MANAGEMENT CONTROL PRACTICES AND PERFORMANCE OF SMEs IN MALAYSIA: A COMBINED APPROACH OF THE BALANCED SCORECARD AND LEVERS OF CONTROL

Abstract

This paper examines the combined impact of two management control frameworks, namely the Balanced Scorecard (BSC) and the Levers of Control (LOC), on the performance of Malaysian Small and Medium Enterprises (SMEs). The BSC focuses on key performance indicators across four perspectives: Customer, financial, internal business process, and learning and growth. The LOC advocates the use of different control mechanisms, categorised into belief systems, boundary systems, diagnostic control systems, and interactive control systems. These frameworks provide a comprehensive management control function on their own. Hence, the integration is expected to further enhance their effectiveness in helping SMEs achieve business objectives. We administered a questionnaire survey to 500 SMEs, yielding 138 usable responses. These were analysed using Statistical Package for the Social Sciences (SPSS) software for Pearson correlation and regression analysis. The results reveal significant interrelationships between the BSC and LOC practices, with the strongest correlation between the LOC’s diagnostic control system and the BSC’s learning and growth perspective. Overall, this study demonstrates the effectiveness of the BSC and LOC in enhancing SMEs’ performance, particularly reporting that the causal effect on companies’ performance increases when combining the two. It highlights the applicability and benefits of these practices in enhancing the survivability and sustainability of SMEs.