Integrated performance measurement system for Slovak heating industry: A balanced scorecard approach

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The prerequisite for businesses’ success, competitiveness, and non-bankruptcy is their performance. An effective performance measurement system is a suitable tool for measuring and improving business performance. The development in performance measures moved from financial measures focused on company profitability to measurement systems combining different methods, approaches, and tools. The paper aims to identify key performance indicators for Slovak heating companies based on the developed integrated performance measurement system. The analysis sampled 292 Slovak companies within SK NACE 35 (heating industry). The performance measurement system was built on balanced scorecard principles, while the least absolute shrinkage and selection operator (Lasso regression) method was used to select financial indicators. Based on the combination of the above methods, a performance measurement system framework for the analyzed sample of businesses was created. The results show that when managing performance, the analyzed businesses should focus on the following financial performance indicators: Receivables turnover ratio, Return on equity, Return on costs, Total debt to total assets, Material intensity, Labor to revenue ratio, Netto cash flow to assets, Net working capital to total assets, and Short-term liabilities to assets. When building performance measurement system based on balanced scorecard principles, financial indicators were supplemented by non-financial ones. In addition to the original balanced scorecard principles, the performance measurement system was extended by environmental constituents. Also, the paper’s deliverable combines Lasso regression and balanced scorecard principles in order to select key performance indices.

Acknowledgment
This paper is prepared within the grant scheme VEGA No. 1/0741/20 (the application of variant methods in detecting symptoms of possible bankruptcy of Slovak businesses in order to ensure their sustainable development).

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    • Figure 1. Strategy management map as a platform for building performance management system
    • Table 1. Formulas for the indicator’s calculation
    • Table 2. Formulas for EVA indicator calculation
    • Table 3. Descriptive statistics for the analyzed businesses
    • Table 4. Results of the EVA indicator
    • Table 5. Indicators selected with the use of Lasso regression
    • Conceptualization
      Jarmila Horvathova
    • Funding acquisition
      Jarmila Horvathova, Martina Mokrisova
    • Investigation
      Jarmila Horvathova
    • Resources
      Jarmila Horvathova, Martina Mokrisova
    • Supervision
      Jarmila Horvathova
    • Validation
      Jarmila Horvathova
    • Visualization
      Jarmila Horvathova, Martina Mokrisova
    • Writing – original draft
      Jarmila Horvathova
    • Writing – review & editing
      Jarmila Horvathova, Martina Mokrisova
    • Data curation
      Martina Mokrisova
    • Formal Analysis
      Martina Mokrisova
    • Methodology
      Martina Mokrisova
    • Project administration
      Martina Mokrisova
    • Software
      Martina Mokrisova
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Problems and Perspectives in Management