Measuring Performance in the Hospitality Industry: An evaluation of the Balanced Scorecard approach in the UK’s Licensed Retail Sector

The research investigates the role of performance measurement within the hospitality industry and in particular, the UK’s licensed retail sector. The research aimed to: 1) Analyse what is meant by performance management and to establish its application and use in various types of business; 2) Explain the balanced scorecard approach to performance measurement and to assess its theoretical and business value; 3) Establish the methods of performance measurement utilised by licensed retailers and to evaluate the effectiveness of these methods; 4) Apply the balanced scorecard method in selected collaborating organisations and to compare its usefulness to more traditional methods of performance measurement; and 5) Make recommendations and evaluate how a balanced scorecard approach might improve performance management in the licensed house sector.

The research highlighted a shortage of hospitality-related research with the industry predominantly using financial performance measures. The balanced scorecard was therefore put forward as a solution as it measures both the financial and non-financial performance of an organisation.

The financial and non-financial performance measures used by financial analysts and pub companies were identified through questionnaire surveys and semi-structured interviews, the results of which demonstrate the licensed retail sector’s reliance on financial performance measures. Case studies were developed on a number of Managed and Leased/Tenanted pub companies (PubCo’s) which also demonstrated this reliance, although the Managed PubCo’s are beginning to embrace non-financial measures and two of the Managed PubCo’s had adopted the balanced scorecard approach.

The fast pace of consolidation which is evident within the UK’s licensed retail sector had impacted upon the research as three of the PubCo’s featured in the case studies had been acquired by competitors during the study. The PubCo’s sampled for the questionnaires also changed during the data collection process, mainly due to consolidation.

It was recommended that further research would be necessary to develop a balanced scorecard for the UK’s licensed retail sector. It was also suggested that further empirical research could be conducted within those PubCo’s identified as using the balanced scorecard, to determine the extent to which the balanced scorecard assists them in managing and improving both their financial and non-financial performance.

The author suggests that The Centre for Licensed Retailing at Nottingham Trent University might provide the resources to continue with the research with a need also to develop standardised definitions of the financial performance measures used by PubCo’s. This development would enable performance data to be compared across the sector whilst also removing the opportunities for data manipulation by PubCo’s which was identified during the research.