A Framework to Align Strategic Efficiency and Performance Improvement Using the Integration of Activity Based Costing and Non-Financial Performance Measurements (An Applied Study)

Companies are now operating in an intensive competitive environment and there is shortage of the information needed by most organizations. This study introduces the integration of activity-based costing system and the balanced scorecard approach in an attempt to make such information available to the organization. The main objective of the research is to investigate the impact of applying both ABC and BSC upon the performance of the organization and on improving the efficiency of the business. The research worked mainly to answer the following main questions; do the companies which adopt both ABC and BSC show better performance and efficiency in implementing their strategies than those companies that do not adopt any of them or just adopt one tool of them? Does the adoption of the ABC system positively affect the four BSC perspectives? Do the ABC system and the BSC approach have a significant effect upon improving both performance of the organization and business efficiency? Information will be collected through questionnaire responses from a random sample of service business units (banks) and manufacturing firms (food). Sample size was 138 (69 for each sector). Response rate was 68% in banks and 74% in food industries firms. The research results mainly indicated that the ABC system positively influences the BSC approach. Further, it was found that ABC and BSC have a role in improving the performance of the organization. Also, unlike ABC, BSC can enhance business efficiency. Finally, with regard to the difference between the banks and the food industries companies in terms of adopting ABC and BSC, it is found that there is little difference between them. The only two noticed differences were the impact of ABC upon the internal business processes perspective of BSC for the favor of banks and the impact of ABC upon the learning and growth perspectives of BSC for the favor of food industries companies.