Designing a Balanced Scorecard to Measure a Bank's Performance: A Case Study

Abstract

Performance measurement systems play a key role in evaluating the strategic performance of an organization, but many managers agree that their evaluation systems do not adequately fulfill this function. Hence, in recent years a shift towards the Balanced Scorecard (BSC) has emerged as a managerial approach to evaluate the strategic performance of the organization. The purpose of this study is to contribute to the understanding of how BSC is developed and applied in evaluating the performance of a Large Local Bank (LLB) in Iraq. Using the concepts of Kaplan and Norton, and the data made available from the bank, a BSC was derived to measure the performance of the bank between 2006-2009. The analysis assisted the cause-effect relationships between the non-financial, and the financial dimensions of the BSC. Due to lack of research work, in this area, in the banking sector in Iraq, this study shall contribute to the knowledge on how banks in Iraq may apply the BSC to evaluate their performance, and how they might turn strategic vision into potential performance. The authors proposed some future research needs required in this area. The use of the BSC developed here is limited to the bank studied; however, the approach could trigger off reflections among policy makers and other banks to start using the BSC.