The main purpose of this research report is to develop or find a relationship between the strategic and operational management. The purpose of this paper is to find a means of connecting strategic management and operative performance measurement.
Changes in competitive environments have increased the importance of strategic management in corporations. Successful companies must be able to anticipate changes in operative environments and be able to react faster than their competitors (Kaplan and Norton, 2001). This raises the question: what is the right strategic direction for a company at each moment?
Kaplan and Norton (1992, 1993, 1996a, b) developed the balanced scorecard (BSC) concept early in 1990. Lillrank (2000) regards BSC as one of the most important inventions in the field of management in the last decade.
It consists of the idea that effectiveness cannot be measured only in monetary terms - as a reversing mirror. To date, BSC seems to have been successful and more and more companies are starting to use it. Although BSC seems to have a central role in performance measurement, there is great diversity in the field too (Neely, 2000). However, according to McCunn (1998), and Bourne et al. (2003) most of the BSC implementations fail somehow.
The Finnish and Scandinavian energy sectors are currently undergoing major changes. Deregulation in the early 1990s, privatization, market factors, internationalization and supranational have all changed the business environment. Earlier energy production and transfer were part of government control and operated regionally in a monopolistic way. Management based on political decision making does not work today.
The Nordic countries currently form a market based on free competition, and other European countries are also opening their markets. These conditions increase the challenges for companies in the energy sector, in which companies are improving their internal efficiency through strategic positioning (Hernesniemi and Viitamo, 1999; Turunen, 1996; Riskula, 1996). These companies, therefore, need means with which to assess, develop and implement strategies effectively.
Strategic management in not only defining important issues in an organization, but also ensures that they are implemented too (Johnson and Scholes, 1999). BSC is one possibility for communicating and implementing the strategy. BSC facilitates an outline of the strategy and provides a frame for strategy discussions before implementation of the strategy (Kaplan and Norton, 1996b, 2001; Malmi et al., 2002; Murray and Richardson, 2000; Olve et al., 1998).
Development of a performance measurement system includes ...