Developing Balance Score card in Managing Corporate Social

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Developing Balance Score card in Managing Corporate Social
Responsibility
1
Amin Navasery, 2 Bita Farhoudnia, 3Moein Ahmadi, 4Maliheh Dorostkar,
1
Department of Information Technology and Management (DITM), Faculty of Computer Science, Bharati Vidyapeeth University,
Pune, India (Corresponding Author)Email: [email protected]
2
Department of management, Islamic Azad University, Science and Research branch, Sirjan, Iran
3
Bharati Vidyapeeth University, Yashwantrao Mohite College, Pune, India
4
Research and entrepreneurship Center, Payam Noor University, Hormozgan, Iran
Abstract
The corporate social responsibility movement has been gathering momentum
for the past ten years. Balanced Scorecard is "a focused set of key financial and
non-financial indicators. The balanced scorecard (BSC) is a strategy
performance management tool - a semi-standard structured report, supported by
design methods and automation tools that can be used by managers to keep
track of the execution of activities by the staff within their control and to
monitor the consequences arising from these actions. We can divide the
accounting in two parts. The first one is financial accounting and the second is
cost accounting. Nowadays in globalization world we think about managerial
strategic decision making and how we can reduce the cost of production and
finally increase the profit. This paper will try to demonstrate corporate social
report (CSR) which is one part of financial reports,than the paper talks about
balance score card (BSC) as a new cost method which is more useful for
managerial strategic decision making. It means the paper try to find a linkage
between cost accounting and financial accounting by emphasis on CSR and BSC.
Key words: balanced scorecard, corporate social report, strategic decision making
Introduction
Organizations have used systems consisting of a mix of financial and non-financial measures to track progress
for quite some time. One example of a such a system was created by Art Schneiderman in 1987, a mid-sized
semi-conductor company; the Analog Devices Balanced Scorecard was similar to what is now recognised as a
"First Generation" Balanced Scorecard design. Subsequently Art Schneiderman participated in an unrelated
research study in 1990 led by Dr. Robert S. Kaplan in conjunction with US management consultancy NolanNorton, and during this study described his work on performance measurement. Subsequently, Kaplan and
David P. Norton included anonymous details of this use of balanced scorecard in a 1992 article. Kaplan and
Norton's article wasn't the only paper on the topic published in early 1992 but the 1992 Kaplan and Norton
paper was a popular success, and was quickly followed by a second in 1993. In 1996, they published the book
The Balanced Scorecard. These articles and the first book spread knowledge of the concept of balanced
scorecard widely, and has led to Kaplan and Norton being seen as the creators of the concept. The main role of
annual reports is to provide useful information to shareholders and other stakeholders about the financial
position and performance of the business as well as its future prospects to help them make decisions. Corporate
social report is one of the financial reports but it is not compulsory for the company to publish their social
report cause there is no special standard for that and still there are some problem for preparing the report but we
should now what is social report and second we want to know more about balanced scorecard and how this to
report can help the management for decision making.
In the days to come CSR will go on to gain further importance for a number of reasons including the
competitive advantage to be garnered by the companies. Even now, companies in Europe and North America
are waking up to the strategic possibilities and competitive advantages offered by being an environment
friendly company. Customers might be willing to pay more for environment friendliness and for healthy food.
Environment friendly and cheaper automobiles, for instance, have attracted public attention. In other words,
CSR activities can create value addition.
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Corporate Social Responsibility
Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social
performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation
integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a
business monitors and ensures its active compliance within the spirit of the law, ethical standards, and
international norms. CSR is a process with the aim to embrace responsibility for the company's actions and
encourage a positive impact through its activities on the environment, consumers, employees, communities,
stakeholders and all other members of the public sphere who may also be considered as stakeholders.
The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many
multinational corporations formed the term stakeholders, meaning those on whom an organization's activities
have an impact. It was used to describe corporate owners beyond stakeholders as a result of an influential book
by R. Edward Freeman, Strategic management: a stakeholder approach in 1984. Proponents argue that
corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts
from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt
the role of governments as a watchdog over powerful Multinational Corporation.
Accounting researchers have recently increased their studies on non-financial aspect of disclosure, such as
theoretical approach of social and environmental accounting, analysis of social and environmental issues,
impact on managerial accounting, and implication of social and environmental requirements upon corporate
entity‘s performance, the variables that affect social and environmental disclosures in annual reports.
Corporate social reporting also known as Social accounting, social and environmental accounting, corporate
social responsibility reporting, non-financial reporting, sustainability accounting etc. is the process of
communicating the social and environmental effects of organizations, economic action to particular interest
group within society and to society at large. The corporate reporting is total communication system between a
company and its users. Social and environmental reporting (SER) is a fast growing area of modern corporate
reporting (Gray, 2000; Jahanshahi et al, 2011;Khaksar et al, 2011).
CSR-Asia
defined Corporate
Social
Responsibility as
a concept whereby companies
integrate social and environmental concerns in their business operations and in their
interaction with their stakeholders on a voluntary basis. Many companies all over the
world are now starting to see the benefit of practicing CSR in their bottom lines.
European countries are now seriously engaged in this concept on different levels and
even in interpretation of how the concept works.
Recent years have witnessed an increase in the number of companies reporting publicly on various aspects of
their environmental and social performance (Kolk, 2003; CSR Network, 2003; Nawaser et al, 2011). The most
consistent reporters have predominantly, but not exclusively, been large companies operating in ‗sensitive‘
industrial sectors. These companies primarily produce a substantial stand-alone paper and/or web based report.
Since 1993, KPMG‘s tri-annual survey of reporting practice has charted a steady growth in the number of
reporters. In the latest (2002) survey, for example, it is noted that 45% of the top 250 companies of the Global
Fortune 500 (GFT250) now issue an environmental, social or ‗sustainability‘ report compared to 35% in 1999
(KPMG, 2002).
The recent increase in social, environmental and ‗sustainability‘ reporting has not been universally acclaimed.
Many academic researchers have been critical of key features of emerging practice, given its tendencies towards
managerialism at the expense of accountability and transparency to stakeholder groups (Belal, 2002; Eizi et al,
2013; Gray and Milne, 2002; Owen et al., 2000).
Social accounting put emphasis the notion of corporate accountability. It is an approach to reporting firm‘s
activities which stresses the need for the identification of socially relevant behavior, the determination of those
to whom the company is accountable for its social performance and the development of appropriate measures
and reporting techniques.
The intensity with which corporate social responsibility impacts a firm's competitive field is not a constant.
Actually most of the time social issues hit businesses in a short burst followed by a phase of relative peace.
(Hashemzadeh et al, 2011)Looking beyond the ethical scandal of the day one can identify several longer waves
consisting of a group of similar social issues. These longer waves are usually driven by a particular stakeholder
group. A first wave of social transformation started in the U.S. at the end of the 19 th century as a response to the
largely unchecked industrial capitalism. Protest was mainly fuelled by concern about nonexistent workers'
rights and the robber barons' quasi monopoly positions. Eventually the arrival of labor unions completely
transformed the competitive field and also the lives of many workers.
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Balance Score Card as Strategic Management System
Although many companies have performance measurement system that incorporate financial and non-financial
measures, they use them mainly for the feedback and control of short-term operations according to Kaplan and
Norton, the objectives of the balanced scorecard are more than just collection of financial and non-financial
performance measures; they are derived from a top-down Process driven by the mission and strategy of the
business unit. In particular, the balanced scorecard should translate a business unit‘s mission and strategy in to a
linked set of measures that define both thelong-term strategic objectives, as well as the mechanisms for
achieving those objectives.(Dehkory et al, 2013; Hakkak et al 2014) The measures incorporate a balance
between external measures relating to customers and internal measuresrelatingto critical business processes and
innovation and learning. They also incorporate a balance between outcome measures (the result from past
efforts) and the measures that drive future performance.
Kaplan and Norton (1992) developed an innovative multi-dimensional corporate performance scorecard known
as the Balanced Scorecard. It provides a framework for selecting multiple key performance indicators that
supplement traditional financial measures with operating measures of customer satisfaction, internal business
processes, and learning and growth activities. It is a step towards linking ‗short-term operational controls‘ to the
‗long-term vision and strategy‘ of the business. The focus is on the strategy and vision. It compels the firm to
align its performance measurement and controls with the customers‘ internal business processes and learning
and growth perspectives and investigate their impact on the financial indicators.Kaplan and Norton (1996)
describe how innovative companies are using the measurement focus of the score card to accomplish the
following critical management processes:
1) Clarifying and translating vision and strategy into specific strategic objectives and identifying the critical
drivers of the strategic objectives.
2) Communicating and linking strategic objectives and measures. Ideally, once all the employees understand the
high level objectives and measures, they should establish local objectives that support the business unit‘s global
strategy.
3) Planning, setting targets, and aligning strategic initiatives. Such target should be over a 3- 5 year period
broken down on a yearly basis so that progression targets can be set for assessing the progress that is being
made towards achieving the longer-term targets.
4) Enhancing strategic feedback and learning so that managers can monitor and adjust the implementation of
their strategy, and, if necessary, make fundamental changes to the strategy itself.
Implementation of balanced scorecard
The implementation of the Balanced Scorecard is an innovative way to create strategic awareness in the
organization. It is a top-down communication which when embedded in on-going management processes results
in the replacement of formal communication programme. Kaplan and Norton (2001) have documented the
experiences of Mobil, Motorola, and Sears with the Balanced Scorecard in communicating with their employees
on the goals and mission of the company and, in turn, influencing this behavior and performance. Mendoza and
Zrihen (2001) observed that the French management control tool called the ‗tableau de bord‘— best translated
as performance scorecard — is identical to the Balanced Scorecard developed by Kaplan and Norton. The firms
have used these contemporary performance management tools to overcome the limitations of traditional budget
and planning system. They have documented the rich experience of implementing the Balanced Scorecard in a
French affiliate of an English holding company most of whose shareholders are US pension fund beneficiaries.
The scorecard measures an organizations performance from four perspectives:
1. The financial perspective
It is all about financial performance – at least for the profit maximizing business. The objectives should be
defined in order to excite the owners or sponsors to ensure continued funding of the organization.
Some examples: ―increase shareholder value‖,‖ boost shareholder confidence‖.
2. The customer perspective
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Looking at the organization using the customer perspective is about how the customers perceive the value
offered. The objectives should closely define how customers should perceive the proposal in order for them to
reward the organization with the financial results hey expect.
Some examples: ―perceived as a low-cost supplier‖, ―perceived as flexible and adjustable ―,‖perceived as a
high–quality furniture store‖, etc.
3. The internal business process perspective
The internal process perspective of balanced scorecard focuses on the deliveries the internal organization must
make in order to perceived by customers according to its customer objectives.
Some examples: ―the lowest prices in the bay area‖ , ―customization of services in less than a week‖,‖ only
quality brand furniture‖, ―convincing market communication‖, etc. The internal business process perspective
comprises three sub-processes, namely
i.
The innovative process,
ii.
The operations process and
iii.
Post sales services.
4. The learning and growth perspective
The learning and growth perspective of balanced scorecard focus on the competencies and resources needed in
order to make the deliveries defined in the internal processes objectives.
Some examples:‖ highly flexible material management system‖, ―top project management skills‖, ―strategic
alliance with quality furniture markers‖, etc.
The learning and growth perspective of a company emphasizes three capabilities:
A.
The employee capabilities, measured using employee education and risk levels
B.
Information system capabilities, measured by percentage or manufacturing processes with real-time
feedback and
C.
Motivation, measured by employee satisfaction and percentage of manufacturing and sales employee
empowered to manage processes.
A company‘s strategy influences the measures it uses to track performance in each of these perspectives.
Conclusion
The study was an opportunity to review the concepts of corporate social responsibility and management tools,
the BSC.We need to try to complete the corporate social report which is can more helpful for society and also
balanced scorecard as a tool for using in managerial strategic decision making. When we know that how the
balanced scorecard can help the management and we know there is related to complete the information and data
for BSC and CSR than we can concentrate more on this two item and work on them to gather. When the
accountant want to collect their information for BSC they can define their plan that how their balanced
scorecard can be useful in their CSR and vice versa. It can also save a time to prepare some kinds of reports.
The results of paper are when we have a strong balanced scorecard in our company it means we have power to
prepare a good corporate social report too. Than paper suggested to the management for using the BSC as can
be helpful for preparing the CSR and we should never forget that we are responsible to society. We should
move forward with the respect of society and try to increase the level of life and show our duty by publish our
company social report.
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