Strategic Management Accounting 

Executive Summary of Westpac Banking Corporation

This assignment is on one of the biggest four banks in Australia namely Westpac Banking Corporation. Apart from the strategies for increasing the profits and productivity, measures such as a balanced scorecard are used for the Strategic performance measurement. Research is carried out in this area to provide a comprehensive analysis of the benefits of the Balanced Scorecard in reaching the strategic objectives of the bank. The issues in the implementation of the Balanced Scorecard and the common barriers in the successful implementation of the balanced scorecard are also discussed. 



1.Benefits of Balanced Scorecard in reaching the strategic objectives.

2.Issues in implementation of Balanced scorecard in Westpac.

3.Common barriers to successful BSC implementation in the financial services sector in general.


References. to 

Introduction to Strategic Performance Measurement System

The strategic performance measurement system is a major element for enhancing the performance of the business. Implementation of the proper SPMs reveals that actions are in alignment with the strategy and objective (Dagnino, King & Tienari 2017). The objective of the report is to analyze and ascertain the major issues pertaining to the implementation of the SPMS, majorly the Balanced Scorecard (BSC) in the financial service sector. To conduct the study, Westpac Banking Corporation, among the four main banks in Australia is selected. Westpac is committed to providing relentless services to the customers and strives to attain goals through teamwork, integrity, and planning . The report covers different aspects such as the benefits of the Balanced Scorecard in attaining the strategic aim of the bank followed by the issues that are faced by the faced in its implementation. Apart from it, a common hindrance to the scorecard implementation is discussed to provide a better picture of the organization. 

1. Benefits of Balanced Scorecard in Reaching the Strategic Objectives

Westpac banking corporation is an Australian financial services provider with its headquarters in Sydney. It is commonly known as Westpac and is Australia’s finest and oldest banking institutions. It has a customer base of 14 million and employs more than 40,000 people (Westpac group 2020). Its core business activities are divided into five key divisions namely consumer bank, business bank, Wealth Management, Westpac Institutional Bank, and Westpac New Zealand. Apart from this, it is a member of the Global ATM Alliance and Global Banking Alliance for Women (Westpac 2019).

This paper uses the theoretical lens of the four pillars of the balanced scorecard as a measure to influence sustainability reporting. The four perspectives are correlated with the bank’s structure and the activities carried out by the organization for social and environmental reporting. 

Since the year 2002, Westpac has started to expand its sustainability practices and it includes sustainability reporting as a part of its organizational performance disclosure practices. It has started issuing a stand-alone report on sustainability-related activities. As most of the reporting is voluntary, it refers to the initiatives taken by the company. Ever since Westpac has commenced its reporting, it has maintained a pioneer position in the Australian banking sector (Westpac sustainability 2019). Westpac not has the longest history in sustainable reporting but is also a significant contributor to the development of sustainability reporting framework. The Dow Jones Index incorporates the Triple Bottom Line approach for the analysis of the social, economic, and environmental performance. As per Morecroft (2015) by using the Balanced Scorecard approach, a relationship can be established between sustainability reporting and stakeholder expectations. 

The objectives are aimed at creating sustainable value for helping customers, supporting shareholders, engaging employees, and contributing to the communities. 

The balanced scorecard was developed in 1992 by Kaplan and Norton to assist performance measurement and management. It is a structured tool consisting of financial and non-financial objectives. It helps in the evaluation of the expectations of the stakeholders and helps in the generation of the strategic possibilities for meeting those demands. Its main purpose is to shift the focus of the company from just the financial perspective (Ryu, Kang & Chung 2018). The balanced scorecard provides the framework for performance setting in four specific categories namely financial, customer, internal processes, and learning and growth (Gerhard 2017). 

The methodology followed is to shift from a performance management tool to a strategic decision-making tool. The Balanced scorecard in the current scenario is being increasingly used by corporate houses as the sustainability indicators can be quantified (Tantalo & Priem 2016). The sustainability reports of Westpac for the last few years have been analyzed. The number of indicators is then quantified with the reporting and disclosure required in each category. This measurement is required to lay emphasis on each category of reporting. The sensitive issues have been identified and legitimate techniques are developed to resolve the same. Disclosures about the same also form a part of the sustainability reporting in order to fulfill the organization’s legitimacy (Westpac sustainability 2019).

As Westpac operates in the financial services sector, its impact on environmental issues are different from those of a manufacturing company and not dangerous to that extent. In order to cover specific issues, the four perspectives of the balanced scorecard are expended and reclassified or subdivided into smaller categories to cover all the elements of sustainability reporting. As customers of varied types come in contact with the bank, the social impact is a major focus point for Westpac (Westpac sustainability 2019).

Westpac chooses to design its balances scorecard in line with the new SBSC categories as below:

The proposed outcome from this analysis and how it has helped Westpac in achieving its goals is discussed below:

Financial perspective

This refers to an analysis of the profitability strategy. Though there is no direct correlation available between sustainability reporting and profitability of the company, the financial results can still be interpreted and used for strategies like cost reduction and costs of compliance with the sustainability requirements (Varadarajan 2017). The further financial perspective includes asset management and the contributions and investments made in relation to sustainability management. This perspective also encompasses within itself enhancing the shareholder value and providing a positive impact for the stakeholders.

Customer perspective

This perspective aims at the identification of the groups of customers and customer segments and also the market share of Westpac. The strengths and weaknesses of each customer group and segment are evaluated and analyzed. The aim is to shift the customer focus to the supply chain in order to expand the sustainability management practices of Westpac. 

Internal Business Process perspective

This category aims at the measurement of the efficacy of the internal processes and systems towards value creation. The innovation of services should be in such a way that it is in line with the sustainability indicators and it should include the development of the organizational policies to support both the traditional management and sustainability development and reporting practices (Christofi, Leonidou & Vrontis 2015).

Learning and Growth perspective

As businesses and organizations are evolving from time to time, this perspective relates to the capability of the organization to refresh its processes to lead to superior ability (Cameron 2014). It aims at the development and preservation of the capabilities and morale of the employees as the sustainability view of this includes the disclosure of the employee profile, workload, rewards and recognitions, and empowerment. 

In comparison to the initial balanced scorecard view adopted by Westpac in the year 2002, it has shifted its focus to sustainability reporting and hence the classification of these indicators has been altered to be in line with the SCSC criteria. A tabular representation of the same has been presented below:

This classification and focus on each category have helped Westpac shift its focus to the most significant issues that are related to the organization and thus it has taken real-time measures to resolve the issues using this balanced scorecard technique and achieve its sustainability targets to a larger extent. 

2. Issues in Implementation of Balanced Scorecard in Westpac

When Westpac commenced its sustainability reporting in the year 2002, it had made disclosures relating to five sensitive issues, the potential effects of the same and the tactics used by Westpac have also been disclosed. Thus it has followed risk mitigation policies in addition to the defensives disclosures made as a response to its criticisms and promotes social value change. 

In the year 2008, Westpac’s CEO left the organization and this resulted in a major change in the management. The stakeholder impact reporting was changed and some new indicators were added to the sustainability reporting in addition to the existing indicators. These were unexpected and contained interesting information as well. For instance, using suppliers with a fair trading policy was included in the social perspective as a part of the SSCM strategy (Keating et al 2008). Westpac stared the system of providing coffee to its fair trading suppliers through the company’s cafeterias. It was done to communicate the values of the company towards the translation of the sustainability principles in the day-to-day activities of the bank. 

As there was a change in the top management in the year 2008, more and more employee issues were being reported. All these were brought into the balanced scorecard framework under specific categories and the learning and growth indicators were updated to resolve the same. 

The Global Financial Crisis combined with the departure of the CEO had an impact on sustainability reporting and the balanced scorecard had to be altered to suit the changing requirements. The sensitive issued disclosed during this period had almost doubled. 

Protection of the general public from the global financial crisis became a priority for Westpac and the related issues including responding to lending and risk management, employee development, social entrepreneurship were also incorporated. As each area requires specific research and addressing, the implementation of the balanced scorecard started becoming more and more complex. 

The inclusion of new issues like climatic change and the responsiveness of Westpac to the same give a glimpse of the social awareness of the company. The first stage of reporting based on the balanced scorecard approach was from the year 2002 to 2004 in which the traditional reporting structure was followed and post 2004, the stakeholder impact definition was expanded to incorporate a variety of factors (Keating et al 2008). As Westpac operates in the service-oriented industry, customer service remains the focal point and due to this dominant factor, it has faced the challenge of establishing suitability models to be in line with the customer groups. It has faced criticisms due to the fact that all the financial indicators were not disclosed in the balanced scorecard and it faced shortcomings in the translation of the management strategies to achieve the objectives of Westpac (Westpac 2019). As more and more importance was given to the noncore stakeholders, the financial perspective was taking a backseat. 

The disclosures relating to the internal business processes perspective assumed significance initially but the reporting declined during the crisis period. Westpac had developed and implemented a structured set of policies initially, but as years passed by, there have been fewer disclosures. Westpac defends its situation by stating that these policies had already become a part of the company culture and hence the disclosures have been skipped (Westpac 2019). 

From the analysis of the balanced scorecard over years, it can be observed that the indicators used in the learning and growth perspective have more or less remained the same and repetitive with little or no innovation. Thus capturing these perspectives has been difficult despite the efforts of Westpac. As more and more sensitive issues were addressed, the stakeholder expectations had increased manifold with answers required for almost everything. This makes it difficult for Westpac as the business operates in unforeseen conditions. 

As a resolution for the same, Westpac set up a Community Consultative Council (CCC) to establish stakeholder dialogue and this consisted of more than 20 groups of stakeholders represent ting different interests and expectations. This is a meaningful mechanism to discharge accountability and assess the relevant issues for sustainability reporting. 

3. Common Barriers to Successful BSC Implementation in The Financial Services Sector in General

As the indicators and the contents of the balanced scorecard are being reviewed and updated, the reports become imbalanced when the comparison has to be done over the years. The percentage of indicators under each perspective is also different referring to the fact that the organization might choose to disclose the parameters where it has been successful and sideline the other factors. It is not easy to identify the information or disclosure missed or omitted (Hopper & Bui 2016). 

It is basically difficult to quantify learning unless it is translated into financial numbers. Hence the increase in profits is used as a tool for measurement through the establishment of a direct relationship between these two factors that cannot be proved. The financial services sectors focus on customer service management and hence the number of complaints of the customers and the resolution rate of the same is dominant in this model (Dagnino, King & Tienari 2017). The measurement and disclosure of the same is still a challenge.

The indicators relating to employees do not undergo any major changes and hence the employee-related issues are not fully captured by the balanced scorecard as every company wants to protect its image. 

The balanced scorecard usually states compliance with the theoretical frameworks and the details about the smaller issues related to the same might not be fully disclosed (Tan, Zhang & Khodaverdi 2017).

Apart from this in the financial services sector, the organization faces challenges like the poor definition of metrics, lack of efficient data collection, and reporting techniques. Lack of a formal structure for review also happens to be an issue to successfully implement the balanced scorecard (Tan, Zhang & Khodaverdi 2017). Too much focus on the internal processes and lack of improvement in the methodology also act as barriers. The time and cost involved in the data collection might be high that small firms cannot afford the same. The stakeholder and employee engagement might be difficult to buy in as all the employees might not act in unison to the solutions provided in the balanced scorecard. Another reason for the failure of the balanced scorecard is that the resolutions provided by the same are not used as a caching mechanism which results in a few policies just remaining on the paper and not followed by the active implementation of the same (Cooper, Ezzamel & Qu 2017).

As the management is busy with the bigger objectives and achieving financial targets, the tactics developed by the balanced scorecard take a second position resulting in a lapse of the system and ultimately question the existence of the balanced scorecard approach. 

Conclusion on Strategic Management Accounting

Westpac’s balanced scorecard and sustainability reports address the key stakeholder issues and how effectively the non-financial performance indicators have been used to gain an advantage by the company. As a continuous effort aimed at growth, Westpac’s practices are a key for its survival and development. The study provided an insight into sustainability reporting and the use of a balanced scorecard in the organization. Further, the research clearly establishes that Westpac has four pillars of the BSC that helps in influencing sustainability reporting. The four perspectives are completely linked to the structure of the bank and its operations thereby helping in the social and environmental reporting.

References for Strategic Management Accounting

Cameron, B.T 2014, ‘Using responsive evaluation in Strategic Management, Strategic Leadership Review, vol. 4, no. 2, pp. 22-27

Christofi, M, Leonidou, E & Vrontis, D 2015, ‘Cause-related marketing, product innovation and extraordinary sustainable leadership: the root towards sustainability’, Global Business and Economics Review, vol. 17, no. 1, pp. 93-111.

Cooper, D. J., Ezzamel, M. and Qu, S. Q 2017, ‘Popularizing a Management Accounting Idea: The Case of the Balanced Scorecard, SSRN Electric Journal vol. 34, no. , pp. 991–1025.

Dagnino, G, King, D & Tienari, J 2017, Strategic management of dynamic growth. Long Range Planning, vol. 50, no. 4, pp. 427-430.

Gerhard, S 2017, ‘Creativity research in Management accounting: A Commentary’, Journal of management accounting research, vol. 29, no. 3, pp. 49-54.

Hopper, T & Bui, B 2016, ‘Has management accounting research been critical?’, Management Accounting Research. vol. 31, pp. 10-30.

Morecroft, JD 2015, Strategic modelling and business dynamics: A feedback systems approach, John Wiley & Sons, Hoboken.

Ryu, D., Kang, S., & Chung, C 2018, ‘Does institutional monitoring matter? evidence from insidertrading by information risk level’, Investment Analysts Journal, vol. 47, no. 1, pp. 48-64. doi:10.1080/10293523.2017.1413152

Tan, Y., Zhang, Y. & Khodaverdi, R 2017, ‘Service Performance Evaluation Using Data Envelopment Analysis and Balance Scorecard Approach’, An Application to Automotive Industry vol. 248, no. -2, pp. 449–470.

Tantalo, C & Priem, R 2016, ‘Value creation through stakeholder synergy’, Strategic Management Journal, vol. 37, no. 2, pp. 314-329.

 Varadarajan, R 2017, ‘Innovating for sustainability: A framework for sustainable innovations and a model of sustainable innovations orientation’, Journal of the Academy of Marketing Science : Official Publication of the Academy of Marketing Science, vol. 45, no. 1, pp. 14-36.

Westpac 2019, Westpac 2019 Sustainability report, viewed 7 May 2020,

Westpac AR 2019, Westpac 2019 Annual report & accounts, viewed 7 May 2020,

Westpac group 2020, Company overview, viewed 7 May 2020,

Westpac sustainability 2019, Timeline of sustainability milestone, viewed 7 May 2020,

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Strategic Management Accounting Assignment Help

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