Key Indicators of Performance Measurement in Small and Medium
Industries using Balanced Scorecard Method
Wiwik Sulistiyowati, Isnaini Rodiyah and Ika Ratna Indra Astuti
Universitas Muhammadiyah Sidoarjo, Indonesia
Keywords: Balanced scorecard, performance measurement, small medium industry.
Abstract: This research aims to know key indicators of performance measurement in Small and Medium Industry (SMI).
The method mostly used in this research is the qualitative method with balanced scorecard concept approach.
The study has seven indicators; these are Ability, Resources, Environment, Strategy, Process, Measurement,
and analysis, innovation and learning. The result of research is significant indicators that important for
performance measurement of small-medium industry are resources variable with leadership experience
indicators in managing firms with 3.7 critical ratio value and ability variable with human resources
management and resources useful with 3.55 critical ratio. Based on the result, in the real that development of
small and medium industry depend on leadership or owner. Based on these results that in reality for the SMI
developed based on leadership or owners. This is because the owner is indirectly the leader of the SMI, and
all policies and rules based on the leader. Thus, of course, the leader's experience in managing the highest
scores is an essential indicator of SMI's performance. Based on these results, in reality, for SMI’s developed
by leadership or owners.
1 INTRODUCTION
Small and Medium Industry (SMI) is one of the
strong foundations in Indonesia's economic sector.
This is evident, at the time of the monetary crisis can
survive in running the production process. In Sidoarjo
Regency, has many SMI, there are 15,000 SMI with
82 small industry centers and 32 types of SMI
commodities. In its development, SMI has several
constraints on improving the quality of its products.
This is due to the absence of standardization of
processes and products; there are still many who have
not performed the company's performance. Thus, the
purpose of this research is to know the performance
of SMI, so that will get some important indicator to
the performance of SMI. The method used in this
research is qualitative with balanced scorecard
method approach. The aim of measuring performance
is not only to know how a business is a performance
but also for the better future. Performance
measurement generates data that will inform the users
where the business is, how it is doing, and where it is
going (Kairu et al., 2013). A performance
measurement system enables an enterprise to plan,
measure and control it is performed according to a
pre-defined strategy (Okwo and Marire, 2012).
A balanced scorecard is one of the most popular
and practical concepts of a system used for measuring
business performance (Zizlavsky, 2014). BSC is
based on the rationale that skilled employees will
improve process quality and cycle time, which
therefore leads to on-time delivery and customer
loyalty (Zizlavsky, 2014). Balanced Scorecard is a
strategic planning tool developed (Kaplan and
Norton, 1996, Awadallah and Allam, 2015). In
addition, balanced scorecard based on a four-
dimensional framework, these dimensional there are
learning and growth, internal business process,
customers, and finance (Kaplan and Norton, 1992).
The BSC is a performance measurement
conceptualization that translates an organization’s
strategy into clear objectives, measures, targets, and
initiatives organized in the four perspectives:
financial, customer, business process, and human
resources or innovation and learning (Kassahun,
2010). The benefit of BSC was to assist an
organization to developed implement effective
business strategies (Kaplan and Norton, 1992). The
BSC has an overall positive effect on the performance
of an organization but find not all aspects of the BSC
are beneficial (Madsen and Stenheim, 2014).
Basuony (2014) also find the BSC benefits
organization but the benefits lean towards large
Sulistiyowati, W., Rodiyah, I. and Astuti, I.
Key Indicators of Performance Measurement in Small and Medium Industries using Balanced Scorecard Method.
In Proceedings of the Annual Conference on Social Sciences and Humanities (ANCOSH 2018) - Revitalization of Local Wisdom in Global and Competitive Era, pages 311-315
ISBN: 978-989-758-343-8
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
311

organizations. Madsen and Stenheim (2014) find
three common benefits of the BSC to management,
there are: the BSC assists managers to focus on
strategy, structure, and vision; the BSC integrates
financial and non-financial based on metrics to
assistant manager to focus on the entire business
process and ensure current business activities and
events contribute to customer value and to the long-
term organizational strategy, and the BSC assist
managers to monitor the execution of a strategy by
mapping cause-effect linkages between employee
activities and strategy implementation. The aim of the
research is to find indicators that important of the
performance of Small and Medium Industries based
on balanced scorecard methods.
2 METHOD
The methods of this research are qualitative methods.
The study was purpose finding of indicators that
important of a performance of small and medium
industries based on balanced scorecard methods.
Random Sampling in deriving a sample of 100
respondents from small and medium industry in
Sidoarjo Regency. The questionnaire has 7 (seven)
variables, and these are Ability, Resources,
Environment, Strategy, Process, Measurement, and
analysis, innovation and learning. The population is
entrepreneurs in small and medium industries. Data
collected using a questionnaire that had close-ended
and open-ended. With 4 (four) point Likert scales
items. Validity and reliabilities tested by SPSS V.16.
After that, data were analyzed using descriptive
statistic and tabulation of data.
3 RESULTS AND DISCUSSION
The performance of SMIs is performed by
distributing questionnaires to SMI actors in Sidoarjo
Regency. Questionnaires given to the respondents are
7 (seven) variables, and each variable is decreased
into several attributes that represent the condition of
the SMI and the things to be measured. The variable
and attribute are shown in table 1. The result of
validation and reliability testing, which all variables
and attribute are valid and reliable, this means, that
the data can be used for the continuous process.
Table 1: Indicators each variable.
No
Variable
Indicator
1
Ability
X1.1
Effective Human
Resources and
Resource
Management
X1.2
Flexible in adapting
to new industries and
market trends
X1.3
Managerial system in
improving
adaptability to
resources and
environmental change
2
Resources
X2.1
Leadership
experience in
managing the
company
X2.2
Knowledge of
product/service
development
X2.3
Knowledge of
marketing
X2.4
Knowledge of
customer service
X2.5
Knowledge in
managing the
company
3
Environment
X3.1
Consumer groups
and market segments
are identified
X3.2
Understanding and
learning about
consumers,
anticipating consumer
needs and developing
business processes
X3.3
Measuring customer
satisfaction
periodically and the
results are used for
improvement
X3.4
The company knows
its competitors and
cares about its
position in the market
X3.5
The company collects
competitor
information
4
Strategy
X4.1
The company has a
strategy
X4.2
Strategies are
developed, reviewed
and updated
periodically based on
information from
consumer,
environment and
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No
Variable
Indicator
performance
measurement
5
Process
X5.1
The design,
production, and
delivery processes are
well coordinated to
ensure no problems
and time are required
X5.2
Production and
delivery processes are
continuously
evaluated and
upgraded to achieve
the best performance
X5.3
Supporting
production and
delivery processes
(for example finance
and accounting
departments, IT,
legality, risk
management, etc.)
support well.
X5.4
The supplier's
relationship with the
company in the
production process is
well managed to
ensure the
achievement of the
objectives.
6
measurement
and analysis
X6.1
Key financial and
nonfinancial
information and data
are well managed and
used to support the
achievement of
corporate objectives
X6.2
Information on
competitors,
environments, and
technologies, etc., is
collected and
analyzed to improve
performance and all
activities
X6.3
Employees and
departments know
how to measure their
performance. The
results can be used to
guide the activities
and improve
performance.
X6.3
Employees know the
duties and goals and
their contribution to
No
Variable
Indicator
achieving company
goals and running
strategy.
7
Innovation
and Learning
X7.1
Investment in new
product development
X7.2
Efficiency of a new
product development
process
X7.3
The company
provides training
Based on data collected from a questionnaire,
there are some important variables in running the
business and measuring the performance of its
business. Several important variables and attributes
are used in SMI performance assessment, namely: a.
Resource variable with leadership experience
indicator in managing company with importance
value is 3.7; b. Variable Capability with an HR
management indicator and an effective resource with
an interest value of 3.55; c. Resource Variables with
knowledgeable indicators of product/service
development with a value of 3.55; d. Process
variables with indicators supporting production and
delivery processes (e.g., finance and accounting, IT,
legality, risk management, etc.) support well with a
value of 3.55
Based on validation and reliability analysis,
indicating that resource variable with leadership
experience indicator in managing company has the
highest importance value. This correlates with the
results of open interviews that the management or
management of SMI must be powerful in running the
business supported by experience regarding
managing the business.
Then the ability variables with HR management
indicators and effective Resources, this is correlated
with the ability of employees and competition
between SMEs as well as efficiency and effectiveness
in the work and employee relationships with business
owners also affect the situation of a conducive work
environment. Another important variable is the
resource variable with the knowledge indicator of
product/service development this correlates to the
interview result that is the ability of the employee to
increase the consumer's trust by improving the
product quality.
Process variables with indicators Supporting
production and delivery processes (e.g., finance and
accounting departments, IT, legality, risk
management, etc.) support well this correlates with
interview results i.e. that financial and environmental
factors strongly support the company's performance.
Key Indicators of Performance Measurement in Small and Medium Industries using Balanced Scorecard Method
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Based on qualitative data from interviews and
field observations, it shows that some indicators are:
3.1 Affects the Company's
Performance
 Management of SMIs
The management must be strong in running a
business supported by experience in managing a
business.
 The ability of employees
The ability, in this case, is the skills and insight
employees in carrying out their work, and
employee motivation can be a full support from
the leadership, reward and punishment system
and a clear career path.
 Then the integrity of employees into their task,
it is very important, with the high integrity of
employees can be seen that the sense of
belonging in the workplace can affect the results
and productivity work.
In addition, the quality of the products both and
in accordance with the wishes of consumers, each
consumer hopes that the products ordered or
purchased in accordance with the wishes and needs,
with excellent product quality and producer (SMI)
can provide quality products in accordance with
consumer expectations, it will affect quality of
company performance. Also, the financial and
environmental factors are excellent and conducive.
Some people argue that the company's performance is
right if the financial condition is also excellent and
profit increases. As well as the existence of consumer
confidence in SMI products and work system, if
consumers already believe in the quality of products
produced by SMI, then consumer loyalty will be
created. The synergistic relationship between
producer as the provider of product and consumer as
a buyer, if this cycle goes well, hence company (SMI)
will run well and develop.
3.2 Financial and Non-Financial
Factors
Almost 80% of respondents stated that financial
factors are measured to determine the level of
company performance as well as to know the level of
stability and know the comparison of financial
statements and to improve performance. While 20%
is not done because it does not do proper financial
management that is not doing well bookkeeping and
not a measurement of business performance.
Based on the measurement results of the
questionnaire on the implementation of SMI
performance measurement, it can be seen that: a.
Type of performance measurement that is
implemented in the company is 80% of SMI does not
conduct company performance measurement. And
20% of SMI perform performance implementation
that is a measurement of financial performance and
consumer satisfaction. b. Have not done performance
measurement by using a specific method, only
conventional nature that is finance and consumer
satisfaction from consumer complain to product
received. The methods are ISO 9000, TQM, and
Balanced Scorecard. c. The reason SMI perform
performance measurement is to meet the needs of
consumers and as feedback for human resources in
carrying out its work. d. The reason for not running
performance measurement is that there is no time and
resources to perform performance measurement and
performance measurement is not required. Based on
the result of the research, the weakness of not yet
measure of performance of SMI (40%) from the
responder, that is Weaknesses and problems in
applying performance measurement a. Licensing
issues from the government. b. Quality of labor that
has not met the standards c. Work system and
working methods that are not yet optimal d. Still
minimal knowledge of technology and environment
e. Venture capital f. Prices of raw materials and
strategies that have not been met g. The absence of
recording and documenting the data well.
The result of this research has supported the result
of research conducted by Babatope and Akintunde
(2010), the problem following operation of SMI,
there is poor access to money or capital markets,
shortage of skilled manpower, poor management, and
low entrepreneurial skill base, overbearing regulatory
and operating environments. The result of this
research has supported the result of research by Kairu
et al. (2013), the result among showed that improved
internal business process and increased customer
loyalty important for performance measurement.
The suggestions for further research are compared
with another method for performance measurement
of a small and medium industry. For example ISO
9001, service quality and Malcolm Bald Ridge
National Quality Award (MBNQA) method. But, to
an implementation of the method must be fit for SMI
condition.
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4 CONCLUSIONS
The result of research is significant indicators that
important for performance measurement of small-
medium industry are resources variable with
leadership experience indicators in managing firms
with 3.7 critical ratio value and ability variable with
human resources management and resources
effective with 3.55 critical ratio. The problem
following the operation of small and medium
industries these are legality, skilled of manpower,
work system, lack of knowledge of technology and
environment, modal, the price of material and lack of
documentation and administration management.
ACKNOWLEDGEMENTS
The authors would thank you for Ministry of
Technology and Higher Education Research and also
to Department of Research and Community Services,
Universitas Muhammadiyah Sidoarjo.
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