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 DOI: 10.1177/0047287505278992

2005 44: 201Journal of Travel ResearchPaul Phillips and Panos Louvieris

A Balanced Scorecard PerspectivePerformance Measurement Systems in Tourism, Hospitality, and Leisure Small Medium-Sized Enterprises:

  

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Performance Measurement Systemsin Tourism, Hospitality, and

Leisure Small Medium-Sized Enterprises:A Balanced Scorecard Perspective

ross-country performance comparin the tourism, hospitality, and leier of reasons. Past studies in the fielinsey Global Institute study (1998on methodological grounds. Moreof best practice research available fr

n some of the nuances of tourismets, United Kingdom (UK) tourismical of the value of best practiceK.proving business performance has bnets of management and remains fu

ional success (Neely 1999). Despthat managers can operate solelyindicators, strict financial outcome

measures used. During the past deer of scholars and practitioners have

traditional quantitative performance

PAUL PHILLIPS AND PANOS LOUVIERIS

to focus on conventional financial post hoc indicators (e.g.,Fitzgerald and Moon 1996; Wright 1998; Buckmaster 2000).

Reliance on accounting-based performance indicatorshas been highlighted as inadequate in the service sector (e.g.,Fitzgerald and Moon 1996; Ittner and Larcker 1998). Twoapproaches have been advocated in attempts to overcome thelimitations of historical-based measures: first, the enhance-ment of accounting information used to support the manage-ment control and decision-making processes within the orga-nization; second, the identification of performance measuresthat are broader in focus and include qualitative measures.

According to the European Commission, the Europeantourism industry is dominated by small medium-sized enter-prise (SME) organizations, with more than 99% of firmsemploying less than 250 employees and about 94% employ-ing less than 10 persons. On average, tourism SMEs inEurope provide jobs for 6 employees (microenterprises). Ofthe total turnover generated by SMEs in Europe, 6.5% is sus-tained by tourism SMEs. As tourism is a labor-intensiveindustry, any improvement in performance will enhanceemployment levels, which, in turn, will enhance competi-

In response to the United Kingdom’s government’s de-sire to improve the performance of tourism, hospitality,and leisure small medium-sized enterprises, this articleanalyzes the performance measurement processes within 10best practice organizations. Related to contemporary ap-proaches to improving business performance in the manage-ment literature, performance measurement approaches areanalyzed using the balanced scorecard framework. An ex-ploratory case study approach using the balanced scorecardas the theoretical framework was taken to explore and elicitcritical success factors in performance measurement. Re-sults revealed that four key concepts drove measurement andperformance evaluation systems across the sample. Thesewere the exercising of budgetary control with a view to in-creasing total revenue, the undertaking of customer relation-ship management as a means of improving quality of serviceand customer retention, the necessity for strategic man-agement in managing internal business processes, and col-laboration (both inter and intra) to drive innovation andlearning. The article also proposes a balanced scorecardtemplate for hotels.

tiveness at the national level.This research study seeks to identify best practice perfor-

mance measurement among UK tourism, hospitality, and lei-sure in SMEs. The remainder of this article is organized as

Keywords: tourism; small medium-sized enterprises;hospitality and leisure; performance;balanced scorecard

ison is very diffi-sure industry for ad—for instance, the)—have been criti-ver, there is a pau-

om other countries.infrastructure and

practitioners aredeveloped outside

een one of the cen-ndamental to orga-ite the evanescent

with accounting-s remain the domi-

cade, an increasingexpressed disquietmeasures that tend

follows. First, the balanced scorecard (BSC) is discussed.Given, the lack of empirical BSC research in a SME context(see Andersen 2001), the concern here is to explore the BSCpower to sustain and enhance performance measurement.Next, the research method is outlined, followed by the resultsof the case analysis. Finally, the results of the study are re-viewed, major themes are discussed, and conclusions andmanagerial implications are drawn.

BALANCED SCORECARD

Since its development in the early 1990s (see Kaplan andNorton 1992), the BSC has been written about extensively.This can be illustrated by a citation analysis drawn from the

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Journal of Travel Research, Vol. 44, November 2005, 201-211DOI: 10.1177/0047287505278992© 2005 Sage Publications

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papers presented at the First and Second International Con-ferences on Performance Measurement, when it was notedthat the BSC was the dominant underlying theory to the field(Marr and Schiuma 2002). The BSC, with its emphasis onfinancial, customer, internal business processes, as well aslearning and growth, has been widely adopted by manufac-turing, service, nonprofit, and government organizationsaround the globe (Olve, Roy, and Wetter 1999). The BSChas evolved to fulfill two control roles within organizationsat strategic and operational levels. At the strategic level, thefocus is to determine what the organization is trying toachieve, while at the operational level, the focus is to deter-mine the salient processes to be monitored.

Kaplan and Norton’s (1992) BSC has emerged as a ubiq-uitous performance managerial tool that provides managerswith the mechanisms to develop performance objectives andmeasures linked to strategy. The BSC methodologyacknowledges the deficiencies in many business perfor-mance measurement systems, which often rely totally onfinancial metrics and attempts to overcome the deficienciesof existing systems by measuring and analyzing resultsacross a range of activities (Sanger 1998). An additionalbyproduct of the BSC is the role that it can play in changemanagement, which goes well beyond the original idea ofmerely broadening performance measures (Kaplan andNorton 1996).

The BSC concept presents a significant challenge tounderlying assumptions regarding performance measurementand highlights the need to observe measures from a numberof perspectives (Liyanage and Kumar 2001). The BSCmakes a “compelling case” for including nonfinancial mea-sures in a performance measurement system (Amaratunga,Baldry, and Sarshar 2001). It recognizes that operationalmeasures, such as on-time delivery, order cycle times, andproduct returns, should be equal in status to the more tradi-tional financial measures. These “leading indicators” canhelp identify trends in performance before they appear infinancial data (Sanger 1998).

The term BSC reflects Kaplan and Norton’s (2001)attempt to provide a monitoring system that communicatesboth financial and nonfinancial measures using a combina-tion of lagging and leading indicators while addressing long-term and short-term objectives (Denton and White 2000).The critical elements referred to by Kaplan and Norton are asfollows: targeting customers for profitable growth; the valuepropositions that lead customers to do more business and athigher margins with the company; innovation in products,services, and processes; and investments in people and sys-tems to enhance processes and deliver differentiated valuepropositions for growth (Kaplan and Norton 2001). In short,organizational success can best be achieved and measuredwhen viewed objectively from four perspectives (see Figure1): financial, customer, internal business processes, andinnovation/learning.

A successful BSC implementation should enable organi-zational change, not solely measurement for measurement’ssake. The BSC aids strategic thinking, fosters teamwork, andencourages learning (Kaplan and Norton 2001). Accordingto Oliveria (2001), the BSC can help identify performanceindicators that can be influenced directly by staff and manag-ers, thereby encouraging changes in behavior and activitiesto achieve corporate goals. The BSC can facilitate a mean-ingful link between strategy and measurement while com-municating the strategy to everyone in an organization(McAdam and O’Neill 1999). By establishing commongoals for all stakeholders, the BSC helps unify all parties intheir quest for a favorable hotel guest experience, whichleads to positive financial outcomes (Denton and White2000). An effective BSC will articulate the strategic direc-tion of the company, the motivation for that strategic direc-tion, and how it will improve the organization’s performance(Whitaker 2001).

The BSC ties each question that represents a corporateobjective to an outcome measurement. This is linked to themeasurement of a supporting process—a “driver” that en-ables the attainment of the corporate objective. The out-come measurement—a “lagging indicator”—measures whathas happened, while a driver measurement—a “leadingindicator”—looks at the potential to improve performance(Oliveria 2001). Indicators can be used to measure progresstoward the achievement of the organization’s vision. Othersare used to measure the long-term drivers of success and per-formance (Amaratunga, Baldry, and Sarshar 2001). Everymeasure should be part of a chain of cause-and-effect rela-tionships that represents the strategy, and there should be amix of lead-and-lag indicators. Strategic goals must be mea-sured in a way that links them to the financial indicatorswithin the scorecard (Amaratunga, Baldry, and Sarshar2001). There should be a maximum of 10 indicators, acrossthe four perspectives, to avoid the process becoming un-wieldy (Ziegenfuss 2000). The three key performance mea-sures, as perceived by businesses, are cash flow, customersatisfaction, and employee satisfaction, with customer satis-faction generally regarded as the most important perfor-mance indicator (Gautreau and Kleiner 2001).

Brewer and Speh (2000) provide a model for developingindicators across the four perspectives of the BSC:

Financial Perspective: The most important lagging fac-tor, which acts as a system of checks and balances.

202 NOVEMBER 2005

Professor Paul Phillips, MBA, PhD, FCCA, DipM, is deputy direc-tor of the Kent Business School, University of Kent, in Kent, UnitedKingdom, and professor of strategic management. His teaching, re-search, and consultancy interests and expertise include travel andtourism, strategic planning systems, e-business strategy, and per-formance management and measurement. Prior to joining the KentBusiness School in January 2004, he held the prestigious CharlesForte Chair of Hotel Management, which was created by a gener-ous endowment from Forte plc in 1986 at the School of Manage-ment, University of Surrey, United Kingdom. He was director of theCentre for Hospitality Industry Performance Research and streamleader for the university’s MSc degree program in international ho-tel management. He has written more than 100 papers and textbookpublications, including E-Business Strategy: Text and Cases (2003)and Strategic Planning Systems in Hospitality and Tourism (1998,with Luiz Moutinho). Dr. Panos Louvieris, BSc, MSc, PhD, DipM,CIM, MBA, MAIS, is senior lecturer in information systems in theSchool of Management at the University of Surrey, in Surry, UnitedKingdom. He has held directorial posts in information systems andmanagement in the private sector. His research interests and publi-cations are in the areas e-business management, knowledge man-agement, and information systems development. He is currently in-volved in both private sector and government research contracts(Department of Trade & Industry) in the tourism sector concernedwith business performance management, e-business systems devel-opment, and e-channel management. His teaching interests arestrategy and tactics for information technology, e-business man-agement, and business strategy.

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The Customer Perspective: What do customers thinkmakes the business successful? Measures should cap-ture customer opinion. They can be general (e.g., cus-tomer value and customer retention) or more specific(e.g., product/service quality, flexibility, cost, andresponse time).

Internal Business Processes: What must be done inter-nally to meet and exceed customer needs? These arepredominantly nonfinancial measures (e.g., mea-sures of quality that are time based and flexibilityorientated).

Innovation and Learning: What needs to be done on acontinuing basis to delight and retain customers? Thefocus should be on the future rather than current capa-bilities. Measures should relate to issues such as newproduct development, percentage of sales from newproducts, and process improvement rates. This canalso relate to human resource measures.

The process of implementing and maintaining a BSC canbe automated (Sanger 1998). A business case must be made,strategies identified, tactical objectives and performancemeasures identified, a data warehouse created, informationtechnology (IT) selected to manage the data warehouse, abalance scorecard report created, the strategy managed, andthe tactical objectives refined (Oliveria 2001). Internal andexternal performance data must be identified, and to makethe implementation process easier, the chosen software sys-

tem should link directly into existing applications anddatabases (Sanger 1998). A simple scale is usually used tonormalize the scores (e.g., scoring 0–10 for each factor andthen using a conversion process to convert into actualmeasures). The Key Performance Indicators should then beweighted (Sanger 1998).

Figure 2 shows the four key processes in managing thestrategy that inform the BSC: translating the vision, commu-nication and linking, business planning and feedback, andlearning (Ziegenfuss 2000). Whitaker (2001) stresses theimportance of leadership in the development and continueduse of the BSC. McAdam and O’Neill (1999) believe itstrengthens links between customer improvement initiativesand organizational change.

METHODOLOGY

For the purpose of this research, the UK’s Department ofTrade and Industry’s definition of SMEs is used, which iden-tifies SMEs as businesses employing fewer than 250 em-ployees (see Table 1). The project team performed a pilotstudy and investigated 11 businesses (three hotels, two pubs,two restaurants, two leisure operators, and two visitor attrac-tions). To identify the areas for detailed research, a prelimi-nary investigation into the critical success factors in tourism,hospitality, and leisure SMEs was conducted by interview-ing 38 SME consultants, owners, and managers (see Jones

JOURNAL OF TRAVEL RESEARCH 203

FINANCIAL “To succeed financially, how should

we appear to our stakeholders?

CUSTOMER “To achieve our vision, how should we

appear to our customers?”

LEARNING AND GROWTH “To achieve our vision, how will we

sustain our ability to change and improve?”

INTERNAL BUSINESS PROCESS “To satisfy our stakeholders and

customers, what business processes must we excel at?”

VISION AND STRATEGY

FIGURE 1BALANCED SCORECARD: FOUR PERSPECTIVES

Source: Kaplan and Norton (1996). Used with permission.

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and Hwang 2002). Interviewees were questioned about theirlevel of performance and the factors that lead to this, alongwith a series of very open questions, based around the Euro-pean Foundation for Quality Management model. This studyled to the proposition that effective performance manage-ment processes were a key determinant of success for SMEs(Bowen, Lockwood, and Phillips 2003).

Best practice practitioners were identified based on rec-ommendations from tourist boards, national trade associa-tions and the Department of Trade and Industry, as well asrecommendations from individual industry professionals.This list was further refined by identifying companies thatwere the recipients of awards such as the Excellence throughEngland Award, the Leisure Property Forum Award, Auto-mobile Association (AA) Hospitality Awards, Investors inPeople (IIP) awards, and Vision 100 awards. For this study,

owners of 10 SMEs were interviewed, 2 each from the hotel,pub, restaurant, leisure, and visitor attraction sectors (see theappendix for a summary of each case organization). All 10case organizations were award winners, regionally or nation-ally, or had performed consistently in grading schemes. Toensure cases would be suitable (and to avoid redundant useof resources), participants were assessed by a telephonescreening interview to establish if there was a prima faciecase that they were a highly successful business. Anotherselection criterion was that the 10 case organizations shouldbe geographically dispersed across the UK (largely for creat-ing face validity with regard to the ultimate users of theresearch output—SMEs throughout the UK).

The primary aim of this exploratory study is to gain someinsight into the performance measurement processes used bytourism, hospitality, and leisure best practice organizations.

204 NOVEMBER 2005

Translating the Vision -clarifying the vision -gaining consensus

Communicating & linking -communicating & educating -setting goals -linking rewards to performance measures

Business Planning - setting targets - aligning strategic initiatives - allocating resources - establishing milestones

Feedback & Learning - articulating the shared vision - supplying strategic feedback - facilitating strategy review & learning

Balanced Scorecard

FIGURE 2MANAGING STRATEGY: FOUR PROCESSES

Source: Kaplan and Norton (1996). Used with permission.

TABLE 1

SOME EUROPEAN SME COMMISSION DEFINITIONS

Criterion Micro Small Medium

Maximum number of employees 9 49 249Maximum annual turnover NA EUR 7 million EUR 40 millionMaximum annual balance sheet total NA EUR 5 million EUR 27 million

Note: SME = small medium-sized enterprise.

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A semistructured interview instrument, based on the philoso-phy of the BSC, was devised. Open and closed questionswere used to explore performance measurement activitieswithin each case organization. The questionnaire consistedof the following seven sections:

• organization information;• financial information systems in use;• sources of information used to measure the organiza-

tion’s performance;• current performance measurement activities;• performance target setting;• revenue management; and• future developments of performance measurement.

Each interview lasted approximately one hour, and inter-views were typed and transcribed in full. The researchers feltthat the case study approach would be most appropriate toelicit more in-depth information regarding performancemeasurement issues under consideration, as research casesoffer a unique tool to build theory by examining phenomenanot suited to traditional statistical approaches (Stake 1995).Given the paucity of previous tourism management perfor-mance studies, as well as with the exploratory nature of theinvestigation, the BSC was used as a descriptive framework.This is in agreement with Yin (1994), who asserts that devel-oping a case description is appropriate when theoreticalpropositions are unclear. As 10 case studies were availablefor analysis, secondary analysis across cases was performed.All case organizations were analyzed from the prospective ofthe BSC and form the basis for the results in the followingsection. It must also be borne in mind that examining busi-ness practices in the tourism, hospitality, and leisure industryis an area that is underdeveloped, and the results should beplaced in this context.

RESULTS

The interviews covered a wide range of performancemanagement issues, and cross-case analysis revealed somedisparity in processes. For example, uses ranged from paper-based manual processes to highly innovative computerizedprocesses, a disparity that highlights the potential for imple-menting and maintaining a BSC (see Sanger 1998). No caseorganization was explicitly using the BSC, which was un-surprising given the lack of empirical research (Andersen2001). However, the case organizations included nonfinan-cial measures in their performance management system. Thefollowing section provides an overview of the critical suc-cess factors with relevant quotes from interviewees.

Financial Critical Success Factors

1. Collect the Relevant Information to Support FinancialDecision Making. In essence, operators will be betterequipped to formulate performance measurementstrategies if they work with appropriate information.

The New Mill Restaurant. The proprietor of the New Millhas created bespoke financial management software that en-ables him to integrate the information from his accounts into

a spreadsheet package detailing average spend across severaldepartments.

“We’ve got two restaurants. Average spend for eachof these is broken down. I’ve got my gross profit mar-gins. I also monitor them through the liquor sales sep-arately on a monthly basis.”

The integrated management information system (MIS)allows the owner to know from which part of the businesssales are generated and to adjust his operations accordingly.

“Am I achieving growth in average spend, whichdrives the revenue and the covers, or am I just gettingmore average spend and less covers, which is mask-ing a decline in volume? Your revenue’s going up,but your volume is going down. I can keep an eye onthat because I’ve set where I think the average spendand the covers should be, so if they start to deviate alot, then I can pick that up.”

2. Digitization aids the collection, analysis, and dissemi-nation of financial information. There appears to be amove away from manual, paper-based systems, sug-gesting that owners appreciate that speed and accu-racy of data collection. A fast control cycle achievedthrough digitization will benefit their financial perfor-mance measurement strategies.

The George at Stamford. This establishment has a fullyintegrated financial and management information system.The George piloted a front-of-house software package in-corporating guest billing, reservations, and electronic pointof sale, which, in turn, drops down into the accountspackages.

“From our reporting systems, we have a series ofspreadsheets from which we monitor things like cashflow, profit performance, staffing, and organizationalcharts.”

The organization is able, on a daily basis, to measure itsperformance and how that fits into the weekly budget re-quirement. Food purchases are listed daily and measuredagainst what has been sold. Weekly accounts are produceddetailing turnover and gross profit margins on food andwages.

“Although we pay monthly, we do know what we’respending every day more or less because we have acropping system. We do number of covers everymonth after the end of each period . . . statistical anal-ysis of number of covers, average room rate, roomoccupancy.”

The finance director would like to extend the use of soft-ware to detailing table spend, for example, which would en-able him to identify customer trends more easily. For exam-ple, “Are pasta sales increasing? Have they gone to steak?Do they like that new dish that we’ve just put out?”

3. Forecasting—linking digitized financial reporting sys-tems and management information systems—facilitates

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a more coherent interaction between day-to-day oper-ations management and forecasted performance.

K-Spa. The hotel and leisure complex has a fully inte-grated, IT-based financial and management information sys-tem. The chief executive officer is able to use the system tomonitor current performance and plan for the future.

“We have a weekly business meeting. Following thatone, we have a yield meeting, which discusses wherewe can go to and get extra business to meet financialtargets. Following that, we have a financial forecastmeeting where we pull the results of the two meetingsdown into spreadsheets to work out how much ourbudget is going to be exceeded by or under by. Then,we forecast where we can make cost savings asappropriate.”

Customer–Related Critical Success Factors

1. Build a customer profile. Operators are not able to seteffective customer related indicators and targetsunless they have a good understanding of their cus-tomer base. SMEs should be aware of who their cus-tomers are, where they come from, what they expectfrom a visit, and whether they will return.

The Old Bell. The proprietor owns two properties in thearea and has a comprehensive understanding of both cus-tomer bases by analyzing average house price, average in-come, and the level of unemployment locally.

“You have to cater your performance measurement towhat you are going to do [in each property]; hence,we do two for one here. We do specials. We do barbe-cues . . . outside in the summer. Now, in the other one[property], I wouldn’t dream of doing that.”

He is able to draw in his knowledge of the local marketwhen putting performance measures into context.

“Why are we down on beer? Have we lost happyhour? Have we lost the footballers? Where are they?”

2. Communicate with customers to build relationshipsand encourage loyalty. Face-to-face interaction be-tween customers and staff assist the collection ofanecdotal indicators of performance. A guest historycan also be built up through informal exchanges—customers being more likely to return if they feel val-ued. Collating and interpreting customer satisfactioninformation, particularly in terms of anecdotal feed-back, must be systematic and rigorous; digitizing MISshould facilitate this process.

The George at Stamford. The establishment uses a mix-ture of formal and informal techniques to collect informationfrom and about customers. Comment cards are placed in allbedrooms, the details of which, both positive and negative,are fed back to staff at weekly management meetings. Staffare encouraged to speak to guests and report back. Informa-tion is then fed into the computerized guest history program,a part of the reservations package. Follow-ups are under-taken on guest histories.

3. The quality of service offered by SMEs is crucial tocustomer satisfaction and retention. It can also beused as a measure of performance, through the grad-ing schemes offered by organizations such as the AA,the Royal Automobile Club, and the English TourismCouncil.

Techniques for measuring quality of service. All thecases participate in grading schemes of some kind. Inaddition,

• Patshull Park operates a mystery customer initiative;• EcoTech is looking to work with focus groups from

across the customer base; and• K-Spa, Angel Inn, Pennyhill Park, and Flamingo Park

Wildlife Encounter undertake benchmarking withcompetitors, nationally and internationally.

Internal Business Process CriticalSuccess Factors

1. Investing in staff is integral. Participants cited staff askey to measuring and evaluating internal businessprocesses. There was a clear emphasis on training anddevelopment and staff empowerment, with a view tostreamlining internal operations and highlightingpotential problems. IIP status, or schemes such asExcellence through People, may encourage operatorsto think more about their internal business processesand enable them to form more effective performancemeasurement strategies across the business as awhole—in terms of the guest/staff relationship, en-couraging innovation, and facilitating learning, aswell as refining internal operations.

Examples of investing in staff.

• Pennyhill Park’s staff training and development planlinks training with meeting business objectives.

• As illustrated in the section on financial critical suc-cess factors, K-Spa has a comprehensive performancerelated pay package for staff, which makes links be-tween staff incentives and financial reward.

• The George at Stamford also provide staff financial in-centives, by giving them cash bonuses for introducingnew staff to the organization.

• The Matfen Hall Hotel and Golf Club is sponsoring anemployee through the final year of her Higher NationalDiploma conversion course, thus linking learning andstaff retention.

• Flamingo Park Wildlife Encounter cites the achieve-ment of IIP status and the creation of a positive work-ing environment as key business objectives for thenext three years, highlighting the links between formalrecognition of the value of staff and fostering a strongorganizational culture.

• EcoTech’s staff engage in multiskilling through pro-ject-based work, which in turn encourages a culture ofinnovation.

• The Old Bell encourages staff empowerment and aimsto improve the organization’s prospects for growth byinvolving the staff in every aspect of the business, in-cluding financial areas.

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I think it gives them a sense of responsibility and Ialso think it gives them a sense of being part of whoyou are. . . . [He] doesn’t work for me, he works withme. A partnership. If I do well, he does well. If I don’tdo very well, he just gets paid. So they have a greatersense of responsibility.

2. Measuring productivity is key. Productivity was arecurrent factor across the case organizations. It wasseen as key to the measurement of internal businessprocesses. The George at Stamford defines produc-tivity as the wages paid as a percentage to achieveturnover, but links were also made between staff in-centivization and productivity, particularly throughperformance-related pay schemes.

K-Spa. The organization’s performance measurementstrategy focuses on its staff. A comprehensive performancereview and development strategy for all employees is beingput into operation, after piloting in a sister hotel. Previously,annual pay increases were related to the inflation index; how-ever, it was felt that staff in certain categories were being un-dervalued or mistakenly overvalued. The company is intro-ducing a system of three appraisals per annum and a finalperformance review prior to the pay awards. The term “mo-ment of privilege,” as opposed to “appraisal,” is used, as it isconsidered less frightening and more reflective of the aim ofthe exercise. The management team is undertaking a series ofpeak training programs with an element of peer assessmentto enhance performance at senior management level.

Staff are absolutely our key performance indicator.We used to do a guest questionnaire and we used touse the responses, but next year’s performance mea-surement will be to introduce a more formal customerreview process. We will invite customers to makecomments, and we will actually send to them, oncethey’ve stayed, a little note asking them just to com-plete it . . . to actually measure how well our staff andhow our product are performing.

Innovation and Learning Critical Success Factors

1. Staff must be drivers of innovation. To encourageinnovation and facilitate learning, SMEs should en-sure there is dialogue between staff and senior man-agement and should aim to foster a strong organiza-tional culture. Participants linked the measurement ofinnovation and learning with the measurement ofinternal business processes in terms of staff as a keyasset.

The George at Stamford. The organization has daily staffmeetings run by the general and service managers. All staffundertake an induction program organized by a qualified in-house trainer and a follow-up session 14 days after they havestarted. There is a training manual for each department, withnew lesson plans having recently been added. A staff exitquestionnaire, used when employees move on, aims to iden-tify their reasons for leaving.

We’ve got to look at the way we recruit, induct, train,retain, and motivate these people to stay with us.

The finance director, the general manager, the servicemanager, and the catering manager completed a course—which has now been cascaded down—with the aim of en-couraging learning and training throughout the organizationthrough internal measurement and auditing.

Staff are encouraged to suggest new ideas and ways toimprove existing operations.

The courtyard was just a courtyard until someonesaid, “Well, what if we put tables out?” Yes, great,OK, put tables out. Then . . . “Why can’t we have an ala carte section under the canopy?” So we do that.“What do they do when it is chilly in the evenings?”“Oh, we’ll get these heaters that I’ve just seen.” Sothat’s the sort of thing—that’s the way it is driven.”

2. Whether it is through knowledge sharing orbenchmarking, SMEs should be encouraged to under-take cross-industry comparisons when setting innova-tion and learning indicators and targets. Perhapsbecause of the unique nature of their product, visitorattractions were best able to articulate the most spe-cific indicators and targets. An attempt should bemade to quantify the level of innovation withinSMEs; this is made easier for organizations such asEcoTech, for whom innovation is a key fundingrequirement.

Flamingo Park Wildlife Encounter. The owners are in-vited to share best practice with zoos across the world, forexample, with zoos in Milwaukee and San Diego. The Fla-mingo uses such knowledge sharing and benchmarking exer-cises to inform innovation and learning strategies and to re-view performance measurement strategies as a whole.

The organization aims to successfully organize at leastone new and innovative event per year, implement a school’scharter, upgrade menus in line with customers’ eating habits,and develop and implement a recruitment policy that encour-ages the employment of mature, skilled, and experiencedstaff.

The New Mill Restaurant. The proprietor of the New Millis involved with both the Restaurant Association of GreatBritain and the Academy for Food and Wine Service with aview to increasing the level of, and measuring the success of,innovation within his establishment.

It’s networking. When you hear what other people inthe country are doing or you see someone who is re-ally successful, you get into these things eventually. Ifyou look at the successful restaurants, it’s usually be-cause the people are out and about getting involved inthe industry. The ones that aren’t successful are usuallythe ones that sit, saying they’re doing the right thing,but they don’t actually know what else is happening.

DISCUSSION

The BSC literature review, when placed in the context ofthe findings of this research study, illustrate that the caseorganizations have yet to fully avail themselves of the bene-fits of the BSC. Based on the literature review, this suggests

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that tourism, hospitality, and leisure SMEs would appear tobe missing out in the areas of control at the strategic andoperational level, change management, lead indicators,links between strategy and measurement, and performanceimprovement.

Nevertheless, when analyzing the case data, it becameevident that four key concepts currently drive performanceacross the industry. These being the exercising of budgetarycontrol with a view to increasing total revenue, the under-taking of customer relationship management as a means ofimproving quality of service and customer retention, thenecessity for strategic management in managing internalbusiness processes, and collaboration (both inter and intra)to drive innovation and learning. The critical success factorsobserved in this study were the means by which operatorsmanaged each of these concepts. The potential for e-customer relationship management and the need to definestrategic management specifically for SMEs are both areas inwhich further study could be undertaken.

However, even in best practice SMEs, there were stillsome notable barriers to the implementation of effective per-formance measurement activities. SME operators have diffi-culty in articulating the critical success factors, indicators,and targets used to assess their organization’s performance.To overcome this, SME operators must first work with theright information—in terms of financial information, cus-tomer profiles and feedback, business objectives, and train-ing and development needs. In essence, having a thoroughunderstanding of the business in the context of its vision andstrategic direction is a prerequisite for effective performancemeasurement.

There is often too much reliance on so-called hard finan-cial information to inform business strategies. Retrospectivefinancial indicators featured in many of the cases and inter-viewees rated financial targets the most important. Pub andrestaurant case organizations appear to place the greatestreliance on financial data, but there does appear to be anincreasing awareness of the need to adopt a more balancedapproach to achieve results that can directly inform businessstrategy. So-called soft indicators, which are not affected bythe time-lag effect, are becoming more important, and caseorganizations across the industry were able to articulate ex-amples, particularly in customer care (e.g., K-Spa and TheGeorge at Stamford) and innovation and learning (EcoTechand Flamingo Park Wildlife Encounter).

The tacit (behaviors and/or the constitution of mentalstates not ordinarily accessible to consciousness) dimensionwas apparent in performance measurement strategies, partic-ularly for internal business processes and innovation andlearning, which can lead to operators failing to review strate-gies rigorously, or frequently enough. If performance mea-sures are to be successful, an attempt must be made to reviewthem on a regular basis and in a systematic manner. K-Spaprovides an example of how this can be achieved throughtheir performance-related pay initiatives.

When digitizing performance measurement systems,SMEs should ensure that systems are fully integrated. Someof the case organizations operated computerized systems thatwere not compatible, and others were still operating with acombination of paper and electronic information systems.However, operators are aware of the benefits of digitization,and the cases illustrate the level of integration that can be

achieved (e.g., The New Mill Restaurant and The George atStamford).

Table 2 illustrates a hotel BSC based on the aggregationof metrics used by the two hotel case organizations. The levelof IT-based, integrated financial reporting systems withinthe hotel industry is a significant driver for the control of sup-ply and demand. Hotel operators value the accuracy andspeed of information retrieval attained through digitization.Profitability is an important factor, as is forecasting. In termsof managing the customer relationship, case organizationsplace an emphasis on quality of service. Direct dialoguebetween the customer and staff is encouraged, and the notionof customer profiling is becoming increasingly important.

Hotels appear to place an emphasis on having clear busi-ness objectives and then implementing, tracking, and eval-uating those objectives through the staff, who also act asdrivers of innovation. Hotels invest heavily in motivating,training, and retaining their staff to achieve good results.Cross-industry comparison is undertaken to encourage inno-vation and stimulate learning among hoteliers.

CONCLUSIONS ANDMANAGERIAL IMPLICATIONS

This study has identified performance measurementamong best practice tourism, hospitality, and leisure SMEs.Nevertheless, not all organizations that were originallyapproached agreed to be interviewed, so the sample may bebiased in terms of being representative only of those will-ing to participate in the study. However, we have identifiedpriority factors—budgetary control, customer relationshipmanagement, strategic management, and collaboration—that are slightly different from Kaplan and Norton’s (1992)perspectives, which are financial, the customer, internalbusiness processes, and innovation and learning. This rein-forces the problems of SMEs simply implementing manage-ment tools developed in larger organizations.

This study recommends that managers within best prac-tice SME tourism, hospitality, and leisure organizations whowish to develop effective performance measurement sys-tems should incorporate digitization, holistic approaches,and well-trained and motivated staff into the process. Man-agers should aim for digitization to enable the swift andaccurate retrieval of information from financial and man-agement information systems, a system that would, in turn,allow for greater operational control. Effective performancemeasurement should be viewed holistically. Financial, cus-tomer-related, internal business process and innovation andlearning should not be measured in isolation but must beviewed as part of a whole. There does appear to be a movethroughout the industry in this direction, with the visitorattractions often offering the most tangible and creativeexamples (e.g., Flamingo Park Wildlife Encounter andEcoTech).

Staff should be acknowledged in the formation and per-formance measures. Well-trained and empowered staff en-hance the guest experience, track and evaluate the effective-ness of internal business processes, and drive innovation andlearning. It is encouraging that many of the case orga-nizations involve staff in the performance measurement pro-

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cess, in both informal (The Old Bell) and formal (K-Spa)capacities.

Given the paucity of literature examining business prac-tices in tourism, hospitality, and leisure SMEs, the resultsillustrate that traditional BSC-type processes are appropriate.This study illustrates how firms can adopt the BSC to im-prove their performance measurement systems. The provi-sion of more empirical research would certainly be useful toallow more accurate reflections about importance of theBSC. Finally, the lack of cross-country performance mea-surement comparison is an issue that needs to be addressed inthe tourism, hospitality, and leisure industry. Best practiceperformance measurement presents significant opportuni-ties for UK SMEs, so any attempt to create and implementnational and international standards are timely. However,there will no doubt be reluctance and hesitation by some UKtourism, hospitality, and leisure organizations to adopt bestpractice, but we believe that there are overwhelming benefitsto the industry. Moreover, even SMEs are competing in theglobal marketplace, so managers who wish to grow theirbusiness should be looking for suggestions derived frominternational collaborative studies. We believe that the

diffusion of best practice performance measurement innational and international markets will be one of the keys toenhance performance among the UK and global tourism,hospitality, and leisure industry.

APPENDIXCASE ORGANIZATIONS

1. The Angel Inn

The interview was conducted with the proprietor.

Background. The Angel Inn is situated in Skipton, North York-shire. It is an independently owned, proprietor-run restaurant. Theestablishment has won a number of awards, including the BookerPrize for Excellence 1998, the Publican Pub Caterer of the Year1998, the Guide Michelin Bib Gourmand Red “M” 1997, the EgonRonay Pub of the Year 1995, and the Automobile Association (AA)Newcomer of the Year 1992. The restaurant; its sister hotel, TheGeneral Tarlaton; and a small wine company run from the Angelemploy approximately 60 staff.

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TABLE 2

HOTEL SECTOR BALANCED SCORECARD

Category Critical Success Factor Key Performance Indicators

Financial Profitability Gross operating profitNet operating profitSales achieved

Budgetary control Adhering to budgetMeeting financial targetsAchieving predicted room and occupancy ratesRevenue per available roomCash flow

Customer related Quality of Service Guest surveysMystery guestParticipation in grading schemes

Customer relationship management Anecdotal feedback via staffCustomer satisfaction levelsAverage spend

Customer profiling Customer satisfaction levelsCustomer retention rate

Internal business Having clear objectives Meeting financial targetsTracking objectives Internal auditing

Completion of capital projectsInvesting in staff Staff satisfaction surveys

Staff development reviewsStaff retention rate percentage

Productivity Wages (%) to achieve turnoverStaff incentive schemes (e.g., performance-related pay)

Innovation/learning Staff as drivers of innovation Number of new products/servicesProcess improvement initiatives

Cross-sector comparison Networking relationshipsMembership of trade/professional bodiesParticipation in grading schemes

Encouraging teamwork Courses completed by staffLevel of multiskillingProductivity

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2. EcoTech, Swaffham

The interview was conducted with the communicationsmanager.

Background. EcoTech is an alternative energy centre inSwaffham, Norfolk. It has been funded by the United Nation’s Chil-dren’s Fund, the Countryside Agency, Business Link, and theSwaffham Learning Partnership. Facilities include the DiscoveryCentre, Wind Turbine, gardens and grounds, a shop, and a cafeteria.

There are 18 members of permanent staff, of whom approxi-mately 8 are full-time. In addition the Discovery Centre employs10–15 seasonal staff on temporary contracts. It holds Investors inPeople status.

3. Flamingo Park Wildlife Encounter

The interview was conducted with a family partner.

Background. Flamingo Park Wildlife Encounter is a family runvisitor attraction in Seaview on the Isle of Wight. It opened in 1971,and recent awards include the 2002 Good Britain Guide Isle ofWight Family Attraction of the Year, the 2000 Best Visitor Attrac-tion—Southern Region in the English Tourism Council (ETC) Eng-land for Excellence Award, and 1999 Top Place of Interest—Isle ofWight Tourist Board.

Sixteen staff are employed across the park, the gift shop,and the catering outlet. The management team consists of thefour family partners, a livestock manager, a conservationmanager, an education officer, and a gift shop manager.

4. The George at Stamford

The interview was conducted with the finance director.

Background. The George at Stamford is situated in Stamford,Lincolnshire. The establishment consists of a 47-bedroom hotel,restaurant, garden lounge, and bar, as well as three private diningrooms. It has been awarded three AA/Royal Automobile Club stars,one AA dining rosette, and is listed in the Egon Ronay and GoodFood guides.

5. K-West (incorporating K-Spa)

The interview was conducted with the general manager andtraining manager.

Background. K-West is situated in Kensington, London. Facili-ties include a hotel, spa, restaurant, and bar. The establishment em-ploys approximately 80 permanent staff and a further 41 from anagency. K-West’s sister hotel has piloted a staff-based performancemeasurement system that is now being introduced at the Kensingtoncomplex.

6. Matfen Hall Country House Hotel

The interview was conducted with the general manager.

Background. Matfen Hall is situated in Newcastle upon Tyne. Itis a 31-bedroom hotel with a restaurant, conference facilities, andan 18-hole golf course (with 300 members). The establishment wonthe 2002 ETC Award of Small Hotel of the Year. It also holds aPride of Northumbria Award and an ETC Silver Award. The organi-

zation employs approximately 90 staff and holds Investors in Peo-ple status. It is a popular wedding venue with approximately 111events planned in 2002.

7. The New Mill Restaurant

The interview was conducted with the proprietor.

Background. The New Mill Restaurant is situated in Eversley,Hampshire. It was awarded the 2002 AA Award for OutstandingWine List and holds one AA dining rosette.

The establishment employs approximately 17 full-time and 4part-time staff, supplemented by casual staff. The managementteam consists of the proprietor and his wife, the general manager,the restaurant manager, and the head chef.

8. The Old Bell

The interview was conducted with the leaseholder.

Background. The Old Bell is situated in Shifnal, Shropshire.The Punch Pubs Group recommended it to the study. The proprietoroperates three units in total, with the Old Bell employing approxi-mately 46 staff. The management team consists of the leaseholder,his wife, a head chef, and a restaurant manager.

9. Patshull Park Hotel and Country Club

The interview was conducted with the sales and operationsmanager.

Background. Patshull Park Hotel and Country Club situated ona 280-acre site in Pattingham, Shropshire. Facilities include an 18-hole golf course, a health and fitness centre, a gym, and a fishinglake. The hotel holds AA three-star and Investors in People status. Itemploys approximately 87 staff, and the management team consistsof a general manager and department heads for rooms and sales,food and beverage and the country club (which is, in turn, brokendown into health and fitness, golf, and fishing).

10. Pennyhill Park Hotel

The interview was conducted with the marketing manager.

Background. Pennyhill Park is a five-star 123-bedroom hotelsituated in a 120-acre site, in Bagshot, Surrey. Facilities include 19conference rooms, two restaurants, two bars, a nine-hole golfcourse, an outdoor pool, a tennis court, and a rugby pitch (the Eng-land team trains on site when playing at Twickenham). The hotelholds two AA dining rosettes. Sixty-five percent of its business co-mes from the conference and banqueting market, and approxi-mately 190 staff are employed on site, making it one of the largestoperations interviewed for the Industry Forum Adaption Pro-gramme study.

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