A balanced scorecard analysis of performance metrics

Many organizations have invested substantial resources in recent years to implement a balanced scorecard of performance metrics. From a historical focus exclusively on financial metrics of performance, the emphasis has shifted recently to a consideration of a portfolio of non-financial performance metrics related to customers, business process and technology. In this paper, we investigate the best practice frontier relationship between a financial performance metric (return on assets ROA) and three nonfinancial performance metrics (number of access lines per employee, percentage of digital access lines and percentage of business access lines) reported and used in the U.S. telecommunications industry. Analyzing detailed data from over fifty local exchange carriers for a period of five years (from 1993 to 1997), we find that managers must tradeoff contemporaneous ROA when increasing the percentage of business access lines. We also find that managers do not have to trade off ROA with the other two nonfinancial performance metrics because these metrics are contemporaneously congruent.