| Empirically, most strategy research studies employ the | | | | dimension may lead to misleading conclusions. |
| construct of business performance to examine a | | | | According to Venkatraman and Ramanujam (1986) a |
| variety of strategy content and process issues | | | | border conceptualization of business performance |
| (Ginsberg and Venkatraman, 1985). This second article | | | | would include emphasis on measures of operational |
| in the series concerns the use of financial and | | | | performance, which consists of those key parameters |
| operational performance; through the summarization of | | | | which may lead to an improvement in financial |
| two seminal papers written by Venkatraman and | | | | performance. Venkatraman and Ramanujam (1986) |
| Ramanujam (1986) and Kaplan and Norton (1992). | | | | note that it would be logical to treat operational |
| | | | | performance measures such as market-share, new |
| Venkatraman and Ramanujam (1986) study consider | | | | product introduction, product quality, marketing |
| as an important document for the theoretical | | | | effectiveness, manufacturing value-added, within the |
| discussion regarding the evaluation of the | | | | domain of business performance. |
| measurement of business performance. One of the | | | | |
| key issues addressed by this study is the attempt to | | | | Kaplan and Norton (1992) have presented another |
| delineate the performance concept. More specifically, | | | | seminal paper regarding the measurement of business |
| whether business performance should be | | | | performance. Its name, “The Balanced Scorecard |
| differentiated from the overall discussion on | | | | – measures that drive performance” could |
| organizational effectiveness. The view taken by | | | | suggest for the way they approach the issue. |
| Venkatraman and Ramanujam (1986) was that | | | | According to the writers, since there is increasing need, |
| business performance, which reflects the perspective | | | | both for large and small businesses, to master a |
| of strategic management, is a subset of the overall | | | | variety of capabilities in different fields, the traditional |
| concept of organizational effectiveness. The | | | | measures of financial performance gives inadequate, |
| narrowest conception of business performance | | | | or in some cases inaccurate, perspective for the |
| centers on the use of simple outcome based financial | | | | status of the business and its ability to keep improving. |
| indicators that are assumed to reflect the fulfillment of | | | | The balanced scorecard tries to overcome these |
| the economic goals of the firm. Venkatraman and | | | | difficulties through the completion of financial measures, |
| Ramanujam (1986) refer to this concept as financial | | | | which reflect for actions that already have been taken, |
| performance. Financial performance measurement is a | | | | with those of operational performance measures, |
| multi-dimensional one. Sample of financial measures, | | | | which consists of parameters that may drive the |
| group into dimensions can be presented as follow: | | | | forthcoming financial performance. Operational |
| Profitability – return on investment (ROI), earning | | | | measures according to the balanced scorecard |
| before interest and tax (EBIT), gross profit margins. | | | | constructed from three dimensions – How do |
| Growth - market share growth, Sales Growth. | | | | customers see us? (Customer perspective), What |
| Efficiency – return on sales (ROS), return on equity | | | | must we excel at? (Internal perspective), Can we |
| (ROE). Analyses made by using single financial | | | | continue to improve and create value? (Innovation and |
| measure or several measures relating to only one | | | | learning perspective). |