Cultural Values, the Balanced Scorecard and Perceived Organisational

Performance

Bruce Gurd (University of South Australia); John Rice (The University of New

England); Peter Hyde

Abstract: Western hotel chains sometimes use the same management systems world-

wide, expecting support from their Asian staff. We explore the results of the

implementation of the balanced scorecard (BSC) in a Thai hotel being managed by a U.S.

chain. Our survey was distributed to every manager and supervisor of the hotel. Despite

the emphasis placed on the BSC by the hotel chain, this study found that there was a

lower level of commitment to the performance measurement system in this hotel than it

had in previous research sites, and that the level of support depended on the cultural

values of the employees. There are questions as to whether or not Western tourism and

hospitality operators should be more aware of the potential lack of engagement with

their systems by Asian managers.

Keywords: balanced scorecard, cultural values, Thai hotel

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1. Introduction

There is a significant debate about multi-national enterprises (MNEs) using the same

systems in all their subsidiaries across the world, particularly in human resource

management. Despite a significant body of research on cross-cultural issues in tourism

and hospitality (Hope, 2004; Chen et al., 2012; Tsang, 2011), there is limited evidence

for the effectiveness of hotel chains using the same world-wide systems irrespective of

the country of operations. Generally the operations management of the international

chains work relatively well, there is some resistance to imposed systems (Hope, 2004).

While Qu, Cooper and Ezzamel (2011) argue that adaptation and customization are part

of the attraction of the BSC, there are global chains using the same BSC system world-

wide irrespective of cultural values in the country they are operating in. The paper

investigates the reaction to the implementation of the BSC by a US hotel chain into a

Thai hotel and the interaction between the values of the managers and supervisors, the

perceived effectiveness of this system and the perceptions of performance of the hotel.

The BSC is a well-known strategic performance measurement system in tourism and

hospitality (Brander-Brown and McDonnell, 1995; Atkinson and Brander-Brown, 2001;

Harris and Mongiello, 2001; Evans, 2005; McPhail et al., 2008; Sainaghi et al, 2013). BSC

implementation can be a lengthy and complex process, requiring commitment of time

and resources (Doran et al., 2002).

The concept of cultural distance, explored in tourism research by Ng, Lee and Soutar

(2007), is useful to explore whether the distance has an impact on the effectiveness of

the implementation of the BSC in its Asian subsidiaries. The BSC, designed by the US

parent, encapsulates a view of strategy execution based on the ideas of Kaplan from

Harvard Business School and his practice partner, Andrew Norton. There is a paucity of

literature regarding what happens when international hotel and tourism operators try

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to ‘impose their systems on their global operations, and the resultant clashes that occur

between systems that are suitable in the country of origin and the potentially clashing

cultural values of the countries in which they operate (e.g., Hope, 2004; Lervik et al,

2005). We contrast the values of Thai managers with those of the US managers who

devised the BSC system.

2. Prior Literature and Theory

2.1 Prior Research into the Use of the Balanced Scorecard in Hospitality

Sainaghi et al (2013) provide a thorough analysis of two decades of research into the

BSC in hotels. While the hotel industry has its own measures of performance (e.g. ARR,

REVPAR and GOPPAR), the BSC has provided a structure for a more integrated view of

performance and shift from an emphasis on short-term measures to longer term

measures.

Two studies in particular (Huckestein and Duboff, 1999; Denton and White, 2000) have

reported on the BSC implementation experiences of US chains - Hilton Hotels and a

Marriott franchisee, White Lodging Services. In both cases, the BSC was found to be a

generally useful tool, in that it brings together, in a coherent model, previously

disparate measures of performance (Huckestein and Duboff, 1999). In the Hilton study,

the authors pointed to the BSC’s success in reinforcing a coherent business culture in

highly diversified business, as well as in encouraging managers to focus on both short-

term and long-term measures, rewarding teamwork and allowing best practices and

strategic information to be shared (Huckestein and Duboff, 1999). These benefits were

also found by Denton and White (2000) at White Lodging Services.

2.2 Effectiveness of Strategic Performance Measurement Systems

While organizations can implement a strategic performance measurement system, such

as the BSC, there are different patterns of effectiveness. Henri (2006) identified four

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dimensions of the effectiveness of a performance measurement system – monitoring,

attention-focusing, strategic decision-making and legitimization. The first dimension,

monitoring, focuses on the role of performance measurement as a diagnostic control

system (Simons, 2013) or feedback system for tracking progress and comparing

outcomes to expectations. Henri’s (2006) second dimension is attention-focusing, the

role of performance measurement in creating alignment in the organization and

providing focus on important issues, including the focus on organizational uncertainties

that Simon’s (2013) called interactive controls. Strategic decision-making is the third

dimension: will a performance measurement system be used to make important non-

routine decisions by helping to explain the underlying cause–effect relationships? The

last of Henri’s dimensions is about the legitimizing role of performance measurement

systems, including justifying decisions, reinforcing beliefs and validating a point of view.

2.3 Understanding Schwartz’ cultural values

Schwartz (1994, 1999) developed an instrument of values that can be used for both

individual values and national cultural values, based on a priori theorizing, rather than

Hofstede’s (2001) approach based on post hoc examination of the data (see Schwartz,

2006). Schwartz (2006) summarized his seven country-level value types as constituting

three bipolar dimensions: embeddedness versus autonomy, hierarchy versus

egalitarianism, and mastery versus harmony. The embeddedness–autonomy dimension

captures the relationship between the individual and the group. Embeddedness, at one

end of the pole, represents a cultural emphasis on the person as part of the group,

committed to maintaining the status quo, and restraining inclinations that might disrupt

the solidarity of the group or the traditional order. At the other end of the pole there are

two types of autonomy: intellectual autonomy, the individual independently pursuing

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his or her own ideas and intellectual directions; and affective autonomy, the individual

pursuing positive personal experiences (e.g. pleasure, exciting life, varied life).

The hierarchy–egalitarianism dimension concerns ways to ensure a sense of

responsible behaviour that preserves the social fabric. Hierarchy represents a cultural

emphasis on obeying role obligations within a legitimately unequal distribution of

power, roles, and resources. Egalitarianism, at the other extreme, represents an

emphasis on the transcendence of selfish interests in favour of voluntary commitment

to promoting the welfare of others, who are seen as moral equals.

The final dimension, mastery–harmony, is about the natural and social connection of

people to their world. Mastery refers to getting ahead by asserting one’s self with the

aim of mastering and changing the environment; harmony is about accepting the world

as it is, understanding and accepting it rather than trying to change or exploit it.

These cultural values flow into the work environment (Schwartz, 2004). The question

for multinational tourism and hospitality operators is whether or not they need to

adjust their systems and procedures to adapt for different values in different countries.

It is this central question that this research paper addresses.

2.4 Perceived Organisational Performance

The Govindaranjan and Gupta (1995) measure is a comparative measure of the

perceived performance of a Strategic Business Unit, in this case the hotel, against its

competitors. The items include aspects of performance which may be found in a BSC -

financial (return on investment, profit, cash flow from operations and cost control),

customer (sales volume, market shares, new products, market development) and

learning and growth (personnel development and political public affairs).

2.5 Hypotheses Development

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The first hypothesis builds on the polar opposites of harmony and mastery. In previous

Schwartz samples it was found that the harmony of the staff from the host country,

Thailand, was higher than the harmony values of the home country (U.S.) managers.

This is likely to reduce the effectiveness of performance measurement. For example,

using a BSC for monitoring or attention-directing is likely to be seen as intrusive by the

Thai managers and therefore inconsistent with harmony. The prototypical manager

with strong mastery values would tend to exhibit self-assertion in the furtherance of

their own, and their perceived shared, interests. We anticipate that managers who

perceive measures of organisational performance as both rational and objective will

tend to have an enhanced opinion of organisational performance when they exhibit

strong mastery values in contrast to when managers embrace values more associated

with harmony. Hence:

H1: For employees with higher levels of mastery (and concomitantly lower harmony

values), the interaction effects of harmony and BSC support on perceived performance will

increase.

A second bipolar dimension is autonomy–embeddedness. Banker, Chang and Pizzini

(2004) note the importance of the BSC in articulating the interconnected nature of

activities and measured organisational performance. Their findings note that employees

tend to place greater weight on managerial performance measures when they are linked

to the wider organisational strategy. Such an approach sees employee actions as

embedded within organisational systems and outcomes. We anticipate that employees

who see themselves as innately integrated into a complex organisational setting will

tend to see tools like the BSC as useful metrics to measure and improve performance.

We therefore hypothesize that:

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H2: For employees with higher levels of embeddedness (and concomitantly lower

autonomy values), the interaction effects of embeddedness and BSC support on perceived

performance will increase.

The third bi-polar scale is hierarchy–egalitarianism. Recent critical research has tended

to see the BSC as an elaborate too to increase organisational control (Seal and Ye, 2014).

Seen within the context of other activities that seek to increase organisational oversight

of individual employees' action, the BSC may be seen as a tool to extend control at thee

detriment of employee freedom.

We expect that managers in a society with lower egalitarianism are more likely to

accept managerial systems and policies, as they submit more willingly to hierarchy. As

Dickson et al. (2003) noted, employees in less egalitarian societies are more likely to

comply with directives without questioning them and do not expect to have their say in

decisions affecting them or to participate in the process of setting goals. Schwartz

(1999, p.43) noted that employees who are more autonomous are more likely to oppose

“the use of power and prestige to reward workers”: a performance measurement

system cuts across their more individual values. Hence:

H3: For employees with higher levels of egalitarianism (and concomitantly lower levels of

hierarchy), the interaction effects of egalitarianism and BSC effectiveness on perceived

performance will decrease.

3. Method

The hypotheses were tested in a single hotel in regional Thailand, which is part of a U.S.

chain. The chosen chain has had a well-developed BSC in place for many years, having

pushed this system out to its Asian hotels in the 1990s. One hundred surveys were

distributed among the most senior 100 supervisors and middle managers, with 79

returned (79%).

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The survey instrument was a combination of three previously used and well-tested

instruments: Henri’s (2006) instrument for the effectiveness of performance

measurement systems, Schwartz’ (1999) measure of cultural values, and the self-rated

measure of performance (Govindarajan, 1984; Govindarajan and Gupta, 1985). To

enable clearer analysis, the four performance dimensions were merged into a single

measure of BSC effectiveness for the purpose of hypothesis testing. The instrument was

translated into Thai, back translated and checked for equivalence of meaning.

Demographics were collected for race, country of birth and management levels. The

survey contained 93 questions, which was expected to reduce the response rate;

however, with strong management support, it did not. A seven-point Likert scale was

used for the Henri (2006) and Govindarajan and Gupta measures. The Schwartz

measure was analysed according to the method provided by the developer, based on

combinations of items. The regression analyses were performed following Preacher et

al.’s (2007) and Hayes and Mathes (2009) analytical techniques using the Hayes macro

within SPSS, utilising the Johnson-Neyman functionality that probes the interaction

effect strength at various values of a moderator.

4. Results

4.1 Descriptive Statistics

The results for the three bipolar Schwartz values are shown in Table 1. Independent

sample t-tests show that this study’s sample in the Thai hotel was significantly higher

on all three dimensions than the previous Thai sample used by Schwartz (1994).

<<Table 1 about here>>

The descriptive statistics for the four performance measurement constructs are shown

in Table 2. <<Table 2 about here>>

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Henri’s sampling frame for studying performance measurement was across Canadian

manufacturing organizations, whereas our sampling frame was within a single Thai

hotel, with possible differences arising because of sector, national culture, and single

entity rather than many. Independent sample t-tests show that our result is lower for all

four constructs than Henri’s sample.

The variables used in our regressions were derived as follows. The Embededness -

Autonomy, Hierarchy - Egalitarianism and Harmony - Mastery variables were based on

factors scores derived using SPSS for each of the six sub-elements. These scores had a

mean or zero and an SD of one. As the derived integrated scores are conceptualised as

continuums, we subtracted the Embededness score from the Autonomy score to form a

continuous Embededness - Autonomy score (and so forth for the remaining variables).

Our dependent variable, drawn from Govindaranjan and Gupta (1985), seeks

respondents rating of the organisation’s performance along a number of dimensions. As

all respondents were, in effect, employed within the same organisation, a degree of

clustering of responses, or a skewed distribution, was possible. In fact, a relatively

normal distribution of responses to this question emerged with little skewness or

kurtosis evident (both measures of skewness and kurtosis fell within the threshold

values suggested by Small (1980). This suggests that individuals’ views of

organisational performance varied greatly across the sample and this was thus a useful

item to explore as our dependent variable.

Descriptive statistics are shown in Table 3 and the final results of our modelling are

shown in Table 4. We note that in our fully specified model the interaction of hierarchy–

egalitarianism and BSC adoption is highly significant in explaining variance in perceived

organisational performance. <<Table 3 about here>> <<Table 4 about here>>

4.2 Testing the Hypotheses

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The first hypothesis states that for employees with higher levels of harmony (and

concomitantly lower levels of mastery), the interaction effects of harmony and BSC

support on perceived performance will decrease. <<Figure 1 about here>>

Figure 1 illustrates this hypothesised effect. In essence, the interaction coefficient

declines as responders move from high mastery to high harmony preference, albeit only

slightly. This is consistent with our hypothesised effect of BSC implementation as

somewhat obtrusive within the Thai context for those employees who value a

harmonious work environment.

In our fully specified model, however, the interaction illustrated in Figure 1 is not

shown to be significant, and indeed the interaction probe provided above shows that

there is no zone of significance for this interaction effect evident at any level of the

harmony-mastery measure. This suggests that other cultural values provide stronger

explanatory value in determining managerial views on performance.

The second hypothesis suggests that for employees with higher levels of embeddedness

(and concomitantly lower autonomy values), the interaction effects of embeddedness

and BSC support on perceived performance will increase. In essence, as employees feel

more embedded in their work context, they see BSC implementation as potentially more

valuable and hence in combination, higher embededness and BSC support combine to

improve their perception of organisational performance.

Hypothesis 2 is not supported in our fully specified model (p = 0.118), although it does

approach significance – and is found to be significant (p < 0.05) in those parts of the

embeddedness – autonomy spectrum shown below. We thus find that employees who

report high organisational–contextual embeddedness see the introduction of the BSC as

predictive of improved organisational performance. <<Figure 2 about here>>

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The third hypothesis suggests that for employees with higher levels of egalitarianism,

the interaction effects of egalitarianism and BSC effectiveness on perceived

performance will decrease. In fact, our findings contradict this hypothesised effect. This

effect suggests that for employees with a strong preference for egalitarianism and

fairness, BSC introduction tends to positively influence their perceptions of

organisational performance. An explanation of this effect would be that in a socially

influenced organisational hierarchy BSC implementation enables a more meritocratic

workplace where employees are judged on their performance rather than their position.

<<Figure 3 about here>>

More intuitively, the interaction effect of BSC Support and Hierarchy - egalitarianism is

shown in the following figure: <<Figure 4 about here>>

In Figure 4, which integrates both the direct and interaction effects of BSC Support and

Hierarchy - Egalitarianism in explaining perceived organisational performance, we see

that at all levels of BSC Support, employees with a greater preference for egalitarianism

tend to see performance as better than those with a preference for hierarchy, with this

variance increasing at either end of the Hierarchy - Egalitarianism continuum.

5. Discussion

Our fully specified model suggests that in the absence of managerial preference for

egalitarianism, efforts in monitoring service, customer satisfaction and efficiency do not

increase managerial perceptions of performance values. It is reasonable to expect that

the introduction of an integrated system on decision-making might result in heightened

managerial performance in a hotel chain, through, but this was not the case.

There is evidence in our paper that there is significant variance among Thai managers in

their preference for organisational outcomes, and these preferences relate to collective

versus individual outcomes. A preference for individual outcomes – especially in

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relation to egalitarianism and fairness as opposed to hierarchy – tends to predispose

managers to BSC adoption, which can be seen as a meritocratic assessment tool to

better assess the relative contributions of individuals and groups within a hotel setting.

It must be noted for future research that our sample of rural Thai hotel supervisors and

managers is very different from previous Schwartz samples using Bangkok teachers.

This may be because of higher Westernization in Bangkok than in a rural area and

differences between hotel managers and teachers. As Ralston et al. (2006) and Taras

and Steel (2009 have noted, cultural values may be changing over time.

As for the three bipolar dimensions, we anticipated that higher levels of harmony

amongst the Thais would produce greater use of attention-directing and legitimization

in determining perceived performance. The harmony value encourages the use of the

performance measurement systems for attention-focusing, as supervisors were willing

to cooperate to achieve the goals and identify areas in which they could improve.

Harmony is consistent with key values like flexibility, rather than control.

Responsiveness, change, cohesion and adaptability are more related to this use than

order, conformity and predictability. The organizational learning associated with an

attention-focusing use contributes to the emergence of new strategies within the hotel.

In this sample, Thai supervisors and managers have a high score for embeddedness.

Thais are very focused on relationships. Rather than rock the boat, rules, guidelines and

procedures would generally be accepted. Thai managers are still very tied to the

thinking of their next-in-line, which is the only the legitimization aspect that mediates

performance. The strength of the group is sufficient to ensure that they accept the

legitimizing impacts of the performance measurement system.

Our results in relation to egalitarianism–hierarchy were especially interesting. We

anticipated that higher hierarchy preference would create a situation whereby

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managerial employees would see BSC adoption positively (as a means of legitimating

and operationalising appropriate managerial prerogative), but the opposite was in fact

evident. A preference for hierarchy actually reduced the degree to which BSC adoption

anticipated perceived performance within our fully specified model.

6. Conclusion and Limitations

Performance measurement tools have been used very successfully around the world

now for many years and benchmark most of the world’s leading hotel brands. Chief

executives have observed both the operational excellence and financial benefits that can

come about with positive rollout of the tools. Standardized systems set down by head

office must be carefully used in a different culture and in a different country.

In the case of the Thai hotel, a workable BSC had been implemented. Yet the

effectiveness of the system was not high; certainly less effective than in other Western

environments. A successful performance measurement system in a hotel requires the

buy-in and understanding of each person with supervisory capacity. Understanding the

local context is important. Western tourism and hotel operators may be insistent on

using one world-wide system, but the case for adaptation seems strong. The Thai smile

might indicate agreement, but underneath there may be no real intention to change

patterns of behaviour. In such an environment informal means of control using the

natural capabilities of the local people may be far more powerful. Hotel managers

moving around Asia are likely to be very conscious of this. Their head office

management might still imagine that it is their systems and processes that make the

difference, but we trust that they are conscious of the role of their local management in

high levels of customer experience, service delivery with good cost control.

14

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Table 1 Results compared with previous Schwartz samples (1994)

Thailand (Schwartz, 1994) Thai (current

sample)

Egalitarianism 4.34 4.82

Embeddedness 4.22 4.90

Harmony 3.93 4.97

Table 2 Descriptive statistics – comparison of Thai sample with Henri’s samples (2006)

Henri constructs Sample

mean

Sample SD Henri

Mean

Henri

SD

Monitor 4.36 1.08 5.63 0.98

Attention 4.32 1.01 5.07 1.05

Decisions 4.33 1.03 4.79 0.99

Legitimation 4.54 1.23 4.79 0.96

Table 3 Derived Variable Descriptive Statistics

Variable n Mean s.d. 1 2 3 4

1. Performance 75 4.26 1.36

2. BSC Support 75 5.00 1.0 .642**

3. Embededness - Autonomy 75 .2825 .632 .003 .046

4. Hierarchy - Egalitarianism 73 .1554 .756 .126 -.078 -.073

5. Harmony - Mastery 73 .3772 .708 -.028 -.089 .126 .447**

** Correlation is significant at the 0.01 level (2-tailed)

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Table 4

Direct and Interaction Effect Model

β SE β SE β SE

Intercept 3.439* 1.876 -1.35 1.572 2.741 8.182

Direct Effects

Embeddedness–Autonomy 0.063 0.256 -0.009 0.195 1.501 1.04

Hierarchy–Egalitarianism 0.314 0.237 0.360** 0.18 -1.322 0.896

Harmony–Mastery -0.210 0.255 -0.114 0.194 -0.141 1.07

BSC Support 0.884*** 0.123 0.571 1.556

Interaction Effects

Harmony–Mastery by BSC 0.028 0.203

Hierarchy–Egalitarianism by BSC 0.358** 0.178

Embeddedness–Autonomy by BSC -0.325 0.205

F and (Sig. F Change) .604 .604 13.704 <.0001 10.211 .0200

R2 .026 1.365 .446 1.036 .524 .983

Change in Adj. R2 .421 .027

Figure 1 Interaction effects of BSC support and harmony–mastery values in predicting

perceived performance at values of the harmony–mastery continuum.

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Figure 2 Interaction effects of BSC support and embeddedness–autonomy values in

predicting perceived performance at values of the embeddedness–autonomy continuum

Figure 3 Interaction effects of BSC support and hierarchy–egalitarianism values in

predicting perceived performance at values of the hierarchy/egalitarianism continuum

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Figure 4 Interaction effects of BSC support and hierarchy–egalitarianism values in

predicting perceived performance at High Hierarchy (Low Egalitarianism) and High

Egalitarianism (Low Harmony) Values

y = 0.3706x + 2.5041

-1

0

1

2

3

4

5

6

-2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5

High Hierarchy High Egalitarianism

Inte

ractio

n E

ffe

ct a

nd

95

% C

I