Abu Yahaya Full Thesis Final-1

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School of Management

Blekinge Institute of Technology





Thesis for the Masters degree in Business Administration Spring 2009



Abu Yahaya

A thesis submitted in partial fulfillment of the requirements for the degree of MBA (Master of Business Administration) Blekinge Institute of Technology



Eva Lovstal

ABSTRACTTitle: Using Balanced Scorecard to assess performance of banks in Ghana Author: Abu Yahaya Supervisor: Eva Lovstal Department: School of Management, Blekinge Institute of Technology Course: Masters thesis in Business Administration, 15 credits (ECTS). Background and Problem Discussion: The effect of non-financial variables on the financial performance of banks in Ghana can become significant. The information of how customer satisfaction, internal business processes, organizational learning and growth influences financial indicators is therefore of great importance in assessing performance of banks in Ghana. Purpose: The purpose of this thesis is to create a model to be able to assess performance of banks in several dimensions and measures using the Balanced Scorecard framework. Method: Quantitative and inductive methods. Primary data is financial and non-financial statistics collected from public institutions and sources, staffs and customers of Barclays Bank Ghana limited, Ecobank Ghana Limited and United Bank for Africa (Ghana) Limited. Theory: The theory section looks at different concepts and relevant theories that come up when analyzing banks financial results and how they are being impacted by other nonfinancial perspectives. I have therefore chosen the most common concept for the theory section. Analysis: I have used a model to examine how the balanced scorecard can be used to assess performance of banks in several dimensions and measures in order to provide additional information to all stakeholders - internally and externally. The chosen scenario shall then be used to determine if BSC can provide additional information with respect to the performance of the selected banks. Conclusion: The analyzed banks showed only marginally the impact of non-financial perspectives on financial performance. Analysis also showed that in assessing performance of banks some critical non-financial factors such as customer satisfaction, efficient internal processes and the quality of staff play a crucial role. Of specific interest is the turn-aroundtime on loan processing and disbursement which is a core function of the banks and for which all the selected banks failed to adequately address. But the study also revealed that the BSC framework indeed provides additional information when used to assess the performance of banks in Ghana. i

ACKNOWLEDGEMENTSIt is a great pleasure to me to thank the many people who in different ways have supported my graduate studies and contributed to the process of writing this thesis. First, I would like to thank my supervisor, Eva Lovstal for her insightful direction and support during the period of writing the thesis. I would like to express my gratitude to the management and staff of Barclays Bank, Ecobank Ghana and UBA Ghana who took off time from their busy schedule to answer my questionnaire and to grant me time to interview them, without which I could not have completed this thesis. I will also want to thank the customers of these banks who allowed me to interview them. I would specially thank Mr. Obeng Baffour for his technical help and discussions on my dissertation topic. I would like to thank my family and friends for their sincere interest in my work and their moral support. Finally, above all I thank God for His guidance.


ACRONYMSBBG BPI BPR BSC CR CRM CSI EBG EPR EPS HR IC ROE ROA KPI LOC PMM SLA TAT UBA UBAG Barclays Bank (Ghana) Limited Business Performance Indicator Business Performance Review Balanced Scorecard Customer Retention Customer Relationship Management Customer Satisfaction Index Ecobank (Ghana) Limited Enterprise Resource Planning Earnings per Share Human Resource Intellectual Capital Return on Equity Return on Asset Key Performance Indicator Levers of Control Performance Management Model Service Level Agreement Turn Around Time United Bank for Africa United Bank for Africa (Ghana) Limited


TABLE OF CONTENTS1.0 INTRODUCTION..................1 1.1 Background ....2 1.1.1 Introducing BSC..2 1.1.2 The Banking Sector in Ghana....3 1.1.3 Motivation for work....6 1.2 Focus of study....10 1.3 Problem Discussion...11 1.4 Research Purpose.....15 1.5 Outline of Study....16 2.0 LITERATURE REVIEW....18 2.1 Introduction...19 2.2 Definitions of the Balanced Scorecard....19 2.3 BSC as a Strategic Performance Measurement Model.....21 2.4 Measuring and Assessing Performance..27 2.5 Criticisms of the BSC approach..28 2.6 Conclusion.....30 3.0 RESEARCH METHODOLOGY....31 3.1 Introduction...32 3.2 Research Methods.32 3.2.1 Quantitative Research Methods...33 3.2.2 Qualitative Research Methods.34 3.2.3 Personal Reflective Methods.36 3.3 Data Collections....36 3.4 Formulae for Calculating Metrics...38 3.5 The Characteristics and Size of Selected Sample...39 3.6 Coding40 4.0 ANALYSIS41 4.1 Introduction..42 4.2 BSC Measures for Assessing Performance....42 4.3 Barclays Bank Ghana Limited43 iv

4.3.1 Visions and Values at Barclays Bank...43 4.3.2 Measuring Performance at Barclays Bank..46 4.3.3 Balanced Scorecard Measures at Barclays Bank ...51 4.4 Ecobank Ghana Limited..53 4.4.1 Visions and Values at Ecobank ....53 4.4.2 Measuring Performance at Ecobank....54 4.4.3 Balanced Scorecard Measures at Ecobank......56 4.5 UBA (Ghana) Limited......................................................................................................59 4.5.1 Vision and Values at UBA ....59 4.5.2 Measuring Performance at UBA..60 4.5.3 Balanced Scorecard Measures at UBA61 4.6 Analysis of BSC Performance Measures and Metrics...65 4.6.1 Analysis of Financial Perspective.65 4.6.2 Analysis of Customer Perspective68 4.6.3 Analysis of Internal Business Processes Perspective..71 4.6.4 Analysis of Learning and Growth Perspective...73 4.7 Conclusion..75 5.0 CONCLUSION..76 5.1 Introduction...77 5.2 Conclusion of Study... ..77 5.3 Recommendations.....80 5.4 Limitations and Further Research..80 LIST OF TABLES AND FIGURES FIGURES Figure 1.1: Outline of Study.......16 Figure 2.1: Balanced Scorecard as a performance measurement tool ..22 Figure 4.1: Strategy grid for Barclays Bank Ghana Limited.....48 Figure 4.2: Strategy grid for Ecobank Ghana Limited ..54 Figure 4.3: UBA Strategic Management Pyramid. .60 Figure 4.4: BSC Perspectives/KPI for UBA ....61


TABLES Table 4.1: Balanced scorecard for Barclays Bank Ghana Limited....51 Table 4.2: Balanced scorecard for Ecobank Ghana Limited .....57 Table 4.3: Balanced Scorecard for UBA (Ghana) Limited 63 Table 4.4: Financial Performance Measures for BBG, EBG and UBAG..67 Table 4.5: Customer Measures for BBG, EBG and UBAG....69 Table 4.6: Spearman's Rank Correlation between Customer Perspective and Financial Perspective........70 Table 4.7: Internal Business Processes Measures for BBG, EBG and UBAG......72 Table 4.8: Spearmans Rank Correlation between Internal Business Processes and Customer Perspectives .....72 Table 4.9: Learning and Growth Measures for Barclays, Ecobank and UBA..........74 Table 4.10: Spearman's Rank Correlation between Learning & Growth and Internal Business............75 REFERENCES .101 APENDICES APPENDIX A: QUESTIONNAIRE FOR BANK CUSTOMERS 83 APPENDIX B: QUESSTIONNAIRE FOR CHIEF OPERATING OFFICER (COO) ....86 APPENDIX C: QUESTIONNAIRE FOR CHIEF FINANCE OFFICER (CFO) ....90 APPENDIX D: QUESTIONNAIRE FOR HEAD OF HUMAN RESOURCES.........92 APPENDIX E: EMPLOYEE SATISFACTION SURVEY.....94 APPENDIX F: GLOSSARY OF KEY FINANCIAL TERMS, EQUATIONS AND RATIOS............................95 APPENDIX G: CUSTOMER SURVEY RESULTS...96 APPENDIX H: EMPLOYEE SURVEY RESULTS ...........98





you can measure what you are speaking about, and express it in

numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.... (Lord Kelvin)


1 Introduction This introducing chapter will provide the reader with an insight into the research area. The main focus of this study is the use of the balanced scorecard framework to assess performance of banks in several dimensions and measures.

1.1 Background The background to the study is given in the following sections which look at introducing the balanced scorecard, the banking sector in Ghana and the motivation for this work.

1.1.1 Introducing BSC After questioning contemporary management accounting in several articles during the 1980s, Kaplan & Norton (1992) introduced the Balanced Scorecard (BSC) concept. However, already in 1979, Parker suggested a balanced view on firms operations comprising financial measures and measures related to marketing strategy, research and development, social responsibility and employees.

Despite Parkers early contribution, the 1992 article by Kaplan & Norton appears to have been more timely and may be recognized as setting into motion the scorecard approach, i.e. the starting point to put the BSC to work (Kaplan & Norton, 1993).

According to Roslender (1997), the BSC could serve as an illustration to contemporary best practise pursuits in accounting for strategic positioning, i.e. to support managerial attempts to achieve and sustain a strategic position in the market place. The BSC intends to reflect the necessity of b