Title: Convergence and divergence issues in strategic management - Indonesia"s experience with the Balanced Scorecard in HR management
Authors: Rhodes, Jo., Walsh, Paul., Lok, Pete
Subject: Strategic Management
Publish: 2008
Status: full text
Source: International Journal of Human Resource Management; Jun2008, Vol. 19 Issue 6, p1170-1185
Preparation: Scientific Database Management Journal Articles www.SYSTEM.parsiblog.com
Abstract: Globalization pressures escalate competitiveness and, in response, global companies tend to adopt a handful of Western management practices. One of these is the Balanced Scorecard. However, empirical evidence assessing the transferability and effectiveness of Western best practices into Asian countries is scarce. In particular, empirical evidence relating to the effectiveness of Balanced Scorecard implementations is limited, as is the impact of Asian Balanced Scorecard contextual variables. This article contributes to this gap through the study of a Central Bank of Indonesia (BI) Balanced Scorecard implementation within a conceptual framework that explores convergence and divergence of global management practices. The lessons learned discuss how divergent factors such as national culture, leadership styles, organizational culture and human resource management practices can influence Asian context Balanced Scorecard implementations.
Keywords: balanced scorecard; convergence; divergence; HRM practices; strategic
management    --Download Article

Introduction:
Globalization, deregulation, technological innovation and high customer expectations
continually reshape the global international business landscape. To compete successfully,
companies require focus, innovation and agility to enable quick change (Kinni and Ries 2000;
Christensen and Raynor 2003). In pursuit of sustainable competitiveness, companies adopt
improvement programmes such as Enterprise Resource Planning (ERP), Customer Relationship
Management (CRM), Supplier Relationship Management (SRM), Supply Chain Management
(SCM), Six Sigma, and the Balanced Scorecard. Principally while these programmes originate in
the West, their apparent success encourages others, including Asian companies and Western
companies with Asian operations, to emulate this strategy.
Convergence, the tendency of companies to adopt similar successful management practices,
suggests that companies are becoming more alike, wherever they are located, in terms of
structure, technologies, and ways of operating. Convergence protagonists (Hickson, Hinings,
McMillan and Schwitter 1974; Porter 1986) contend that convergence is influenced by factors
such as, improved global communication and travel (Levitt 1983); technology transfers;
collaboration between organizations and nations (Doz and Prahalad 1991; Rosenzweig and
Singh 1991; Ghoshal and Nohria 1993; Porter 1996); and the operations of multi-national
corporations (MNCs) (Lubatkin, Ndiaye and Vengnoff 1997).
It is axiomatic that Western management practices require modification when used in non-
Western contexts, as embodied by the popular term glocal, to think globally but act locally; this phenomenon, known as divergence, acts counter to convergence. Divergence protagonists
(Hofstede 1995; Adler 1996) argue that employees are likely to exhibit a range of different
attitudes and behaviours. In particular, culturally bound employees from different national
cultures display different work-related preferences (such as promotion by seniority in Japan)
(McGaughey and De Cieri 2002; Chen 2004). Consequently, Western management practices
and improvement programmes may require adjustments when implemented in different cultures.
Convergence and divergence coexist; examining these two perspectives separately is an
over-simplification of the complexity of the business environment (Lowe, Milliman, De Cieri
and Dowling 2002; Huo, Hang and Napier 2002; Jackson 2002). For example, a company may
adopt the same ERP system globally, an example of convergence, but have different HR policies
in different countries. These will influence the nature and effectiveness of country-specific ERP
implementations, an example of divergence.
The debate on the convergence of global best practices (Glinow, Drost and Teagarden 2002;
Chan, Shaffer and Snape 2004) and the effects of divergence due to differences in national
culture (Jackson 2002; Huo et al. 2002; Rowley and Benson 2002) raises a plethora of questions
on the effectiveness of best practice programmes in a non-Western context. Although there is
sufficient evidence to support the convergence proposition for firms in the West (Cooper 1998;
Glinow et al. 2002), empirical evidence assessing the transferability and effectiveness of
Western best practices into Asian countries is scarce. This is particularly true of strategic
management practices.
The Balanced Scorecard is used by many firms including Sears, Kodak and AT&T to improve
their strategic management capabilities (Yeung and Berman 1997; Kaplan and Norton 2001) and
build high performance cultures (Butler, Letza and Neale 1997; Mooraj, Oyon and Hostettler
1999; Brewer 2002; Niven 2002). Most of the evidence relating to the success of the Balanced
Scorecard, or otherwise, originates from the West. Although the Balanced Scorecard
Collaborative (www.bscol.com) claims that a number of Asian firms has successfully adopted
the Balanced Scorecard, the empirical evidence is sketchy. Divergent factors such as leadership
styles, HRM practices, national cultures, organizational culture and industrial development are
likely sources of potential differences in Asian contexts (McGaughey and De Cieri 2002).
This article examines the influence of divergent factors on the convergence of best practices
in strategic management in an Asian context using a Bank of Indonesia (BI) Balanced Scorecard
implementation case. The article contributes contextual insights on the issues and challenges
faced by Asian firms adopting Western strategic management practices. A conceptual
framework, shown in Figure 1, encapsulates the issues around the deployment of the BI Balanced
Scorecard.

Conceptual framework
The apex of the framework shows the desired outcome – a high performance culture. The key
elements that create and sustain a high performance culture (Holbeche 2005) include:
1. flexibility, speed and learning
2. innovation and continuous improvement
3. boundaryless organizational structure to maximize potential network and synergies
4. people motivation to sustain a high level of performance
5. the right ‘deal’ and working environment, and
6. connecting employees to stakeholders with a deep level of meaning.
The conceptual framework proposes that four interdependent elements of divergence:
(1) leadership style (2) national culture (3) organizational culture and (4) HRM practices influence the success of the Balanced Scorecard adoption and ultimately the attainment of a high
performance culture. The Balanced Scorecard considered in Figure 1 is labelled a ‘best practice
Balanced Scorecard’ to distinguish it from the many other variations seen in practice. It has three
defining characteristics: (1) a Strategy Map which describes the business strategy prior to the
selection of metrics and targets; (2) a corporate Balanced Scorecard cascaded to lower levels to
align operational decisions; (3) metrics supported by an automated reporting tool that allows for
data drill-downs and initiative management. Figure 1 implies that a high performance culture
and the sustainability of a best practice Balanced Scorecard are mutually reinforcing.
Different national cultural values, leadership styles, organizational culture, and HRM
practices influence a Balanced Scorecard implementation. Furthermore national performance
appraisal approaches will reflect the divergent cultural values underpinning national managerial
practices. Distinct Asian cultural values and Confucian values such as conflict avoidance,
harmony, face, obligations, guanxi (relationships), status and respect for elders (Chen 2004) are
important factors that affect business transactions and management practices. For example, the
direct transfer of an American head office’s performance appraisal system onto a local Asian
environment may be problematic. Asian employees may view the American style of direct
communication and assertive negotiation as culturally unacceptable, preferring a non-assertive,
indirect and conflict avoidance style of performance evaluation; Asian priorities will focus on
dimensions such as harmony, face and work centrality (Westwood and Lok 2003). This cultural
divergence indicates that a modified version of a Western performance appraisal system, which
takes into account sensitive cultural factors, may be more effective.

Convergent elements – the Balanced Scorecard
The original Balanced Scorecard, introduced over a decade ago (Kaplan and Norton, 1992;
1993) was a metrics system that provided an organizational health check. While the strategic
ives leading to these metrics were linked at a high level across the four perspectives of
Financial, Customer, Process, and Learning and Growth, first generation scorecards did not
intend for companies to perform a comprehensive strategic analysis nor examine their customer
value propositions. The first generation scorecard was best suited to situations where the firm
wished to communicate to staff the metrics that were important for moving forward. Experience
highlighted that metrics alone, without a clearly articulated strategy, leadership support and  employee engagement were not a catalyst for a high performance culture. Kaplan and Norton
(2001, p. 3) when commenting on their early work noted that:
Several years ago, we introduced the Balanced Scorecard. At the time, we thought the Balanced
Scorecard was about measurement not about strategy. We began with the premise that an exclusive
reliance on financial measures in a management system was causing organizations to do the wrong
thing. . . . If financial measures were causing organizations to do the wrong things, what measures
would prompt them to do the right things. The answer turned out to be obvious. Measure the strategy!
In second-generation scorecards, strategy directly informs what to measure using a Strategy
Map linking strategic capabilities development to a customer value proposition and to
shareholder value (Kaplan and Norton 2004); metrics and targets derived from the strategy map
scorecards communicate strategy throughout the organization; regular performance reviews
provide feedback to exercise strategic control. We regard second generation Balanced Scorecards
incorporating StrategyMaps as ‘best practice’ in the context of the Balanced Scorecard identified in
Figure 1. This issue is further explored in Walsh, Lok and Jones (2005).

Cascading process
A Balanced Scorecard is most effective when it aligns the efforts of everyone at every level in an
organization. In Figure 1 this is referred to as the cascading process. Business unit scorecards
when cascaded from the corporate scorecard align the reporting, decisions and behaviours
at the operational level. The cascading process enables a line-of-sight from operational activities
to the firm’s strategic direction and is essential in order to operationalize corporate level strategy
throughout the firm.
The cascading process is predicated on the assumption that ‘measurement drives behaviour’,
especially when linked with a reward and recognition system. Metrics not only provide feedback
on unit and individual performance but also may inspire the individual to seek continuous
challenges. For example, a Balanced Scorecard metric may reveal that customer satisfaction
increased from 80% to 85%. This achievement might then generate further enthusiasm among
employees to improve on this performance. This is not just a change in reported performance but
the enthusiasm generated may indicate a change in performance culture.

Automated reporting tools
Data underpin informed decision-making, yet global enterprises rarely have consistent
transactional operational applications in place because of significant local variations in
applications logic and the business processes around the applications. The resultant proliferation of
standard reports is daunting and it is difficult to find the nuggets of actionable information that are
consistent, and aggregated across business function, business process and multiple employees.
Enterprise performance levels increasingly depend on the ability to respond with near zero
latency; while automated systems support this, many systems were developed using ad hoc
enterprise integration approaches resulting in information silos that support only individual units
and make data sharing and information integration difficult (Yoo, Sangwan and Qiu 2005).
Performance data are the lifeblood of the Balanced Scorecard; without timely and accurate
performance information and performance alerts manual measurement efforts will become
burdensome and resisted by time-poor managers. The widespread use of the Balanced Scorecard
has accelerated the development of automated reporting tools that deliver performance
information on to desktops and keep staff informed about the firm’s expectations. Many IT
vendors now distribute reporting tools, including Corvu, Cognos, Hyperion, SAS, SAP, QPR
and Business s... --Download Article