish us and allow sales
Number of customer and increasing market share. Work at the request of customers,
complaints conquering new products and quick response to request, ensure
that the customers decide for us, not for competitors. Quality is
also that what makes us recognizable, so in order to get
Reducing the number of items satisfied customers, we must not allow ourselves luxury of
that are of non-standard complaints.
quality Shortening the time of Managing own processes is in our hands. Strategic
customer queries processing analysis showed that we have to increase productivity and
PROCESSES

reduce the proportion of human labour in order to produce all

that we can sell and with controlled costs. Investing in the
Investing in process Shortening the time to attract
quality is at the same time investment in productivity and,
automation new customers
besides production processes automation, we have reduced
discarded items and items that repeatedly go through the
process to the minimum extent. Reaction speed and speed of
Introduction of exclusive Productivity increase conquering new products are the source of important
enamel cookware line with competitive advantage and it must be led to the level better
chrome edge than our competitors.
We need to increase the intellectual capital of our
LEARNING AND

company by constant training at all levels and this creates a

DEVELOPMENT

basis to implement all what was envisaged. Evaluation of

Improve the employee skills employees is very important because it allows us to push the
Employee evaluation best in order to get the most from employees.

Figure 1. The balanced scorecard in cookware production in Serbia.

Solutions program. give an explanation of management methodology within

Document to be applied is the conceptual design of the balanced scorecard and explanation of the necessary
Microsoft in developing and implementing a balanced key performance indicators used in developing and
scorecard for measuring the success of corporate presenting a balanced scorecard. The first step was the
governance by management. At the same time, it would provision, installation, connecting and rigging, the

necessary hardware and software components required
for administrator and user management, development
and use by the side of the strategic controlling and end
users. However, the desire to introduce a balanced
scorecard, as soon as possible to use it as a strategic
tool and in the period when it entered the acquisition
process, led to the fact that they began with an Excel
spreadsheet which is still used for monthly reporting.
It is important to emphasize that the author of the
balanced scorecard concept, Robert Kaplan gave
lectures on balanced scorecard and this is one of the
reasons why this company went further in balanced
scorecard implementation. It will be shown one of the first
versions of the ''strategy map of the balanced scorecard''
in this company. First, there are defined all indicators that
are essential for management, as well as their mutual
dependence. Besides, there are defined responsible
persons to fill table and their respective positions in the
organizational scheme. Also, the measuring units and
frequency of measurement are defined. This table is used
to help responsible people cope when filling. Everyone
finds his first feature, and then fills in the plan for next
month (quarter / year), or enter data in the given units of
measure. After that, there will be made a table of
balanced scorecard (which will not be presented here
because of its extensiveness), which pulls data from the
first table and expresses them in percentage. So, it
shows the effect generated by completing the planned
and actual data and is expressed by colours of traffic
lights, that is, by risk zones for each indicator. Balanced
scorecard in this form is one of the reports, which is
analyzed on executive board each month.
The management idea was that balanced scorecard is
to be implemented in aiming motivation and sanctioning
the responsible persons. Besides, the variable part of the
employee salary depends on achieved performances.
What would be stressed is the fact that balanced
scorecard has not been the strategic management tool,
but it serves as an alarm for resolving the operating
problems. The example of the balanced scorecard in this
company is shown in Table 3. It is not possible to
envisage the effects on the firm strategy. One of the first
version of the strategy map of the balanced scorecard
looked like in Figure 2.
Pharmaceutical company, the largest wholesaler, with
large market share, privately owned by domestic
stakeholders and no university professors in the board -
In recent days, the business plan gives the significant
contribution to the successful business and development.
In addition to basic segments like organization structure,
work organization and management, it encompasses and
marketing plan, operating and financial plan, projection of
enterprises growth and development, program of school,
competitiveness strategy, innovation plan, etc., each part
of the plan is an essential chain for its realization, which
is the obligation of every employee, and what impacts on
business success, realized profit and earnings. The
Domanovic et al. 6825
management quality plays the key role. The plan of
growth and development is of special significance, which
contains new market segments, risk analysis and
expected problems analysis, financial and personal
demands, investments inside the enterprises and
partners and so on.
From an interview with the financial director, the
general conclusions might be made. It is predicted as the
change of the information system because of
cumbersome jobs and control. At the moment, it is actual
Yunix system, and financial sector moved toward Oracle.
Balanced scorecard has been introduced, although there
is an intention to introduce a management information
system that would enable automatic registration of all
changes to their records through the reports. The ultimate
goal is the preparation of the real balance sheet and
income statement. There has been represented a
budgetary control. There are defined the global
parameters of success, target values for individual
segments in the value chain and monitor the
implementation of these. The company introduced quality
systems ISO 9001, ISO 14001 and ISO 18001 for
employee protection. Also, it prepared a strategic plan for
the company until 2011, in which it made projections of
balance sheet items, net working capital, ratio analysis,
cash flow, investments, etc. Operational plan is produced
monthly and annually. The system of incentives for all
employees is closely linked with the implementation of
planning parameters. Planning values are aggregated to
the pools, its subsidiaries.
DISCUSSION
Specific conclusions are derived after processing the
questionnaires completed by the financial directors.
Asked whether the latest theoretical knowledge in the
field of strategic management and management
accounting can be applied in enterprises in which they
are employed, three companies responded in part, and
two completely (chemical industry and cookware
production). The financial director of cookware production
emphasized an extensive experience in monitoring the
performance parameters as arguments.
When asked whether they are familiar with the concept
of balanced scorecard, the financial directors of water
production and food production replied that they were
partially aware, and the financial directors of cookware
production, pharmaceutical industry and chemical
industry were completely familiar. When asked to
describe the situation in the implementation of the
balanced scorecard concept, the results are as follows
(Table 4).
Asked what perspectives are contained in the balanced
scorecard, the managers replied as in Table 5. Table 5
shows that all companies measure the company
efficiency from financial and customer perspectives, while
 6826 Afr. J. Bus. Manage.

Table 3. The balanced scorecard in the pharmaceutical industry in Serbia.

Key indicators Measures Measuring unit Frequency of measurement

EBIDTA i. EBITDA RSD Quarterly
i. Overdue receivables
RSD * day Monthly
domestic market
WCR ii. Overdue receivables foreign
RSD * day Monthly
markets
iii. Inventory valuation RSD * day Monthly
Finance
CF i. Liquidity ratios # Monthly
i. Amount of sale domestic
RSD Monthly
market
Sale
ii. Amount of sale foreign
RSD Monthly
market
COGS i. Sale profitability % Quarterly

i. New products sale RSD Quarterly

ii. New products launched
# Quarterly
New products domestic market
iii. New products launched
# Quarterly
foreign market
i. Defective batches # Monthly
Customers Quality
ii. Complaints # Monthly
i. Preparations on the positive list # Semi-annual
ii. Changes in prices of
% Semi-annual
Lobbing medicines
iii. Share on domestic market
% Quarterly
(IMS)

i. Embedded new registrations # Quarterly

ii. Approved new registrations # Quarterly
Registrations
iii. Number of registrations where
# Quarterly
we are first, second, third
i. Number of products which
# Quarterly
make 5% of total sale
Portfolio optimization
ii. Average sale per active RSD / Number of
Quarterly
registration active registrations
Internal processes
i. Liabilities due to suppliers RSD / Day Monthly
Suppliers ii. Savings in procurement
RSD Annually
annually
i. Deficit in relation to the plans
RSD Monthly
Production (internal deficit)
ii. % capacity utilization % Monthly
i. % report of inspections without
CE sign % Semi-annual
critical remarks

i. % sale associates who have

Seller motivation % Monthly
left the company
i. Internal education Employee * education Semi-annual
ii. External education Employee * education Semi-annual
Growth and Knowledge transfer
development iii. % employees on educations in
relation to the total number of % Semi-annual
employees
i. Sick leave Days Monthly
Working discipline
ii. Late arrivals Hours, minutes Monthly
 Domanovic et al. 6827

Table 3. Continued.

Employee satisfaction i. Employee satisfaction # Annually

(questionnaire)
Long-term projects ii. Realized investments RSD Monthly

Koeficijent
CF
likvidnosti

Economic value
added
Sale

Finance Dospela
Dospela
potraivanja
Ukupna vrednost
potraivanja
WCR Direct
zaliha
inostrani
domai production
costs

New product Udeo prodaje

Exports
na ino
tritima

Customer
Image Lobbying

Delivery accuracy Quality control

Odobrene nove
Registration
registracije Udeo inspekcija
GMP
bez primedbi

% Prodaje putem
Channeling
novo izgraenih
sales
kanala Dospele
Internal Intellectual Suppliers
obaveze prema
Portfolio optimization dobavljaima
process Property
New forms

D
M
DMS Employers
motivation
S
Staff competence Work discipline

Learning and Knowledge transfer

growth New Technology

Relations with
Zadovoljstvo Staff
Indeks zadovoljstva
predstavnika lokalnih
local zajednica
community satisfaction

Figure 2. The strategy map of the balanced scorecard in the pharmaceutical industry in Serbia.
6828 Afr. J. Bus. Manage.

Table 4. The state of the balanced scorecard implementation in Serbia.

Offered answers Number of companies

We had no contact with this concept
We are familiar with the concept
We have studied the concept, but we have not undertaken the concrete steps
The first steps have already been undertaken 1
The Balanced Scorecard project exist/existed
The concept has been implemented at the individual business units level 2
The concept has been implemented at the enterprise level 1
Others (has been implemented at operating level) 1
Total 5

Table 5. The balanced scorecard perspectives in enterprises in Serbia.

Companies
Perspectives Water Food Cookware Chemical Pharmaceutical
production production production industry industry
Finance * * * * *
Customers * * * * *
Internal business Process * * *
Learning and growth * * * *
Others

Table 6. The balanced scorecard components in enterprises in Serbia.

Companies
The balanced scorecard
Water Food Cookware Chemical Pharmaceutical
components
production production production industry industry
Strategic objectives or
* *
strategic measures

Target values or action plans * * * * *

Causal-consequential
* *
relationships

just those companies that introduced and implemented
balanced scorecard evaluate the company efficiency also
from other two perspectives: internal business process
and learning and growth. As can be seen, the water
production has learning and growth perspective although
it has not introduced and implemented balanced
scorecard.
Asked what components are contained in the balanced
scorecard, managers replies are as shown in Table 6.
From this and the answer to the question of what type of
balanced scorecard is in use, it can be concluded that
only chemical industry has been applied type 3 of the
balanced scorecard in a way that is described in the
literature, that is, includes strategic measures/objectives,
grouped into perspectives, causal relationships and
action plans/target values associated with the incentives
of employees, especially managers. The way in which
Serbian companies apply a balanced scorecard is simply
not compatible with the theoretical principles. Cookware
production has implemented two components (strategic
objectives or strategic measures and target values or
action plans) and pharmaceutical industry only one
(target values or action plans) although these companies
introduced and implemented balanced scorecard. On the
other side, water production has two components (target
values or action plans and causal-consequential
 Domanovic et al. 6829

Table 7. The expected benefits of the balanced scorecard implementation in enterprises in Serbia.

Companies
Expected benefits Water Food Cookware Chemical Pharmaceutical
production production production industry industry
i. Further strategy
* * *
development
ii. Clarifying and
* *
communicating the strategy
iii. Improving alignment of
strategic objectives with * * *
actions
iv. Focusing resources on
* *
strategy
v. Developing a consistent
system of objectives in the * * *
enterprise
vi. Improving understanding
of cause-effect * * *
relationships
vii. Thorough consideration
of non-financial * * *
performance causes
viii. Improving
performances in the long- * *
term
ix. Alignment of strategic
*
initiatives
x. Improving strategic
learning (control and *
feedback)
xi. Supporting the
management system based * *
on shareholder value
xii. Building a foundation for
* * *
a system of incentives
xiii. Better consideration of
*
stakeholders
xix. Better focus on
* *
customer
xx. Identifying possibilities
for business process * * *
reengineering
xxi. Supporting growth
* *
strategy
xxii. Increasing intangible
* *
assets investment
xxiii. Others

relationships) and food production has only one (target
values or action plans), but in some other more traditional
form different from balanced scorecard model.
Asked whether the system of incentives are compatible
with balanced scorecard, in the sense that incentives of
managers depend on the performance measures
provided in the balanced scorecard, most directors
responded with yes, partly (three). Directors of water
production and chemical industry responded with yes, in
full.
When asked the question concerning the expected
benefits of the balanced scorecard, managers responses
are as shown in Table 7. Table 7 shows a closed list of
expected benefits of balanced scorecard and at the last
others, which meant that directors should have filled it by
their own. Here, directors should have described what
6830 Afr. J. Bus. Manage.

Table 8. The cost-benefit analysis of the balanced scorecard implementation in enterprises in Serbia.

Companies
Perspectives Water Food Cookware Chemical Pharmaceutical
production production production industry industry
i. Implementation of the
balanced scorecard
requires a lot of effort,
but hardly to
bring any benefits
ii. Working with the balanced
scorecard specifies the *
strategy
iii. Balance scorecard could
not be really implemented
because relevant data is not
available
iv. A balanced scorecard is
the first, which made the
* *
strategy understandable
in the collective
v. The initial euphoria
about this new idea has
significantly decreased
vi. Balanced Scorecard has
exceeded expectations
vii. Others (an introduction is
*
expensive)

they would have expected if they would implement
balanced scorecard (for those companies which have not
implemented balanced scorecard yet) or what they would
have expected before they introduced the balanced
scorecard (for those companies which introduced and
implemented balanced scorecard).
Cost-benefit analysis of the balanced scorecard
introduction and implementation is shown in Table 8. As
for the importance of a balanced scorecard for enterprise
efficiency, directors agree that the concept is of great
importance, generally speaking. As the reasons why an
enterprise should not introduce a concept of balanced
scorecard, directors often say that the expected benefit is
too uncertain, that internal procedures and control
systems continue in this concept, but the problems are
the key users who are highly specialized for certain
activities.
When asked to describe the effects of the introduction
and implementation of balanced scorecard, director of
water production did not answer because this concept is
not applied consistently, director of food production
enclosed a table of quality objectives for 2007 year, the
director of cookware production stated that with the
balanced scorecard the efficiency parameters have been
more systematically considered, not just relied on the
managers intuition as it used to be; director of chemical
industry said that the balanced scorecard is made in
Vienna and has no insight into the effects of
implementation on the level of the holding, at the level of
business units, balanced scorecard allows comparison of
costs and strategy implementation, and facilitates
individual work; the director of pharmaceutical industry
replied that a balanced scorecard points to some
potential threats of the process in an enterprise,
dissatisfaction of employees and allows for corrective
measures, while the variable part of salaries of
employees, primarily managers, partly depends on the
fulfilment of the plan.
Conclusions
After the conducted research, the study can derive a
general conclusion that very little or no company has
implemented the concept of balanced scorecard in the
way how it is in literature explained and the way it has
been implemented by companies in other countries. This
can be concluded from a sample of a small number, but
reputable companies in Serbia.
If foreign capital owns a domestic company, the
company has introduced and implemented the balanced
scorecard, such as chemical industry and pharmaceutical

industry. If board members are university professors, as
is the case in cookware production, managers of
companies are more familiar with the balanced scorecard
and are willing to apply it. If the company has introduced
a balanced scorecard, the effects are positive for
expenses, profit rate, the motivation of managers and
employees, but it's quite expensive to implement it in the
long run.
ACKNOWLEDGMENTS
The authors are grateful to the directors of all surveyed
companies, who have provided generous support and
assistance in this research. Also, the authors thank the
Ministry of Education of the Republic of Serbia and
Faculty of Economics, University of Kragujevac for
funding the conducted research. This paper is the result
of the work on a project titled Preclinical testing of active
substances, No. 41010, sub-project: Management and
Marketing Research as a Support to the Interdisciplinary
Project Realisation, financed by Ministry of Science and
Technological Development of the Republic of Serbia.
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