Balanced scorecard implementation and its challenges. The Ethiopian Railways Corporation

TABLE OF CONTENTS

TABLE OF CONTENTS

ACKNOWLEDGEMENT

LIST OF TABLES

LIST OF FIGURES

LIST OF ABBREVIATIONS AND ACRONYMS

ABSTRACT

CHAPTER ONE
1. INTRODUCTION
1.1. Background of the Study
1.2. Statement of the Problem
1.3. Research Questions
1.4. Research Objectives
1.4.1. General Objective
1.4.2. Specific Objectives
1.5. Significance of the Study
1.6. Scope of the Study
1.7. Limitations of the Study
1.8. Operational Definition
1.9. Organization of the study

CHAPTER TWO
2. REVIEW OF RELATED LITERATURE
2.1. Public service reform initiatives in Ethiopia
2.2. Concept of Balanced Scorecard
2.3. The Origins of the Balanced Scorecard
2.4. Implementation perspectives of balanced scorecard
2.5. Features of Balanced Scorecard
2.6. Benefit of Balanced Scorecard
2.7. Empirical Review
2.7.1. The Gap in the Literature Concerning BSC
2.8. Challenges of Implementing the Balanced Scorecard
2.8.1. Challenges of Using Balance Score Card in Strategy Implementation
2.9. Conceptual Framework

CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1. Profile of the Organization
3.2. Research Design
3.3. Data Type and Sources
3.4. Population and Sampling Design
3.5. Sampling Techniques and Sample Size Determination
3.6. Data Collection
3.7. Data Collection Procedure
3.7.1. Unit of Analysis
3.8. Data Analysis Technique
3.9. Validity and Reliability Test
3.9.1. Validity
3.9.2. Reliability
3.10. Ethical Consideration

CHAPTER FOUR
4. DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1. Respondents Demographic Information
4.2. Analysis of the Variables

CHAPTER FIVE
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1. Summary of Findings
5.2. Conclusion
5.3. Recommendation
5.4. Further research direction

REFERENCES

ACKNOWLEDGEMENT

First and for most I would like to thank almighty God who made everything possible. A special thanks to my advisor Messele Kumilachew (Assistant Professor) for his consistent advices, suggestions, and encouragement in providing directions from the beginning to the completion of this research. I extend my deepest thanks to my brother Girma Abdeta and my sister Birtukan Abdeta, and all my family, those who provided moral, material and technical support. Finally, I would also like to thank to the employees and management of Ethiopian Railways Corporation who cooperate with me by filling questionnaire and honest interview that provide valuable information for completing the paper.

LIST OF TABLES

Table 1: Reliability of variables depending on Cromboch’s alpha

Table 2: Balanced Scorecard (BSC) initiative

Table 3: Employees’ awareness level on BSC strategy

Table 4: Current status of BSC Implementation in ERC

Table 5: Operational efficiency in ERC

Table 6: Perception of employees toward BSC implementation in ERC

Table 7: Challenges of BSC implementation in ERC

LIST OF FIGURES

Figure 1: balanced score card framework

Figure 2: Conceptual Framework

Figure 3: Sex Proportions of the Respondents

Figure 4: Age Proportion of the Respondents

Figure 5: Education Level of the respondent

Figure 6: Current position of the respondent in the organization

Figure 7: Respondents Years of Experience in the Corporation

LIST OF ABBREVIATIONS AND ACRONYMS

Abbildung in dieser Leseprobe nicht enthalten

ABSTRACT

The Balanced Score Card (BSC) is one of the most popular Public service reform initiatives in Ethiopia that tries to translate a company’s strategic direction and objectives into actionable initiatives and measurements. The major purpose of this study was to assess the status and challenges faced while implementing the balanced scorecard reform initiative in ERC. Descriptive method of research with a mixed approach of qualitative and quantitative theme was applied. Out of the non-probability sampling purposive sampling has been used. Relevant data for the study was collected using questionnaire and semi structured interview and 81 questionnaires (30% from the total population of 270) were distributed, from this 79 (97.5%) were collected. Then, data collected through questionnaires were analyzed using SPSS Version 24 software and presented by table, bar graph and pie chart. Interview and document analysis were also made to complement the information obtained. The major findings of the study revealed that employees understanding on the vision and strategic objectives and employees positive perception regards to BSC initiative relevance is a good opportunity for ERC. whereas, lack of committed management and employee, manpower skill gap and lack of training, ineffective communication with employees, lack of monitoring and evaluation system are the variables that are statistically significant and have influence on balanced scorecard reform implementation at the Corporation. Therefore, it is recommended that ERC should strength the commitment of management and employee by providing adequate and continuous refreshment training on the concept of Balanced Scorecard.

Keywords: Balanced scorecard, Public service reform, Ethiopian Railways Corporation (ERC), Implementation

CHAPTER ONE

1. INTRODUCTION

This chapter is concerned with background of the study, statement of the problem, objectives of the study, significance of the study, scope of the study, operational definition, and limitation of the study as well as organization of the study.

1.1. Background of the Study

The civil service reforms pursued in Ethiopia to date have been wide-ranging, and have included the adoption and implementation of a number of tools. Key reform tools deployed include Business Process Reengineering (BPR), Balanced Scorecard (BSC), Citizens Charter, and the Change Army. These have been successively introduced to improve service delivery, and enhance transparency and accountability in the civil service (World Bank, 2019).

The Balanced Score Card (BSC) is one of the most popular Public service reform initiatives in Ethiopia. In this regard, it is imperative to assess how the approaches used in introducing new performance measures through the use of BSC have resulted with respect to their intended outcomes. It is also important to consider the organizations that have implemented BSC with comparatively more professional service coaching and follow up during its implementation in order to identify the status and drawbacks of applying BSC as a reform tool.

The Balanced Scorecard model was developed by Kaplan and Norton (1992) to address the problems and limitations of relying solely on financial measures. The model integrates financial and non-financial measures to combat the historical (lagging) nature of most accounting measurement systems, along with their potential for manipulation by senior executives, misdirection and short-termism (Norreklit, Jacobsen & Mitchell, 2008:65). The Balanced Scorecard model was designed to combat over-reliance on purely financial measurement systems in assessing corporate performance. While it retains the financial perspective, the Balanced Scorecard model also incorporates three more perspectives: the customer, internal business processes, and innovation (learning and growth) perspectives (Kaplan & Norton, 1992, 1996a, 1996b, 1996c). The model has achieved worldwide recognition and acceptance as both a performance measurement framework and a corporate planning tool (Khomba, 2011).

The Balanced Scorecard (BSC) is a strategic management system that aims to clarify strategy and to translate it into action (Kaplan and Norton, 1992, 1996 and 2001, 2004, 2006; Kaplan, 2010). It is widely used by organizations as a tool to assess and manage their companies’ performance. In their past studies, Kaplan and Norton have emphasized the need for companies to align the BSC with their strategy in order to reach maximum benefits (Braam, 2010).

The strategy execution of the Balanced Scorecard model still poses challenges for many organizations. Many executive managers are still not aware of the different approaches possible in dealing with strategic and operational activities (Kaplan & Norton, 2008a:4-22; Weil, 2007:1). This implies that there is more to using the Balanced Scorecard model conceptualization than just implementing the model. The Balanced Scorecard model may require changes in the culture within the organization and a transformation of internal business processes and practices for it to be successful.

An empirical study has revealed low ratings in the relationship of corporate performance and the use of the Balanced Scorecard measurement system –Ittner and Larcker (2001:371) found that the implementation of a Balanced Scorecard compensation plan in one of the retail banks in the USA brought about no significant change in the managers’ understanding of corporate strategic goals. Hence the cause-and-effect relationships proclaimed by the Balanced Scorecard model were non-existent in this scenario. The relationships between perspectives could also complicate the weighting of the perspectives themselves, as they cannot be ranked equally (Khomba, 2011).

Balanced score card was introduced in the ERC on date July, 2015. Starting from then the Corporation makes effort to achieve the expected targets using key performance indicator (KPI) evaluation on daily terms and other parameters which divided in four perspectives (customer, finance, internal process and learning and growth) but face lots of obstacles in the implementation, according to the Minute meeting report and monthly evaluation report, the implementation is not at excepted level. And since this system is new to the company there was no such studies made in order to show the challenges during the implementation and give recommendations to elevate the problem. The factors are still there and affecting the implementation so that this study is going to prepared to identify those factors which affect the implementation and give constructive feedback to the Corporation.

1.2. Statement of the Problem

Balanced scorecard has promised many benefits, mainly there are two benefits organizations can expect from effectively implementing the balanced scorecard. These are operational and strategic benefits among the operational benefits; the major one is tracking progress toward achieving organizational goals, measuring performance at various levels from various perspectives. On the other hand, major strategic benefits are communicating strategy to everyone, and linking and aligning the organization around strategy.

In spite of the benefits that are promised by the balanced scorecard, practical studies show that there are challenges of implementation (Marr, 2010). Many organizations assume that once senior management have agreed on their Balanced Scorecard, strategic map and their indicators everyone will happily implement it and collect and report the data. Don’t underestimate the need for training and communication about the Balanced Scorecard initiative and its aims and objectives. Again, this is especially important since there are so many different interpretations of what a Balanced Scorecard is and what it is for. Experience has shown that the support of lower and middle tier managers is essential for the success (Marr, 2010).one of the main problems with Balanced Scorecards arises when senior managers use the performance indicators identified to apply a command-and-control approach in which they use the indicators to punish or reward people. This creates fear, resistance and cheating. Instead, managers should use their Balanced Scorecards to foster a learning culture where everybody is encouraged to collect performance information to improve future performance (Marr, 2010). Another problem that organizations frequently make is jumping into a measurement program too fast and making the program too complicated. Deriving meaningful measurements, gathering reliable data, developing useful analytical techniques and educating managers about how to use the data are all difficult steps (Mamushet, 2015).

Ethiopian Government has launched a massive civil service reform program throughout the country by 2002; all public institutions are compelled to re-engineer their services to become responsive, efficient and effective of their performance. The Government has given high emphasis and dedication towards institutional excellence. At present, almost all public institutions are undertaking Balanced Scorecard (BSC) as a strategic planning and management tool to measure work performance of any organization. Among the effects for public sector reform is the efforts to improve public sector services, through process improvement. The reforming aimed at promotion of efficiency (cost-effectiveness) and provision of effective services to the public (Mamushet, 2015).

The need for improvement in performance and level of service delivery in line with the reform program promoted the use of Balanced Scorecard as a key instrument & management initiative tool for measuring and managing performance particularly in the ERC. However, the achievement of such required efficiency in performance at the Corporation has been hindered by different factors. The recurring customer and staff complaints can be cited as major signals for the gap in performance concerning internal business process & management of human resources. The major statement of the problems of the study can be categorized as Problems related to operational factors such as weak interface among work units, delayed decision-making and weak monitoring system. Problems related to Employee-Employer factors such as lack of commitment and sense of ownership, inappropriate perception and poor communication, biased performance evaluation in some processes and poor linkage of performance results to benefit packages and promotional scheme which is contrary to the principles of BSC, resistance by some employees and unorganized human resource management are the other challenges for implementing BSC successfully. So, it has become imperative to identify the challenges and assign causations for the next round of reforms to be effective by way of devising mechanisms to cope with these challenges (ERC, 2018).

1.3. Research Questions

This study has been attempted to get answers for the following basic questions that are entirely related to BSC implementation processes in the study area.

- What is the level of commitment, knowledge and attitude of actors of the scorecard towards implementation of BSC in the Corporation?
- What is the implementation status of BSC in the ERC?
- What do employees perceive about the progress of BSC implementation?
- What are the existing major challenges in implementing BSC reform initiative in the ERC?

1.4. Research Objective s

1.4.1. General Objective

The main objective of this research is to assess and find out the status and the challenges that hindered successful implementation of Balanced Scorecard (BSC) reform initiative and to identify the prospects in implementing Balanced Scorecard in ERC.

1.4.2. Specific Objective s

- To assess the status of BSC implementation in ERC
- To identify challenges faced in the implementation process of BSC reform initiative
- To evaluate the understanding and commitment of employees and managers towards the reform objectives.
- To describe the perception of employees toward the BSC reform initiative implemented

1.5. Significance of the Study

The Balanced Scorecard is a change, communication and strategic management package designed and implemented in the entire public sector of the country. Effective implementation of BSC in the company helps to achieve organization objective and enables staffs to share the company strategy and evaluate their contribution in the company. The outcome of this study will help ERC to pin point the important challenges that exist currently while implementing BSC and take remedial actions for suitable positive results.

Moreover, the result from this research will assist the Corporation to improve its BSC practice by identifying challenges associated with BSC implementation. In addition to this the finding will give an insight for other researchers who are interested to assess status and implementation challenges of BSC of other organization.

1.6. Scope of the Study

This Research was limited to assessing balanced scorecard implementation and its challenges in ERC and it assesses in all respective departments of the corporation. The study conducted a survey on employees and management of the Corporation located at head office in Addis Ababa and the researcher only considered 81 respondents from the total population of the study. The researcher believed that questionnaires prepared by the researcher, interview and secondary data collection methods were enough to assess the BSC system. This study focuses only on BSC implementation and its challenges of the past four years in ERC.

1.7. Limitations of the Study

The major limitation of the study was shortage of time and availability of relevant documents that clearly shows the overall implementation of the balanced scorecard system in the Corporation. Moreover, shortage of relevant empirical literature especially shortage of similar studies in Ethiopian context was also among the major challenges.

1.8. Operational Definition

Ethiopian Railways Corporation - is a service providing Public Enterprise for which constructing modern railways infrastructure, transports bulk freight and expand passenger railways transport services.

Balance Score card (BSC) – Strategic Plan and management system designed to help everyone in an organization understand and work towards a shared vision & strategy.

Strategy - is defined as the direction and scope of an organization over the long-term; which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations.

Initiatives - These are key action programmes that are required to achieve the objectives.

Reform - it is to mean to put or change into an improved form or condition, but here used as any change activity which change work processes from present state to desired state.

Civil Service Reform - is a deliberate action to improve the efficiency, effectiveness, professionalism, representatives and democratic character of a civil service, with a view to promoting better delivery of public goods and services, with increased accountability.

1.9. Organization of the study

The study was organized under five chapters. Chapter one presents the introduction of the study, statement of the problem, objectives of the study, significance, scope and limitations of the study. Chapter two is dedicated to review of related literature, where various literatures relevant to the study are dealt with adequate depth. Chapter three focuses on the research methodology and provides explanations for the data collection techniques. Chapter four contains the data presentation, analysis and interpretation; and Chapter five gives summary, conclusion and recommendations. A reference of related literature that has been referred while writing the paper is included after chapter five.

CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

This chapter of the research reviews different literatures on balanced score card. In doing this, reform initiatives in Ethiopia and the overall concept of the balanced scorecard briefly stated. Then, the chapter briefly introduces the origin, implementation perspectives, feature and benefits of balanced scorecard. In the final parts of the chapter, empirical review, challenges of implementing the balanced scorecard and the conceptual framework of the study is stated.

2.1. Public service reform initiatives in Ethiopia

Ethiopia stands out as a country that has undertaken extensive civil service reforms during the last 20 years and with some documented positive impacts. In particular, Ethiopia has deployed a range of approaches that broadly fall into the category of ‘New Public Management’ (NPM). The main successive reform tools include Business Process Re-engineering (BPR), Balanced Scorecard (BSC), Citizens Charters, as well as the introduction of a Change Army. While both BPR and BSC are classic ‘New Public Management’ style reforms (World Bank, 2019).

2.2. Concept of Balanced Scorecard

Balanced Scorecard is a performance management tool that enables a company to translate its vision and strategy into a tangible set of performance measures. However, it is more than a measuring device (Kaplan and Norton1996b). It is also defined by Balanced Scorecard Institution as a strategic planning and management system that is used extensively in business and industry, government, and non profits organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals (Mamushet, 2015).

Initially the BSC was developed as a comprehensive performance measurement system encompassing a coherent set of financial and non-financial performance measures covering different perspectives of the organization (Kaplan and Norton, 1992). Managers did not only focus on financial measures when taking decisions, but also non-financial criteria had to be taken into account. When integrated carefully and in a balanced manner in a “scorecard” it would provide managers with a comprehensive and timely view of their business. Four different key perspectives were identified as being critical and thus should be included, i.e., the financial, customer, internal-business-process, learning and growth perspective.

Since 1996, the authors have extended their view, developing and formally proposing it as a strategic management system stressing the importance of aligning the scorecard-information with the business strategy. To translate the strategic goals efficiently into tangible objectives and measures, Kaplan and Norton suggested four interrelated management processes: clarifying and translating vision and strategy, communicating and linking strategic objectives and measures, business planning and target setting, and enhancing strategic feedback and learning. In 2001, Kaplan and Norton introduced five principles to strategically focus organizational management processes: translate the strategy into operational terms, align the organization to the strategy, make strategy everyone’s everyday job, make strategy a continual process, and mobilize change through executive leadership. Subsequently, they extended and refined the tool by describing and explaining the tool’s management processes and principles in more detail and by showing how strategy may be “mapped” using a formal and integrated set of financial and non-financial strategic performance measures allowing for alignment between the control system and firm strategy (Kaplan and Norton, 2004, 2006; Kaplan, 2010) (Braam, G. 2010).

2.3. The Origins of the Balanced Scorecard

The Balanced Scorecard was developed by Robert Kaplan, a Harvard University professor, and David Norton, a consultant from the area of Boston. In 1990 they started research in several companies with the aim of exploring new methods of performance measurement. Traditionally, industries had been relying mainly on financial measures to indicate performance. Many criticisms arose about using only financial measures to track organization performance. In their study, Kaplan and Norton argue that financial measures were too one sided and not relevant to many levels in the organization and that reliance only on financial measures may affect the ability of organizations to create value (Niven, 2006) (Pujas, 2010).

According to Kaplan (2010), the conception of the performance measurement using both financial and non financial metrics dates back to 1950s when General Electronics Company introduced these two parameters to measure divisional performance for its business lines before it took its current form. As Kaplan notes, it is unfortunate that - the noble goals of the 1950s GE corporate project never got ingrained into the management system and incentive structure of GE‘s line business units (Kaplan, 2010, p.5).

As the traditional industry performance measurement systems mainly relied on financial information, they were subject to criticisms for ignoring other intangible assets which are critical drivers of future financial performance , and hence lack the ability to track overall organizational performance.

It was in response to these growing criticisms that the Balanced Scorecard was developed by Robert Kaplan, who was an accounting professor at Harvard University and David Norton, a consultant from the Boston area in 1992. The BSC was, therefore, developed by its proponents in a way that can measure all aspects of an organization using four dimensions: customer, internal business process, learning & growth, and financial perspectives after extensive study made by Kaplan and Norton. Currently, it is implemented as a strategic planning and management system that is used extensively in business and industry, government and non for profit organizations worldwide.

2.4. Implementation perspectives of balanced scorecard

Balanced Scorecard (BSC) is a performance measurement that translates a firm’s strategy into clear measures, objectives, targets, and initiatives. It classifies such initiatives into four perspectives: financial, customer, business processes, and human resources or innovation and learning (Kassahun, 2010). Each of the perspective represents a different aspect of the business organization which operates at optimal capacity.

a. Financial Perspective

Al-Najjar and Kalaf (2012) showed that financial measures convey the economic consequences for the actions taken by the firm. The focus is on the profitability related measures. These measures help stakeholders in the firm confirm the profitability of their investments. This perspective can provide viable and significant information that will assist management monitor the performance of the firm as well as improve motivation and communication and spot problems.

b. Customer Perspective

According to Kairu, Wafula, Okaka, Odera, and Akereke (2013) customer perspective captures the ability of the organization to provide quality goods and services for their customers. It also looks at effectiveness of their service delivery, and the overall customer service and satisfaction. This perspective helps measure the level of customer satisfaction, customer retention and market share of the firm.

c. Business Process Perspective

Gekonge (2005) asserted that the business processes perspective focuses on the internal business which will result in financial success and satisfaction of customers. This includes cost and quality related to the business processes.

d. Learning and Growth Perspective

Kaplan and Norton (1992) showed that a company innovative ability, learning and growth perspective examines the ability of employees proxied by skills, talents, knowledge and training; the quality of information systems captured by systems, databases and networks; and the effects of organizational alignment proxied by culture, leadership, alignment and teamwork, in supporting the accomplishment of organizational objectives. Gekonge (2005) argued that it consists of measures such as employee satisfaction, employee retention and knowledge management.

The import of the foregoing is that the balanced scorecard involves a holistic model that links individual efforts and accomplishments to each business unit objectives (Emma I. Okoye, Augustine Nwekemezie Odum,Chinwe Gloria Odum, 2017).

Balanced Scorecards, when developed as strategic planning and management systems, can help align an organization behind a shared vision of success, and get people working on the right things and focusing on results. A scorecard is more than a way of keeping score…..it is a system, consisting of people, strategy, processes, and technology in a manageable way (Rohm, 2012). Due to this, it is critical to put it into action. Hence, different scholars argued that implementation is fundamental issue of any model to evaluate its effectiveness in the real world. When we deeply insight into balanced scorecard constituents, it enables us to visualize collection of interconnected gauges which show organization’s finance and operations.

In turn how organization is performing and going on will be easily perceived. Thus, balanced scorecard requests everyone to imagine its organization’s mission and strategy from four pillars of perspectives (Kaplan and Norton, 1992, 1996; Kaplan, 2001, 2010).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: balanced score card framework

Source: Adapted from Kaplan & Norton (1996, P.76)

Effective implementation of BSC in public sector is a mandatory that enables organization to convert its unique and complex strategy into simplified and a common term which can be easily understood, shared, communicated and executed. Thus, organization tries to link performance management programs with its strategic goals and tactical objectives that scale up the concept of balanced scorecard. Thus, exercising the technique becomes so difficult when critical care is not taken by everybody in the organizational community. That why the coiners give attention to the excursion parts and based on this issue Kaplan and Norton (2008) argued that implementation stage must be adapted in six stages in simultaneously with integrating strategy planning and operational execution in a close loop manner.

2.5. Features of Balanced Scorecard

The peculiar feature of BSC is its power to align intangible asset with expected tangible results that it helps much to build professionalism in the civil service. BSC helps organizations to think beyond financial bottom lines such as employees’ capacity, leadership capability, process efficiency and a culture of performance.

BSC is introduced in Ethiopia since 2009 and to - date 27% of civil service institutions has undertaken BSC change initiative. Achievements to – dates are:

- Many civil servants and leaders have got training on BSC which is an instrument to revise and describe the strategy and thereby operationalize it ;
- The training helps leaders to get different perspectives to gauge organizational success in balanced view ;
- It is widely understood by leaders and employees that BSC is an important tool to align strategic planning, performance management, project management ,Business processes and budget ; and
- Many professionals and leaders recognize that BSC is a strong tool in communicating and implementing strategies at any level.

The focus of BSC on intangible asset means that organizations shall work tirelessly in strengthening employees’ knowledge and skill which is critical to professionalize the civil service. BSC is the 21st century integrated strategic management system to solve management problems of the information and knowledge society. It is also one of the 21st achievements of management. The following are features of BSC:

- It is integrated strategic management system ;
- It is a communication tool ;
- It is a change management tool ;
- It focuses on four main perspectives, namely : customer / citizens, finance / budget, internal processes, learning and growth ;
- It aligns internal and external organizational achievements ;
- It is about showing the logic of value creation with the help of strategy maps ;
- Aligning intangible asset with the tangible asset through value creation mechanisms ; and
- Above all it is about focusing on critical few issues of the organization (Kaplan & Norton, 2005) (Adebabay, A. G. (2011).

2.6. Benefit of Balanced Scorecard

Madsen and Stenheim (2014), support that the BSC has an overall positive effect on the performance of an Organization, and they found three common benefits of balanced scorecard to management.

- The BSC assists managers to focus on strategy, structure and vision.
- The BSC integrates financial and non-financial-based metrics to assist managers to focus on the entire business process and ensure current business activities and events contribute to customer values and to the long-term organizational strategy
- The BSC assist managers to monitor the execution of a strategy by mapping cause-and effect linkages between employee activities and strategy implementation.

Moreover, (Basuony, 2014) observes aligning organization to the strategy assists in solving the problem of communication especially formal reporting and bureaucracy whereas making the organization strategy an everyday job solves the problem of communication and coordination. Further, as a control system, the BSC assists large organizations to achieve their strategies by enabling management to articulate, communicate, and monitor strategy implementation.

In Addition to this, According to (Kaplan and Norton, 96) The Balanced Scorecard has many advantages these are:-

- Balanced Scorecard (BSC) provides managers with the instrumentation they need to navigate to future competitive success.
- The Balanced Scorecard translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system
- The BSC enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth.

2.7. Empirical Review

Principles of Balanced Scorecard are easily understood in terms of concept whereas to put them into action is too much vague and complex because of non-identifiable among: Operational and strategic performance management:-Implementation of the strategies; Cascading from top stage of the sector to employee position; Relation among strategic, financial and physical plan; and that becomes too much difficult to distinguish their bounders in order to accomplish. Thus, to implement effectively, all must be able to separate and interconnect these factors but everyone cannot link as per the system requests (Lonescu, 2012).

Different studies have been investigated the impact of the Balanced Scorecard (BSC) on firm value. The study’s empirical results showed that BSC use will not automatically improve company performance, unless it is properly applied.

The following are the challenges identified in implementing a balanced scorecard: linkages between non financial and financial measures must be obtained and this usually creates a necessity for change. There may not be improvement on all the measures all the time. There is usually a need to use both objective and subjective measures. The implementation of the balanced scorecard require IT resource, extant literatures affirm that more than half the businesses in US embraced the balanced score card. API (2012) quoting the Gartner group suggests that over 50% of large US firms had adopted the BSC while 44% of organizationsuse the BSC. It was stated further that in Germany, Austria and Switzerland, 26% of firms use the BSC. In Nigeria however the BSC has not been given wide recognition. Equally, choosing a balanced scorecard solution may be risky as there are over two dozen solution providers. Determining the best offer require experience and knowledge of the tool.

Etim and Agara (2011) examined how BSC has contributed to firms’ performance in Nigeria. Their study confirmed that firms that have implemented BSC have indicated positive recovery under-performance conditions and as well as reverse their losses. However, their study suggested that a fifth perspective be introduced that will capture the environment and culture because of the critical roles environment and culture play in the survival of any organization.

Yung-Chieh (2012) in his study aimed at verifying the influence of balanced scorecard implemented by Taiwan LED listed companies on the accumulation of the intellectual capital with organizational commitment as an interference variable using management of human resource, finance, production and marketing departments and staff of production departments as research subjects. It was found that the balanced scorecard implemented by Taiwan LED-listed companies influences the intellectual capital (Emma I. Okoye, Augustine Nwekemezie Odum,Chinwe Gloria Odum, 2017).

2.7.1. The Gap in the Literature Concerning BSC

With the intention of efficiency and effectiveness, both private and public sectors are adopted balanced scorecard system. To this effect, several impressive results and critical obstacles are recognized in implementing BSC. Because of the recent adoption of BSC in public sectors of Ethiopia, few researches are undertaken. Some of them are conducted by Adebabay (2011), Tilaye (2010) and Tamiru (2013). Thus still there are empirical gaps on the scheme.

2.8. Challenges of Implementing the Balanced Scorecard

According to a recent survey on existing challenges of BSC implementation made by Behdad and Mohammad (2014), insufficient information system to support BSC, lack of top management support and dedication, organizational politics and the fact that BSC implementation is time-consuming were the major challenges encountered in implementing the BSC.

Othman (2009) as cited by Pujas (2010) states that one reason why BSC initiatives fail is that many initiatives are not Balanced Scorecard programs in the first place. He goes on to say that very often organizations do not understand what exactly the Balanced Scorecard is and what its implementation involves, regardless of whether they implement the BSC themselves or whether they hire a consultant from the outside.

In general the common challenges of implementing the balanced scorecard, according to Pujas (2010), can be summarized as: limited understanding of BSC, lack of executive sponsorship, lack of BSC education and training, inadequate IT support, inadequate project team, organizational participation, inadequate key performance indicators (KPIs) and lack of planning and communication.

2.8.1. Challenges of Using Balance Score Card in Strategy Implementation

The BSC has its own drawbacks. The criticisms levied on the concept target different theories which have developed surrounding the BSC concept. To begin with, it is argued that the concept is not new. The notion that BSC is a new management System is contemptuous. Because, the French for example used the tableau de Bord which is widely considered to be a similar concept to BSC long before the BSC was introduced. Also, the idea that BSC could be used in all type of businesses is disputed too.

Some of the major challenges using the balance score card in strategy implementation are-Management style (Thomson, 2013) are mostly concerned with the managers’ role in Strategy implementation process. They state that organizational change and culture change must be the leader’s top priority. The authors argue that if the companies’ managers see the need for change, and give this change top priority and use the necessary time, the organization will change.

Thomson (2013) says that in all organizations, at all levels, there exists a natural resistance to change. Social relationships are more strongly weighted than economical factors. The employees feel threatened by changes and the unknown, and they may be concerned with losing their jobs or status. This is also valid for the top management. Few management groups can handle both to establish strategies for the current situation, and at the same time, create acceptance or culture for change in the organization. The Balanced Scorecard is not a tool for imposing a strategy created at the top of the organization or a stick to beat people with. It is actually a tool to allow people to both participate in the strategy process and create objectives and measures that reflect their business area’s efforts to support the broader corporate strategy. The balance score card could fail if the management style is highly centralized with a top-down style of management. For it to succeed the management should decentralize the management style and allow participation of workers who are at the ground.

Lack of integration, (Kaplan and Norton, 2006) claim that the first barrier occurs when the organization can not translate its vision and strategy into terms that can be understood and acted upon. Where fundamental disagreement exists about how to translate the vision and mission statement into action, the consequence is sub optimal use of efforts. With lack of consensus and clarity, different groups will work after different agendas according to their own interpretation of the vision and strategy. Their efforts are neither integrated, nor cumulative, since they are not linked coherently to an overall strategy. The Balanced Scorecard isn’t another stand-alone project or system. It is the performance management and monitoring system, integrating typically a range of disparate systems, measures and monitoring approaches. Therefore, for its successful implementations, all areas have to work together as part of a unified whole, Epistem, (2009:45) (Nigist Kelemu, Getnet Hunegnaw, Migbar Liyew, 2018).

2.9. Conceptual Framework

Regardless of all the popular benefits that are promised by the balanced scorecard, empirical studies, such as Pujas (2010), show that the following are key success factors of BSC implementation.

Balanced Scorecard Concept Clarity: refers to the failure to understand what exactly the Balanced Scorecard is and what its implementation involves.

Executive Sponsorship: represents the support of the top management of the organization during the development and implementation of the system.

Lack of BSC Training: like any system, the implementation of the balanced scorecard, requires the creation of sufficient awareness which obviously requires conducting continuous training and education.

Inadequate IT Support: According to Niven (2006), the problem of gathering and entering data into the Balanced Scorecard is emphasized during the implementation process. To overcome such problem and smooth the implementation process, the system should be supported by an appropriate IT system.

Effective Project Team: To create a Balanced Scorecard that is capable of implementing the company strategy, linking individuals, creating new behavior and enhancing communication, a team of people are needed. Many ambitious initiatives have failed just because they were led by ineffective teams.

Lack of Participation: According to Pujas (2010), during the implementation process, if the importance of employee involvement is not understood, the organization may miss the opportunity to benefit from the employees’ knowledge that is directly related to the areas in which they exert influence.

Planning and Communication: similar to any system, the implementation of the balanced scorecard system requires a precise development plan to guide the selected team during the BSC journey. Without a formal plan showing the implementation path in advance, there is the risk of confusion.

Finally, the researchers presuppose that if such success factors are well addressed in the stated public Organization, the overall implementation of the balanced scorecard system, as their performance measurement and strategic management system would be successful.

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Figure 2: Conceptual Framework

Source: self developed, 2019

CHAPTER THREE

3. RESEARCH METHODOLOGY

This chapter briefly presented Profile of the Organization, research design, sources of data, population of the study, sampling technique, sample size, data collection technique, data analysis technique, reliability, validity and ethical considerations.

3.1. Profile of the Organization

This study was conducted at Ethiopian Railways Corporation which is located in Kirkos sub city, Addis Ababa. The Ethiopian Railways Corporation (ERC) was established on 28 November 2007 by regulation 141/2007 of the Council of Ministers of the Federal Democratic Republic of Ethiopia. The regulation mandates ERC to develop railway infrastructure and provide passenger and freight rail transportation services in Ethiopia.

ERC’s key objective is to develop an integrated and high capacity railway transport system to ensure competitive and affordable transport. ERC has developed railway projects on eight corridors in the country that have been identified as necessary to enhance both the social and economic needs. This Corporation currently has over 270 Managers, Engineer professionals and non-Engineer staff in 22 departments.

The corporation, in executing its strategy it has faced difficulty as it is a case in many other business organizations. Strategy execution has found a solution in the modern management tool of Balanced Score Card. The literature or (History) of Balanced Score Card tells us that, it is born from Research around 1990 by two men: Robert Kaplan- Professor at Harvard University; and David Norton- a Consultant. In these days BSC is adopted & increasingly used on worldwide as the best tool. BSC has been used as a strategic Management system.

BSC described & defined as carefully selected set of quantifiable measures derived from an organization’s strategy. The most fundamental aspects of BSC are the four perspectives- financial, customer, internal Process, learning and growth.

For all its merits the Ethiopian Railways Corporation opted for Balanced Score Card reform initiative of Strategic planning and Management System since July 2015 as this change tool is said to be the best performance management system of the 21st century.

Corporate five-year Strategic plan (2015-2020) of the corporation was developed in the same year. The strategic plan has five strategic themes namely, Organizational excellence, Quality railway net work, Effective and efficient railways operation, Rail way capacity building. The strategic plan has also 27 strategic objectives. Strategic initiatives are also identified to achieve the strategic objectives.

The ERC strategic plan was operationalized to annual plan and operational plan was cascaded in three tiers as (Tier-I) Corporate level Scorecard assigned for CEO, (Tier-II) division and Services Scorecard, (Tier-III) department and individual employee Scorecard. Even though BSC initiative started in 2015 in ERC, Performance evaluation using BSC framework was initiated lately after three years within the Corporation. The first balanced scorecard based performance evaluation was conducted in 2018, since then every six - month performance evaluation at all levels was carried out using the balanced scorecard tool.

3.2. Research Design

In this study, descriptive survey method was employed in order to describe the opinions of employees and management group to assess the Balanced Scorecard implementation and its challenges in the Corporation. The design of the research is descriptive since it allows the collection of data through questionnaires on the bases of sample, which helps to find out the view of the population and explain the phenomena as it is and also helps to answer “what is” questions. In this study, a combination of qualitative and quantitative approaches of doing research was employed, which has been practiced, as recommended by Creswell (2009:203-216). It helps to collect data that could not be obtained by adopting a single method. Therefore, survey with questionnaires and semi-structured interview has been conducted so as to address the status and implementation challenges of BSC reform initiative in Ethiopian Railways Corporation.

3.3. Data Type and Sources

The researcher was used both primary and secondary data sources to obtain data concerning the status and challenges faced in the BSC Reform initiative implementation. The primary sources of data has been collected through questionnaires; by setting self-administered questions in person and semi-structured interviews has been conducted to management members, IT professionals and Change Agents of the company to grasp important information that may not be fully addressed through questionnaire. In addition, websites, papers written on the subject matter, proclamations and Civil service reform documents has been reviewed as secondary sources of data.

3.4. Population and Sampling Design

The pools of population for this study were management members, non management staff of ERC. Only employees who have worked for or more than a year in the Corporation has been included in the pool as recently recruited employees may not have deep knowledge of the Balanced Scorecard implementation and its challenges in the Corporation.

3.5. Sampling Techniques and Sample Size Determination

With regard to sampling technique, Non-probability sampling, specifically purposive sampling technique was used by purposely selecting more relevant individuals and groups which the researcher believed has better access to the development and implementation of the balanced scorecard system in ERC. According to Mugenda, A & Mugenda, O. (2009), a sampling fraction of between 10-30% of the total population in a descriptive research design is considered representative. Therefore, the researcher has been selected 81 respondents, (30% from the total population of 270) as a source of information for this study.

3.6. Data Collection

The primary data were collected using questionnaires addressed in both close and open-ended form and semi structured interview. Likert type scale of measurement was used to determine the level of agreement or disagreement represented by numerical values ranging from one to five. The open ended questions were aimed to enable to discover the feelings, opinions, and practical experiences of performers about status and challenges of BSC implementation. Interviews were conducted with Six (6) management members and five (5) non-management members (IT professionals and Change Agents).

The secondary data was drawn from theoretical reviews, BSC and other relevant Civil service reform documents.

3.7.

To gather necessary information from the participant closed ended questionnaire with a five-point Likert scale and some open-ended questions were used.

The questionnaires were prepared by the researcher based on the study specific objective and relevant available literature. Then the questionnaires were distributed and collected by the researcher from the respondents. Beside this, Interviews were conducted to eleven (11) staff members (i.e. six management members and five non-management members) who the researcher believed to have sufficient background knowledge regarding BSC implementation in the Corporation to obtain more information and understanding in areas that were not be covered through questionnaires. IT professionals, Change Agents and managers at different positions had participated in interviews. Semi-structured interviews conducted and the respondents communicated at head Office of ERC in their offices. The questionnaires were pilot tested among employees at different levels for reliability.

3.7.1. Unit of Analysis

The unit of analysis is the major entity that is being analyzed in a study. It is the 'what' or 'who' that is being studied. The sample unit of this study was employees and management members whom considered as prime source of primary data collection and analysis; this is due to the reason that they are crucial actors in the implementation of BSC at investigation area.

3.8. Data Analysis Technique

Findings of the study are categorized and presented under thematic areas and analyzed using different descriptive statistical tools such as bar graphs, pie charts, tables, frequencies and percentages accompanied by supporting qualitative information. SPSS software version 24 was applied in analyzing the data.

3.9. Validity and Reliability Test

Validity and reliability are two fundamental elements in the evaluation of a measurement instrument. Instruments can be conventional knowledge, skill or attitude tests, or survey questionnaires. Instruments can measure concepts, skills or affective values.

3.9.1. Validity

Validity 'refers to the extent to which the results of the study are accurate. Findings of the study are, thus, presented based on actual results with utmost objectivity of the researcher. Further, to minimize any possible biasing effect and error, Software Package for Social Sciences (SPSS) was applied in analyzing findings of the questionnaires. The researcher also tried to assure the validity of the research instruments in close consultation, comments and recommendations of the advisor.

3.9.2. Reliability

Reliability refers to the extent to which the same answers can be obtained using the same instruments more than one time. According to Wilson (2010) reliability issues are most of the time closely associated with subjectivity and once a researcher adopts a subjective approach towards the study, then the level of reliability of the work is going to be compromised. In order to measure the consistency of the scores obtained and how consistent they were for each individual from one set to another, this study used Cronbach´s Alpha (a measure of the internal consistency of the questionnaire items) using data from all the respondents.

Internal Consistency - this approach to reliability uses only one administration of an instrument or test to assess consistency or homogeneity among the items. Moreover, reliable measuring instrument does contribute for validity. Finally, reliability of the questionnaire has been tested by using Cronbach´s Alpha. Therefore, as specified on table below, the SPSS result shows that the questionnaires reliability for each variable is 0.795, 0.580, 0.882, 0.810, 0.914 and 0.826 Cronbach´s Alpha. Coefficient alpha ranges in value from 0, meaning no consistency, to 1, meaning complete consistency. Therefore, one can say that very good reliability range from 0.80 and 0.95, good reliability range from 0.70 and 0.80, Fair reliability range from 0.60 and 0.70 and Poor reliability range from below 0.6.The result depicts in the below table the total Cronbach´s Alpha test is 0.897. Hence, this result proved that the study has a very good reliability.

Table 1: Reliability of variables depending on Cromboch’s alpha

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Source: Own Survey, 2019

3.10. Ethical Consideration

This research work strictly adheres to the ethical principles with respect to the data used in the work. First, the literature of all the ideas and concepts taken from other scholars were acknowledged. Secondly, the data obtained through questionnaire from staff and interview also remains confidential as stated on the questionnaire.

CHAPTER FOUR

4. DATA PRESENTATION, ANALYSIS AND INTERPRETATION

This part of the paper presented and analyzed the data collected to seek appropriate answer for the questions raised to respondents to find out the Balanced Scorecard implementation and its challenges in ERC. To that end, data collected from primary sources through interview of 11(Eleven) individuals. Of the total interviewed staff, 6(54.5%) were Management members and 5(45.5%) were non-management members. Questionnaires were distributed to a sample of 81 from a target population of 270. Out of the distributed questionnaires 79 (97.5%) were collected back and analyzed using SPSS version 24. In addition, secondary sources collected from the ERC’s five year strategic plan (2015-2020) and other BSC related documents were also used to compliment the information found through the questionnaire. The results obtained and the analysis of the responses is presented below.

4.1. Respondents Demographic Information

This section summarizes the sex, age, educational level, respondents’ current positions in the organization, years of experience on the current job and their total years of experience in the organization. The purpose of this demographic analysis is to know the male and female proportion, age distribution, level of education, respondents’ current position and their experience in ERC. It is indicated in the following tables and figures.

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Figure 3: Sex Proportions of the Respondents

Source: Own Primary Survey, 2019

As shown in the above figure 3, out of 79 total respondent, 59 (74.7%) of respondents are male and 20 (25.3%) of respondents are female. Hence, majority of the respondent are male. This shows that in Ethiopian Railways Corporation male proportion is higher than female.

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Figure 4: Age Proportion of the Respondents

Source: Own Primary Survey, 2019

As indicated the above figure 4, 18 (22.8%) of the respondents are grouped under the age of 20-30 years, 45 (57%) of the respondents are under category of 31-40 years, 11 (13.9%) of the respondents are 41-50 years and the remaining 5 (6.3%) is categorized above the age group of 51. From the table majority of the respondents’ age category belongs to in range of 31–40.

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Figure 5: Education Level of the respondent

Source: Own Primary Survey, 2019

The above figure indicates that 45(57.0%) of respondents have Master´s degree (Post graduate), 32(40.5%) have BA/BSC degree (Under graduate) and 2(2.5%) have Diploma/TVET. This implies that 97.5% of the participants in the survey have already achieved first degree and above. Hence, respondents are well-educated and are believed to know about the study area and to give valuable or reliable responses.

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Figure 6: Current position of the respondent in the organization

Source: Own Primary Survey, 2019

Figure 6 above indicates that 34(43.0%) of the respondents are Experts, 21(26.6%) of respondents are Team leaders, 6 (7.6%) of the respondents are Section managers, 14 (17.7%) of the respondents are Directors (Department Heads) and the remaining 4 (5.1%) of the respondents are Other Position holders. From this result it is possible to deduce that majority of the respondents are Experts and Team leaders. Therefore, it is possible to say that the main implementers of BSC are well represented.

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Figure 7: Respondents Years of Experience in the Corporation

Source: Own Primary Survey, 2019

Regarding their work experience in the Corporation, as the survey result indicates that 20 (25.3%) of respondents have served the Corporation between 1-3 years, 28 (35.4 %) have served between 4-6 years, 22(27.8%) of respondents have served 7-10 years and 9(11.4%) of respondents have served above 10 years. This indicates that, majority of the respondents have served between 4-6 years, and they are expected to have taken part in the building and implementation of the Corporation’s BSC reform initiative.

4.2. Analysis of the Variables

To make ease of presentation and analysis of the information, the data obtained from respondents is grouped in to six inter related thematic areas. All the questions under the six thematic areas has been analyzed and interpreted accordingly.

Table 2: Balanced Scorecard (BSC) initiative

Abbildung in dieser Leseprobe nicht enthalten

Source: Own Survey, 2019

As indicated above concerning BSC based strategic plan preparation, 27(34.2%) of the respondents disagreed and strongly disagreed, 27(34.2%) of respondents remained neutral and 25(31.6%) of the respondents agreed and strongly agreed that the BSC based plan was prepared. This means that the Corporation`s strategic plan was not understood by the respondents by what strategic planning frame work it is prepared. This implies that the strategic plan preparation was not well communicated to all stake holders.

Regarding the prioritization of the BSC initiatives, 37(46.9%) of the respondents disagreed and strongly disagreed, 24(30.4%) respondents partially agreed, whereas 17(21.6%) agreed and strongly agreed. This implies that executives of the Corporation didn’t take the implementation process as a priority.

Concerning resource allocation for the proper implementation of the BSC initiative, 47(59.5%) of respondents disagreed and strongly disagreed, 24(30.4%) respondents undecided and remaining 8(10.1%) of respondents agreed and strongly agreed. From this it is possible to deduce that enough resources were not allocated to design and implement Corporate Balanced Scorecard.

With regard to required data availed and analyzed for the preparation, majority of the respondents 42(53.2%) disagreed and strongly disagreed, 27(34.2%) of the respondents were undecided while 8(10.1%) of respondents agreed and strongly agreed that relevant document and information were not analyzed adequately for BSC based strategic plan preparation. This means that enough internal and external environmental scanning was not carried out to prepare the strategic plan.

As depicted above regarding the adequacy of employee discussion on strategic plan, 46(58.3%) disagreed and strongly disagreed, 23(29.1%) of respondents undecided and only 8(10.2%) of respondents agreed and strongly agreed. As a result the participation of employee in BSC development and implementation process was very limited.

Table 3: Employees’ awareness level on BSC strategy

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Source: Own Survey, 2019

As indicated in table 3 above, 42(53.2%) of respondents agree and strongly agree regarding awareness of the Corporation´s vision, mission and strategy, 24(30.4%) of respondents undecided (agree in part) and 13(16.5%) of respondents disagree and strongly disagree. This indicates that majority of the employees were aware of the Corporation´s vision and mission. This might be because of the fact that the Corporation’s mission and vision is fixed on notice board where employees can see frequently.

As depicted above with regard to training on BSC, more than half of the respondents 41(51.9%) disagree and strongly disagree, 19(24.1%) partially agree whereas 16(20.3%) agreed and strongly agreed. These indicate that continuous and refreshment training on concepts of BSC was not properly administered. This may hinder the implementation of the system.

Table 4: Current status of BSC Implementation in ERC

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Source: Own Survey, 2019

As indicated in the above table (Table 9) concerning the Progress of BSC implementation, 56(70.9%) of the respondent disagreed and strongly disagreed, 14(17.7%) partially agree and 9(11.4%) of respondents agreed and strongly agreed on the progress of balanced score card. This indicates that majority of respondents were not satisfied on the progress of BSC implementation.

Regarding providing BSC status information timely, 49(62%) of the respondent disagreed and strongly disagreed, 20(25.3%) undecided and 6(7.6%) agreed respectively. The response indicated that, the Corporation lacks in availing BSC status information on timely basis and this is one of the reasons which affect the implementation of BSC.

As noted from the table above with regard to providing regular support and feedback, 54(68.4%) the respondents disagreed or strongly disagreed, 17(21.5%) remained neutral and the remaining 8(10.1%) agreed or strongly agreed on the Corporation´s management effort to coach and provide staff with regular feedback. This indicates that weak follow up and feedback system as well as management effort to bridge any knowledge gap was very low.

Concerning motivating employees toward BSC implementation, 57(72.2%) of respondents disagreed or strongly disagreed, 16(20.3%) remained neutral and only 5(6.3%) agreed. This implies most of the respondents confirmed that ERC management failed to motivate the employees for successful BSC implementation.

With regard to performance Evaluation in ERC, 43(54.4 %) of respondents disagreed or strongly disagreed, 17(21.5%) had doubts (undecided) and the remaining 16(20.3%) agreed. So that majority of respondents replied that evaluation is not based on performance.

As depicted in the table above, alignment of individual, team and process activities with the Corporation´s strategy, 34(43%) disagreed or strongly disagreed, 31(39.2%) remained neutral, and 13(16.5%) of them agreed or strongly agreed. This means, the Corporation´s effort to align individual, team and work unit activities to the corporate strategy is poor.

With regard to maintaining balanced view of perspectives, 36(45.6%) disagreed or strongly disagreed, 34(43.0%) of the respondents had reservation (neutral) and 8(10.2%) agreed or strongly agreed in terms of maintaining balanced view of perspectives in the Corporation revealed that the awareness level of management of ERC in maintaining long term and short term as well as tangible and intangible balances is poor.

Regarding level of commitment of ERC´s leadership, 48(60.8%) disagreed or strongly disagreed, 25(31.6%) remained neutral (agree in part), and 6(7.6%) agreed or strongly agreed. From this, it can be concluded that the involvement and commitment of ERC´s leadership in implementing the BSC is very low and serious problem of commitment among leaders. Lack of commitment among leaders can be one of the major constraints to implement BSC and failure of balanced scorecard initiative in the Corporation.

As depicted with the statement above, regards to proper designing of BSC, 52(65.8%) majority of respondents disagreed or strongly disagreed, 20(25.3 %) remained neutral(agree in part), and 6(7.6%) agreed or strongly agreed. This implies that the strategic plan was not properly designed.

Generally the interview results also confirmed regarding the current status of BSC implementation in the Corporation, the BSC initiative was not functional as expected due to lack of management commitment which is the major challenge facing the organization related to BSC reform initiative implementation. In addition, lack of training, employee reluctance, poor organizational culture, lack of cascading and aligning BSC strategy with day to day activity, weak monitoring and evaluation system, active resistance from management (considering BSC as a threat if the BSC tool implemented properly they might lose their position).

Table 5: Operational efficiency in ERC

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Source: Own Survey, 2019

With regard to interfaces as shown the above table 44(55.7%) of respondents disagreed or strongly disagreed, 27(34.2%) neutral & 8(10.1%) remained agreed or strongly agreed. Thus, we can infer that the level of interface & coordination among work units in ERC is very poor.

Concerning effective use of the IT system, majority of the respondents 65(82.3%) disagreed or strongly disagreed, 11(13.9%) remained neutral & 2(2.6%) agreed or strongly agreed. This implies that the BSC system is not IT supported.

As depicted with the statement above, 56(70.9%) of the respondents disagreed or strongly disagreed with the provision of equipment and information provided to them, 12(15.2%) were in doubt and the remaining 11(14%) agreed or strongly agreed. This indicates that the Corporation has not availed the required equipment and information to do the job.

Regarding the level of effectiveness of communication system of the Corporation, majority of respondents 51(64.6%) disagreed or strongly disagreed, 22(27.8%) remained neutral and only 5(6.3%) agreed. This shows that the level of commitment of ERC‘s leadership in informing and communicating employees on a regular basis was very low, and this contributed for weak understanding of the BSC concept and knowledge which as a result impeded successful implementation of the system.

As depicted on the table above, majority of the respondents 56(70.9%) disagreed or strongly disagreed, 15(19.0%) partially agree and 6(7.6%) agreed or strongly agreed on availability of proper check & balance system in the Corporation. This implies proper check and balance system is not in place.

Table 6: Perception of employees toward BSC implementation in ERC

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Source: Own Survey, 2019

Regarding commitment of employees, about 34(43%) of respondents disagreed and strongly disagreed about employees commitment toward balanced score card implementation, 30(38.0%) remained neutral and 15(19%) of the respondents agree and strongly agree respectively regarding the commitment of employees. This indicates reduced effort of employees which arises from poor engagement in BSC system design and implementation process.

Concerning employee’s perception towards target achievement, about 30(38%) disagreed and strongly disagreed on employees’ perception towards target achievement, 30(38%) neutral and 19(24.1%) of the respondents agreed and strongly agreed respectively about positive perception employees toward target achievement. This implied that unless employees perceive positively it is hard to achieve Objectives, to gain benefit from successful implementation of balanced score card. BSC implementation requires readiness in terms of mentality, skill, competence and resource linked with strategy. But, significant number of respondents replied that there is lack of preparation in terms of skill and attitude. Furthermore, lack of commitment adversely affects the effectiveness of BSC implementation.

The attitude of the respondents on the statement that team work became distinguishing feature of ERC reveals that more than half of respondents 40(50.6%) disagreed and strongly disagreed, 23(29.1%) had doubt (agree in part), 14(17.7%) agreed and strongly agreed. This shows that the level of teamwork and integration in ERC is low.

With regard to motivating and participatory culture, majority of the respondents 56(70.9%) disagreed or strongly disagreed on the statement that there was motivating and participatory culture in the Corporation, 14(17.7%) remained neutral and 9(11.4%) agreed and strongly agreed. This implies that participatory and motivating culture in ERC was very low and this negatively affected the implementation process of BSC in the Corporation.

As depicted in the table above, regarding the benefits of BSC implementation the respondents opinions/feelings, 20(25.3%) of the respondents had disagreed or strongly disagreed on usefulness of BSC for ERC, while 27(34.2%) of them believed that the implementation of BSC was somewhat useful (agree in part), 30(38%) agreed or strongly agreed. From this opinion we can deduce that implementing BSC in ERC is helpful in executing its strategic objectives and this imply Corporation have prospects to achieve significant change.

Concerning linking BSC strategy with daily activities, 39(49.4%) of the respondents had disagreed and strongly disagreed, 25(31.6%) partially agree whereas 14(17.7%) of the respondents made their agreement (agree and strongly agree). This indicated that organizational strategy was not properly cascaded and linked with daily activities.

Concerning BSC support to achieve work unit objectives, 33(41.8%) of the respondents had disagreed and strongly disagreed, 24(30.4%) of respondents rated undecided whereas 22 (27.9%) of the respondents made their agreement; this implies support provided to work unit to achieve BSC implementation objectives was low.

With regard to that BSC equipped employee with accountability, 28(35.5%) of respondents disagreed and strongly disagreed, 26(32.9%) respondents were partially agreed while 23(29.1%) agree and strongly agree; the study result indicates that since the balanced scorecard system in ERC was not well cascaded and communicated, the tool was unable to address accountability.

As indicated in table above with regard to that BSC encourages learning and continuous improvement, 22(27.8%) respondents disagreed and strongly disagreed, 24(30.4%) of the respondents partially agree and 32(40.5%) of respondents agreed and strongly agreed as indicated in table above. This implies BSC encourages learning and continuous improvement if properly implemented.

Concerning to question if BSC has increased employees’ understanding of strategies, 24(30.3%) of the respondents disagreed and strongly disagreed, while 31(39.2%) of respondent’s undecided and 23(29.1%) of respondent agreed and strongly agreed. This implies BSC has increased employees’ understanding of strategies moderately.

As depicted in the table above regards to the relevance of BSC to the Corporation 12(15.2%) of the respondents disagreed or strongly disagreed, 23(29.1%) of respondents remained neutral and more than half of respondents 43(54.4%) agreed and strongly agreed. This indicates that the employees accepted BSC as relevant reform tool and understand the benefits of implementing the Balanced Scorecard. So the Corporation can use this as a better opportunity to implement BSC system.

Table 7: Challenges of BSC implementation in ERC

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Source: Own Survey, 2019

As can be seen from table 7 above, level enhanced commitment of Management which is very crucial for any reform to be successful. Majority of respondents 49(62%) agreed and strongly agreed with that there is lack of management commitment regards to BSC implementation, 17(21.5%) respondents remained neutral and 12(15.2%) disagreed and strongly disagreed. As the result implies the major challenges were faced during the implementation of BSC as well as failure to maintain the system at ERC. Above all, weak or lack of commitment from the leadership is a root cause for other factors (variables) of BSC initiative failure in ERC.

With regard to work system, majority of respondents 55(69.6%) agreed and strongly agreed Poor work system & culture backed by bureaucratic & delayed decision-making in ERC, whereas 17(21.5%) respondent’s partially agree and remaining 7(8.8%) disagreed and strongly disagreed. This showed that there is poor work system & culture i.e. lack of reform mentality contributed for weaknesses (challenges) in the implementation process of BSC in the Corporation.

As indicated in the above table, lack of empowerment and motivation, 53(67%) of respondents agreed and strongly agreed with lack of empowerment and motivation in Corporation, 16(20.3%) respondents remained neutral and 8(10.1%) disagreed and strongly disagreed. This implies that empowerment and motivating culture in ERC was poor as a result resistant and incapability in the implementation process of BSC in the Corporation.

Regards to skill, knowledge and ethical gaps, 30(38%) of respondents agreed and strongly agreed with regard to skill, knowledge and ethical gaps in Corporation, 21(26.6 %) respondent’s undecided and 27(34.2%) disagreed and strongly disagreed. This indicates skill, knowledge and ethical gaps were also critical challenges encountered during the implementation process of BSC in the Corporation.

Concerning lack of information on BSC implementation, 29(36.7%) of the respondents showed their agreement (agrees or strongly agree) on the problem of insufficient information, 34(43%) respondents were partially agreed whereas 15(19%) disagreed and strongly disagreed. This indicates that insufficient information was provided on BSC implementation.

In order to check lack of consensus on objectives, the data in table above showed that 31(39.2%) of respondents rated as agree and strongly agree, 26(32.9%) of the respondents rated as moderate (agree in part) whereas 19(24.1%) disagreed and strongly disagreed. Data obtained showed that inability to reach consensus on objectives in the Corporation, because of this it was challenging to cascade objectives and measures.

Moreover, the interview conducted with a total of eleven (11) managers and non managers from selected departments of the Corporation. In the effort to collect information with regard to the implementation of the balanced scorecard, the selected staffs were interviewed about the overall process they went through, the challenges they have faced and the current status of ERC in implementing BSC. Accordingly, the responses from the interview were analyzed in the following manner.

Interviewees pointed out that the reasons for the Corporation to implement BSC are: because of government policy and direction, to plan strategically and measure organizational performance, traditional models have limitations. Therefore the modern tool found to be the BSC System.

From the interview findings it can be concluded that BSC implementation in ERC was not owned and accepted practically by management members. The results of the study goes in line with that of Behdad and Mohammad (2014) who stated that on existing challenges of BSC implementation, insufficient information system to support BSC, lack of top management support and dedication, organizational politics and the fact that BSC implementation is time-consuming were the major challenges encountered in implementing the BSC. Pujas (2010), summarized challenges of BSC implementation as: limited understanding of BSC, lack of executive sponsorship, lack of BSC education and training, inadequate IT support, inadequate project team, organizational participation, inadequate key performance indicators (KPIs) and lack of communication.

Again the informants confirmed that, ERC made some efforts to solve the above listed challenges, such as: Management members discussed on BSC improvement, integrated committee established to monitor for successful improvement and some advocacy works has been done.

CHAPTER FIVE

5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

In this chapter, summary and conclusions of the findings are presented and recommendations are drawn based on the data collected; analyzed and interpreted using different instruments and tools in the previous chapter.

5.1. Summary of Findings

The study was conducted to assess Balanced Scorecard implementation and its challenges in ERC. The study made use of a mixed (both qualitative and quantitative) approach with descriptive theme. Data was collected from both primary and secondary sources using questionnaire, interview and document review. The collected data was analyzed using descriptive approach by Pie charts, bar graphs and tables. The findings of the study have been summarized as follows.

1. I mplementation status of BSC in the ERC

The study confirmed that the Corporation had unsatisfactory readiness and preparation in terms of BSC based strategic plan. In this regard, relevant document and information were not analyzed adequately and enough resources were not allocated to design and implement corporate balanced Scorecard. In addition, the executives of the Corporation insufficiently supported the implementation process by taking the BSC as one of the priorities of the ERC. This indicated that the plan phase was not properly done which contributed for poor implementation of balanced Scorecard in ERC. Furthermore, the strategic plan was not understood by the respondents by what strategic planning frame work it is prepared, this implies that participation of employee in BSC design and implementation process was very limited and also not well communicated.

Moreover, based on the study result majority of the respondents 56(70.9%) believed that, there was no progress towards the achievements of balanced scorecard reform initiative. From this analysis it can be concluded that, BSC implementation status information and required resource were not availed timely, interface among work units was weak, monitoring and evaluation system as well as management effort to bridge any knowledge gap was very low and the BSC system was not supported by IT in ERC. Generally as the study result reveals majority of respondents were not satisfied on the progress of BSC implementation in the Corporation.

2. Level of knowledge, skill and attitude towards implementation of BSC in ERC

The study has shown that, significant number 42(53.2%) of the employees were aware of the Corporation´s vision, mission; this might be because of the fact that the Corporation’s mission and vision is fixed on notice board where employees can see frequently. On the other hand regards to training, more than half 41(51.9%) of the respondents replied that training provided on BSC was very few and scanty. Moreover, the interview result revealed that continuous and refreshment training on BSC was inadequate. These show that continuous refreshment training on concepts of BSC was not properly administered which may hinder implementation of the system. In addition, the study confirmed that there are skill, knowledge and ethical gaps that have contributed for resistance of BSC implementation in the Corporation.

3. Commitment of employees and managers towards the BSC reform objectives.

The finding revealed that 34(43%) of respondents were disagreed and strongly disagreed about employees commitment toward BSC implementation. This implies reduced effort and commitment of employees arises from poor engagement in BSC system design and implementation process. Concerning level of commitment of ERC´s leadership, 49(62%) of respondents agreed with that there is lack of management commitment. From this finding, it can be concluded that lack of leadership commitment is a serious challenge and root cause for other factors of BSC initiative failure in ERC. The result of the study goes in line with that of (Marr, 2010) who stated that many organizations assume that once senior management have agreed on their Balanced Scorecard, strategic map and their indicators everyone will happily implement it and the reverse otherwise.

4. Perception of employees toward the BSC reform initiative

As depicted in the study, the respondents opinions on the BSC initiative implementation in ERC, 20(25.3%) of the respondents had disagreed on usefulness of BSC to the Corporation, 27(34.2%) partially agreed while 30(38%) of respondents agreed on the BSC reform tool relevance. The other important points was perception of employees’ on understanding of strategies, 24(30.3%) of the respondents disagreed, while 31(39.2%) undecided and remaining 23(29.1%) of respondent agreed. This implies BSC has increased employees’ understanding of planning and strategies moderately. Respondents also confirmed that they believed BSC encourages learning and continuous improvement in ERC positively. From this opinion we can deduce that implementing BSC in ERC is helpful in executing its strategic objectives and this implies Corporation has prospects to achieve significant change. On the other hand, respondents have strongly expressed their limited agreement regards to team work and Coordination, support provided to achieve BSC implementation and linking BSC strategy with daily activities to achieve BSC implementation objectives.

5. Existing challenges in implementing BSC reform initiative in the ERC

As can be seen from the study, level enhanced commitment of Management which is very crucial for any reform to be successful. Majority of respondents confirmed their agreement regards to lack of management commitment on BSC implementation. The result implies the major challenges were faced during the implementation of BSC as well as failure to maintain the system at ERC. Above all, lack of commitment from the leadership is a serious challenge which contributed for Poor work system, poor work culture, resistant and incapability, lack of empowerment and motivation and lack of information on BSC implementation process. From this study it can be concluded that lack of leadership commitment in realizing BSC implementation and lack of reform mentality supports traditional organization culture which contributed for BSC reform initiative failure.

5.2. Conclusion

The study was conducted to assess Balanced Scorecard implementation and its challenges in Ethiopian Railways Corporation. While conducting the study, a literature review of the BSC, its concepts and implementation methods were reviewed. Previous studies were also used to identify the most important challenges to the successful implementation of BSC. Data was collected from both secondary and primary sources using questionnaire, interview and document review. The collected data was analyzed using descriptive approach by bar graphs, pie charts and tables.

Based on the analysis, interpretation and summary of the findings, the following conclusions are drawn.

- The study confirmed that somewhat common understanding maintained by the Corporation’s employees about the vision and strategic objectives. This can be considered as a good opportunity in smoothly undertaking the implementation process of BSC initiative in ERC.
- Employee’s positive perception on BSC reform tool has relevance or is a good opportunity for future implementation of the system.
- Most of the respondents’ believed that, BSC encourages learning and continuous improvement in ERC positively. From this opinion it can be deduce that implementing BSC in ERC can be helpful in executing its strategies.
- The Corporation BSC based strategic plan was not properly designed and well communicated, which contributed for poor implementation of balanced scorecard initiative in ERC.
- As per the study findings, lack of continuous training about the BSC concepts has become serious challenge which reduced the effort and commitment of employees.
- The study evidence revealed majority of the respondents were not satisfied on the status of BSC implementation, and that majority of them believed it didn’t meet its targets due to lack of leadership commitment in realizing BSC implementation, management failure to motivate the employees, biased evaluation and lack of aligning BSC strategy with daily activities.
- The existing communication system in ERC is poor as a result it does not facilitate interactive way of communication, BSC implementation status information and required resources were not availed timely, interface & coordination among work units was weak. Furthermore, the existing IT not effectively supports BSC implementation and all these contributed in causing operational inefficiency in ERC.
- Generally, as per the study result majority of respondents confirmed existence of serious challenges of BSC reform initiative implementation in the Corporation. From the finding, major cause of challenges derived from lack of leadership commitment and lack of necessary training which enhancing the old age (traditional) working conditions along with lack of reform mentality lead to BSC reform initiative failure in ERC.

5.3. Recommendation

Based on the major findings of the study, the following recommendations are drawn to enhance the Ethiopian Railways Corporation effectiveness in the implementation of BSC.

- To be effective, ERC should make the implementation of BSC systematize as a result each and every individual has a cascaded plan based on corporate strategy.
- Strengthening reform team and change agent among the corporation community who can speed up the whole reform initiatives.
- The Corporation should sustain and use the employee’s positive perception on BSC reform tool as a good opportunity for improvement in performance. The management should also play a catalyst role in coordinating and motivating employees with a great deal of concern, dedication and sense of ownership to the success of the BSC implementation in the Corporation.
- The Corporation should strength the commitment of management by improving the awareness level of leadership in building positive attitude through education and training.
- Adequate and continuous training should be provided to all employees to enable them to enhance their skill on how to design and implement BSC.
- The leadership should avail required resources timely and also effectively communicate employees on a regular basis.
- To maintain balanced scorecard implementation with relevant information, the Corporation should strength IT support to automate all possible working systems and documentation which may enable to improve operational efficiency.
- ERC’s management should use the BSC framework to align individual, team and process level accomplishments to the reward system. This enables the Corporation to establish ground for competition and best performance through motivation and recognition.
- The leadership of the Corporation should give prior emphasis to the successful execution of the BSC through provision of continuous guidance (direction), strict evaluation and taking timely corrective action for improvement.
- To tackle the challenges encountered in the implementation process of BSC, the leadership of the Corporation should initiate and scan progress level of Balanced Scorecard reform initiative and learn lessons of success in implementing same through creating cooperation and experience sharing.
- Clear and structured responsibility and accountability should, thus, be put in place for weak performance contrary to the requirements of BSC and the Corporation´s BSC implementation manual.

5.4. Further research direction

Due to the fact that this research has been conducted in only in Ethiopian Railways Corporation, the findings cannot be applicable to any other area. Therefore, further study is recommended using larger sample size including other crucial variables. This will in turn introduce results from which generalized conclusions can be forwarded.

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