Improving integrated reporting. A new learning and growth perspective for the balanced scorecard
| DOI | https://doi.org/10.1108/JIC-06-2018-0095 |
| Pages | 60-82 |
| Published date | 31 December 2018 |
| Date | 31 December 2018 |
| Author | Rada Massingham,Peter Rex Massingham,John Dumay |
| Subject Matter | Knowledge management,Accounting & Finance,Organizational structure/dynamics,Behavioural accounting,HR & organizational behaviour,Information & knowledge management |
Improving integrated reporting
A new learning and growth perspective
for the balanced scorecard
Rada Massingham
School of Business, Western Sydney University, Penrith, Australia
Peter Rex Massingham
School of Management, University of Wollongong, Wollongong, Australia, and
John Dumay
Department of Accounting and Corporate Governance, Macquarie University,
Sydney, Australia
Abstract
Purpose –The purpose of this paper is to present a new learning and growth perspective for the balanced
scorecard (BSC) that includes more specific measures of integrated thinking and value creation to help
improve integrated reporting (oIR W). Practical, relevant definitions of these historically vague concepts
may improve intangible asset disclosures (IAD) and increase uptake of theoIR Wframework.
Design/methodology/approach –The paper is conceptual. The authors use organisational learning to
theorise about the learning and growth perspective of the BSC, within the context of the practice of IAD.
Findings –Several criticisms of IAD, theoIR Wframework and the BSC have acted as barriers to
implementing theoIR Wframework. The improved version of the BSC’s learning and growth perspective,
presented in this paper, addresses those criticisms by redefining the concept of integrated thinking (learning)
and more fully connecting that learning to future value creation (growth). The model is designed to be used in
tandem with theoIR Wframework to operationalise integrated thinking. A new BSC strategy map illustrates
how this revised learning and growth perspective interacts with the other three BSC perspectives to create
long-term shareholder value through the management and growth of knowledge within an organisation.
Research limitations/implications –Organisational learning is an important source of competitive
advantage in the modern knowledge economy. Here, the authors encourage further debate on how to report and
disclose information on intangible assets, driven by a new conceptual strategy for organisational learning that
fully supports the BSC’s capacity to help integrated thinking and future value creation for the oIRWframework.
Practical implications –From its roots as a performance measurement system, the BSC has become a
widely used strategy execution tool. TheoIR Wframework has struggled to gain traction, but still has value
in exploring intangible assets and its disclosure from a systems thinking perspective. The model is designed
to bring an explicit understanding of how to improve integrated thinking for theoIR Wframework
facilitating better measurement, management and reporting of human and structural capital. By doing so, the
new model enables a firm to use the BSC to engage with oIRWmore effectively, which should also be useful
for practitioners given the widespread use of the BSC.
Originality/value –The analysis of the BSC’s learning and growth perspective reveals two dichotomies –
one between resources and growth, and another between systems and capability. The revised perspective
resolves these dichotomies with clear, forward-focused measures of learning and intangible asset growth, and
multiple vertical and horizontal connections between the perspective’s four constructs. The authors
demonstrate practical paths to value creation through a range of strategic impacts.
Keywords Systems thinking, Balanced scorecard, Integrated reporting, Integrated thinking,
Intangible asset disclosure, Learning and growth
Paper type Research paper
1. Introduction
The International Integrated Reporting Council (IIRC) recently sought feedback about the
enablers, incentives and barriers to implementing its International integrated reporting
framework (oIRF W). Inspired by this call, we present a proposal that shows how an
improved balanced scorecard (BSC) might remove some barriers preventing companies
from implementing theoIRF Wwhile improving the disclosure of intangible assets
(see also Dumay et al., 2017).
Journal of Intellectual Capital
Vol. 20 No. 1, 2019
pp. 60-82
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-06-2018-0095
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
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JIC
20,1
Practitioners commonly cite two main factors that inhibit wider acceptance of
the oIRFW.First,oIRWis supposed to connect to the internal activities of an
organisation, but it is unclear whether this happens in practice –an issue not widely
explored in the research (Dumay et al., 2017, p. 473). Second, two of theoIRF W’s
main concepts, integrated thinking and value creation, are only vaguely defined (Dumay
et al., 2017, p. 465). When combined, these two factors cloud the benefits the oIRFWcan
bring to companies when implementing. The BSC and particularly its use as a tool to
execute strategy presents an opportunity to extend intellectual capital research to
address these issues. We examine how an improved learning and growth perspective
within the BSC might create more explicit measures of integrated thinking and value
creation for theoIRF W.
Many public and private sector organisations use the BSC because it helps
evaluate and illustrate the cause and effect relationships between actions and goals.
However, the BSC has also evolved into a tool to execute strategy (Kaplan and Norton,
2006). Previous research establishes how BSC can create and report the value of
intellectual capital, and provides a framework for integrated thinking (Kaplan and
Norton, 2001). However, this raises a question. In providing a framework for integrated
thinking, can the BSC’s learning and growth perspective also integrate the oIRF W’s
six capitals?
The BSC’s learning and growth perspective already closely aligns with human and
structural capital for understanding growth in an organisation’s performance and
prospects (Kaplan and Norton, 2006). Human and structural capital are the foundations of
integrated think ing in theoIRF Wandarguablyleadtovaluecreation (World Intellectual
Capital Initiative, 2013). However, both integrated thinking and value creation are
ambiguous terms as currently applied in theoIRF W(Dumay et al., 2017). The ambiguity
of the terms, thus, presents an opportunity to redefine integrated thinking within
theoIRF Wand define its role in “value cre ation”(IFAC, 2017, p. 6). We do so by
incorporating integrated thinking into the BSC’s learning and growth perspective as a
widely accepted growth measure.
When amending the BSC’s learning and growth perspective we examine it from
three perspectives. First, does it answer Dumay’s (2016) call for improve intangible
asset disclosures (IAD) to be forward-focused and interactive? A next-generation BSC
should enable internal control of intangibles, andcreatingpracticalvaluebydisclosing
new information that is important to investors and or stakeholders. Second, Nielsen et al.
(2017) critique the BSC for being too abstract to capture value creation. A fourth-
generation BSC should have inputs and outputs that persuade companies to
useoIR Wfor more than just impression management. The third is whether an
improved learning and growth perspective can adequately measure the drivers of
organisational learning (Massingham, 2018).
2. Linking the concepts
Before developing our essay, we define core concepts to ensure the reader uses the same
terms and meanings as we do. For example, we use the term “intangible assets”instead of
“intellectual capital”for three reasons. First, the term “intangible assets”is often used
interchangeably with the terms intellectual capital, intangibleresources, intangible capital
and intellectual property, even though they are not synonymous (Eccles and Krzus, 2010;
Giacosa et al., 2017). Second, practitioners use the term intangible assets more frequently
than intellectual capital, and its use outside academia is growing (Cuozzo et al., 2017).
Additionally, the IIRC (2013) refers to “knowledge-based intangibles”to describe
intellectual capital, which is more closely related to structural capital in the tradition
tripartite intellectual capital model (Dumay, 2016, p. 175). Additionally, most practitioners
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New learning
and growth
perspective for
the BSC
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