THE RELATIONSHIP BETWEEN STRUCTURAL EQUATION MODELING AND BALANCED SCORECARD: EVIDENCE FROM A SWISS NON PROFIT ORGANIZATION

Bernard Morard, Alexandru Stancu and Christophe Jeannette

Review of Business and Finance Studies, 2012, vol. 3, issue 2, 21-37

Abstract: This paper studies the relationship between structural equation modeling and Balanced Scorecard in a Swiss non-profit establishment. Using financial and non-financial performance indicators collected directly from the organization, the paper proposes a rational construction and analysis of Balanced Scorecard by selecting the factual metrics for the right strategic areas. This choice is made by applying a sequence of Partial Least Squares in the proposed model. Furthermore, the approach establishes the cause-and-effect sequence originally defined by Kaplan and Norton as: the measures of organizational learning and growth will influence the measures of internal business processes, which, sequentially, will impact the measures of the customer perspective that, lastly, will affect the financial indicators. It will be noted that the Kaplan and Norton model of Balanced Scorecard is different from the findings in this study, a case somehow too general to handle today’s complex market environment. Following this, the paper puts forward a time-managed approach to identify the evolution of the main contributors to the current company’s strategy as well as their behavior in the future organizational performance. This approach will be applied and demonstrated in a detailed real case of a Swiss non-profit organization.

Keywords: Balanced Scorecard; Key Performance Indicators; Performance Measurement; Structural Equation Modeling (SEM); Partial Least Squares (PLS); Principal Component Analysis (PCA); Non-profit Organization (search for similar items in EconPapers)
JEL-codes: G39 L31 M19 M40 (search for similar items in EconPapers)
Date: 2012
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