Managing performance at the top: a balanced scorecard for boards of directors

Abstract

Purpose

The purpose of this paper is to draw on the perspectives and experiences of New Zealand board members to propose a balanced scorecard (BSC) for use in measuring and managing the performance of boards.

Design/methodology/approach

The views of 35 board members were elicited via semi‐structured interviews. The interview evidence was analysed using a multi‐step coding process to arrive at key themes on the functions, characteristics and outcomes of effective and ineffective boards. These themes were then used as a basis for proposing an appropriate structure and content for a BSC that reflects board members' perceptions of key factors driving board performance.

Findings

New Zealand board members see behavioural measures of board performance as generally more useful than operational and financial measures. Further, strong relationships and strategic clarity are seen as both drivers of good performance and key outcomes of effective boards. Consequently, the proposed BSC incorporates multi‐dimensional outcome (i.e. lagging) measures. It also recognises the importance of including subjective measures, rather than focusing on readily quantifiable measures that board members perceive as less informative.

Research limitations/implications

This paper provides insight into the perspectives of practising board members and informs the literature on board effectiveness. The proposed BSC adds to the performance management literature in regard to evaluating and managing the performance of boards. However, further studies are now required to test its practical utility.

Practical implications

The proposed BSC provides a potentially useful tool for evaluating the performance of boards of directors.

Originality/value

Few studies of board effectiveness have accessed the views and experiences of practising board members as this study does. Also, little prior research exists on the potential for applying a BSC approach to measuring and managing board performance.

Citation

Northcott, D. and Smith, J. (2011), "Managing performance at the top: a balanced scorecard for boards of directors", Journal of Accounting & Organizational Change, Vol. 7 No. 1, pp. 33-56. https://doi.org/10.1108/18325911111125531