doi:10.1016/S0377-2217(03)00179-6 
Copyright © 2003 Elsevier B.V. All rights reserved.
A balanced scorecard analysis of performance metrics
School of Management, The University of Texas at Dallas, Richardson, TX 75083-0688, USA
Available online 25 June 2003.
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Abstract
Many organizations have invested substantial resources in recent years to implement a balanced scorecard of performance metrics. From a historical focus exclusively on financial metrics of performance, the emphasis has shifted recently to a consideration of a portfolio of nonfinancial performance metrics related to customers, business process and technology. In this paper, we investigate the best practice frontier relationship between a financial performance metric (return on assets––ROA) and three nonfinancial performance metrics (number of access lines per employee, percentage of digital access lines and percentage of business access lines) reported and used in the US telecommunications industry. Analyzing detailed data from over fifty local exchange carriers for a period of five years (from 1993 to 1997), we find that managers must tradeoff contemporaneous ROA when increasing the percentage of business access lines. We also find that managers do not have to trade off ROA with the other two nonfinancial performance metrics because these metrics are contemporaneously congruent.
Author Keywords: Data envelopment analysis; Balanced scorecard; Performance metrics; Telecommunications
Fig. 1. Feasible set for two performance metrics.
Fig. 2. Balanced scorecard for a local exchange carrier.
Table 1. Descriptive statistics of performance metrics US local exchange carriers
Table 2. Results of testing hypothesis of no tradeoffs between any metrics
Testable hypotheses: Null: no tradeoffs between any metrics; alternative: tradeoffs are required between some metrics.
Test statistics:
Not-foundjCONGRUENT: Not-foundj estimated using model (6) with the maintained assumption of feasible set SCONGRUENT disallowing tradeoffs.
Not-foundjTRADEOFFS: Not-foundj estimated using model ((3.1), (3.2), (3.3) and (3.4)) with the maintained assumption of feasible set STRADEOFFS allowing tradeoffs.
Table 3. Results of testing hypotheses of no tradeoffs between subgroups of performance metrics: Hypothesis of no tradeoffs between {ROA (y1), access lines per employee (y2), percentage of digital access lines (y3)} and {percentage of business access lines (y4)}
Test statistics:
Not-foundj123,4: Not-foundj estimated using model (14) with the maintained assumption of feasible set S123,4 that allows tradeoffs between the three metrics {ROA (y1), access lines per employee (y2), and percentage of digital access lines (y3)} but does not allow tradeoffs between any of them and {percentage of business access lines (y4)}.
Not-foundjTRADEOFFS: Not-foundj estimated using model ((3.1), (3.2), (3.3) and (3.4)) with the maintained assumption of feasible set STRADEOFFS allowing tradeoffs.
Table 4. Results of testing hypotheses of no tradeoffs between subgroups of performance metrics: Hypothesis of no tradeoffs between {ROA (y1), access lines per employee (y2), percentage of business access lines (y4)} and {percentage of digital access lines (y3)}
Test statistics:
Not-foundj124,3: Not-foundj estimated using model (14) with the maintained assumption of feasible set S124,3 that allows tradeoffs between the three metrics {ROA (y1), access lines per employee (y2), and percentage of business access lines (y4)} but does not allow tradeoffs between any of them and {percentage of digital access lines (y3)}.
Not-foundjTRADEOFFS: Not-foundj estimated using model ((3.1), (3.2), (3.3) and (3.4)) with the maintained assumption of feasible set STRADEOFFS allowing tradeoffs.
Table 5. Results of testing hypotheses of no tradeoffs between subgroups of performance metrics: Hypothesis of no tradeoffs between {ROA (y1), percentage of digital access lines (y3), percentage of business access lines (y4)} and {access lines per employee (y2)}
Test statistics:
Not-foundj134,2: Not-foundj estimated using model (14) with the maintained assumption of feasible set S134,2 that allows tradeoffs between the three metrics {ROA (y1), percentage of digital access lines (y3), and percentage of business access lines (y4)} but does not allow tradeoffs between any of them and {access lines per employee (y2)}.
Not-foundjTRADEOFFS: Not-foundj estimated using model ((3.1), (3.2), (3.3) and (3.4)) with the maintained assumption of feasible set STRADEOFFS allowing tradeoffs.
Table 6. Results of testing hypotheses of no tradeoffs between subgroups of performance metrics: Hypothesis of no tradeoffs between {ROA (y1)} and {access lines per employee (y2), percentage of digital access lines (y3), percentage of business access lines (y4)}
Test statistics:
Not-foundj1,234: Not-foundj estimated using model (14) with the maintained assumption of feasible set S1,234 that allows tradeoffs between the three metrics {access lines per employee (y2), percentage of digital access lines (y3), and percentage of business access lines (y4)} but does not allow tradeoffs between any of them and {ROA (y1)}.
Not-foundjTRADEOFFS: Not-foundj estimated using model ((3.1), (3.2), (3.3) and (3.4)) with the maintained assumption of feasible set STRADEOFFS allowing tradeoffs.
Table 7. Results of testing hypothesis of no tradeoffs between {ROA (y1), percentage of business access lines (y4)}, {access lines per employee (y2)}, and {percentage of digital access lines (y3)}
Test statistics:
Not-foundj14,2,3: Not-foundj estimated using model (14) with the maintained assumption of feasible set S14,2,3 that allows tradeoffs between {ROA (y1) and percentage of business access lines (y4)}, but does not allow tradeoffs between either of them and either of {access lines per employee (y2)} and {percentage of digital access lines (y3)}.
Not-foundjTRADEOFFS: Not-foundj estimated using model ((3.1), (3.2), (3.3) and (3.4)) with the maintained assumption of feasible set STRADEOFFS allowing tradeoffs.
Table 8. Results of testing hypothesis of no tradeoffs between {ROA (y1)} and {percentage of business access lines (y4)} and either of {access lines per employee (y2)} and {percentage of digital access lines (y3)}
Test statistics:
Not-foundjCONGRUENT: Not-foundj estimated using model ((7.1), (7.2), (7.3) and (7.4)) with the maintained assumption of no tradeoff feasible set SCONGRUENT.
Not-foundj14,2,3: Not-foundj estimated using model (14) with the maintained assumption of feasible set S14,2,3 that allows tradeoffs between {ROA (y1) and percentage of business access lines (y4)}, but does not allow tradeoffs between either of them and either of {access lines per employee (y2)} and {percentage of digital access lines (y3)}.
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