Practices and Challenges of Implementing Balanced Scorecard in State Owned Banks of Ethiopia

Abstract

Abstract This study assessed the overall practices and challenges faced while implementing the balanced scorecard (BSC) as a performance measurement, strategic management and communication system in three state owned banks of Ethiopia: Commercial Bank of Ethiopia (CBE); Construction and Business Bank (CBB) and Development Bank of Ethiopia (DBE). The study tried to evaluate the challenges faced as compared to the standard literatures of the system. In order to assess the implementation status of the stated banks, the study has been conducted by designing five-point Likert scale questionnaires. The total population size of the study was 654 involving department managers, team managers and non-management senior officers of the stated banks. The study adopted purposive sampling technique to select 150 respondents who have the working knowledge of the system of which the responses of 105 respondents were analyzed. Common implementation challenges such as limited understanding of BSC, lack of executive sponsorship, lack of BSC education and training, inadequate IT support, inadequate project team and organizational participation, inadequate key performance indicators (KPIs) and lack of planning and communication were observed in the stated banks at different level. However, lack of formal BSC education and training, lack of planning and communication, lack of organizational participation and inadequate IT support were the major challenges identified. The study advised those banks to conduct intensive awareness creation activities, ensure organizational level participation, develop strong implementation and monitoring mechanism and back the system with relevant IT system to gain advantage of the Balanced Scorecard system.