Category: Balanced Scorecard

The article Successful Applications of the Balanced Scorecard in Higher Education purposed to present the outcomes of successful implementation of the balanced scorecard done on two institutions of higher learning, namely the Kenneth W. Monfort College of Business at Northern Colorado and the University of Wisconsin  Stout.

The author, Deborah F. Beard, describes the balanced scorecard (BSC) as a strategic planning and management system that enables organizations to assess key performance measures, including financial and nonfinancial measures, current performance and drivers for future performance, with the aim to align the organizations mission statement, core values, and vision for the future with objectives, tactics, targets, and programs that are precisely intended to not only inform but motivate continuous attempts toward improvement (Beard, 2009).

The author takes note that BSC was traditionally used in business organizations, but the concept is been increasingly used in education circles, not only because learning institutions have become more business-oriented but also as a tool to improve the delivery of quality education through strategic planning and continuous improvement of value to students and stakeholders. The article offers useful insights into how BSC was founded by Kaplan and Norton, who thought that an organizations performance and competitiveness cannot be evaluated using financial results alone as they failed to capture value-creating activities (Beard, 2009).

Perhaps one of the salient aspects underlined in the article is that a successful BSC undertaken in a higher education setting should not only be able to deliver ever-improving value to students and stakeholders, hence contributing to education quality and organizational stability, but should also have the capacity to improve the overall organizational effectiveness and capabilities and promote organizational and personal learning. Indeed, these are the basic tenets adopted from BSC that form the basis of the Education Criteria for Performance Excellence, awarded to top-performing academic institutions under the Malcolm Baldrige Quality Award Program (2003) (Beard, 2009).

Although the author makes mention of several core values and categories that could be used for successful implementation of BSC in higher education, she emphasizes the importance of adopting the seven categories that embody the core values and conceptions of the Malcolm Baldrige National Quality Award Program (2003), and which could be used by institutions of higher learning to successfully implement BSC, hence be able to undertake continuous improvement of processes.

These categories include: leadership; strategic planning; a student, stakeholder, and market focus; measurement, analysis, and knowledge management; faculty and staff focus; process management; and organizational performance results (Beard, 2009, p. 276). In light of this, the performance of the two colleges  the Kenneth W. Monfort College of Business and the University of Wisconsin- were assessed based on the following: student learning results; student and stakeholder focused results; budgetary, financial, and market results; faculty and staff results; organizational effectiveness results, and; governance and social responsibility results. It is important to note that the student learning results should be perceived as the lagging indicator in the assessment of educational institutions, while all other indicators should be perceived as the main drivers of student learning (Beard, 2009).

Overall, the author emphasizes that the identification and utilization of key performance measures consistent with the mission statements, core values and strategies of institutions of higher learning, along with focused efforts to seek continuous improvement, provides the institutions with real opportunities to not only develop educational value in higher education, but also enable them to clarify their visions and translate strategies into fundamental operational objectives that are line with their missions and core values. This statement denotes the practicability of BSC to higher education (Beard, 2009).

Reference List

Beard, D.F. (2009). Successful applications of the balanced scorecard in higher education. Journal of Higher Education, 84(5), 275-282.

Introduction

First developed by Robert Kaplan and David Norton at Harvard University, the Balanced Scorecard BSC approach has become a major method for corporations to improve their performance, with studies indicating that more than 66% of the companies that implemented the approach realized a significant increase in profitability (Kaplan & Norton, 2011).

In addition, a number of local governments, military and national civil organizations have been using a BSC approach to improve their performances. In the UAE, Emirates National Oil Company (ENOC) is one of the best examples of corporations that are applying the BSC to set its goals and achieve the desired objectives.

The company has rolled out several programs to apply BSC in line with its goals and objectives with an aim of promoting human capital development by focusing on the young UAE nationals with their careers for the better future. The company started adopting the concept of BSC in 2009 on a number of levels, with about 35 scorecards implemented in all business units.

According to analysts, the company has attained some impressive milestones with BSC. For instance, customer satisfaction, enhancing efficiency in operations and promoting Emiratization is some of the significant outcomes of the approach.

Nevertheless, a comprehensive understanding of the outcomes of using BSC need be studied every year to determine the progress. There is a need for additional studies show how the company has achieved the desired goals using the BSC.

The results of the study are applicable not only in academics, but also in management and policy making in order to provide analysts, policy makers and corporate leaders utilize the information to enhance the quality of their professional decisions.

Aims and objectives

The purpose of this study is to develop a comprehensive analysis of BSC application and use at ENOC. The research uses a qualitative approach to describe the level of outcomes of BSC at the company since the approach was adopted in 2009. The research aims to interview some professionals and executive individuals at the company in order to determine the level of BSC as well as the outcomes of the approach.

Key Research questions

• What strategies has ENOC employed in applying and using BSC?
• What are the corporate expectations of using the BSC
• At what levels are BSC approach applied at ENOC?
• What are the outcomes of using ENOC in terms of corporate performance?

Review of literature

Although it is a recent approach, balanced scorecard has become popular with most organizational leaders in the modern context. By definition, the BSC is a methodological tool composed of a set of both financial and non-financial measures regarding to the success factors of a given company or organization (Kaplan & Norton, 2011). It reflects that need for strong and effective organizational activities used to create value.

Since its development, BSC has widely been studied from a practical perspective where case studies are used to examine its effectiveness as well as differences in corporate performance between the organizations that adopt and those that fail to adopt the concepts of BSC (Akkermans & von Oorschot, 2002).

In addition, it has been studied by examining the differences in performance or outcomes between the departments that adopt and those that fail to adopt the concepts. From these studies, a number of observations have been made, most of which provide a clear indication that BSC is an important tool in measuring and enhancing performance in organizations.

According to Ashurst and Doherty (2013), it has been shown that BSC ensures that strategic initiatives that follow best practices are cascaded throughout the entire organization, which helps in increasing creativity and other ideas that are not expected prior to the adoption of the concept.

The author further indicates that BSC helps organizational leaders to overcome three foundational problems that cause challenges in the work of management- performance measurement, strategic implementation and rise of intangible assets.

According to Kaplan and Norton (2010), the traditional methods of measuring financial performance fail to reflect critical aspects of the modern business environment and fails to encourage thinking on a long-term basis.

Thus, BSC is set to deal with this problem. Secondly, it has been shown that intangible assets have the capacity to create more than 75% of the value that organizations achieve per given time (Kaplan & Norton, 2010). With the traditional methods, it was not possible to measure and use these assets.

On the other hand, the concept of BSC is effective in providing the metrics required to measure and use these assets effectively (Abushaia & Zainuddin, 2012).

Moreover, BSC deals with the problem of successfully implementing strategies by working with vision, people and management of resources and barriers to development. In this context, BSC helps in measuring the strategy and the process of executing the strategy. It describes the strategy in s consistent manner throughout the company (Kaplan, Norton & Horv1th, 2006).

According to Inamdar, Kaplan and Bower (2012), BSC articulates how an organization creates value for its owners or shareholders by displaying the key priorities as well as relationships between the outcomes and the factors that enable performance. In other words, it displays the relationships between cause and effects in an organization in order to measure performance and create value for the shareholders (Frost, 2012).

Methodology

Study design

A qualitative study was developed to examine the effects of balanced scorecard BSC at ENOC. In this case, ENOC was used as a case study in order to examine how organizations adopt the concept of BSC and the benefits that come along with the idea.

The idea was to interview leading corporate managers and leaders at the company in order to draw information from their experiences with the company and the concept of BSC used therein.

Study sample

The study focused on interviewing two managers at ENOC. The managers were chosen because they have been involved in the implementation and maintenance of the BSC concept since it was adopted in 2009.

Secondly, six employees were interviewed to determine their perceptions and experience with the idea of BSC at their workplace. The idea is to determine the outcomes of the BSC concept at the workplaces. The inclusion criterion was to interview individuals who had been at the company for at least 5 years since 2009.

Data collection

Interviews were used to collect information from the target corporate leaders and employees. Each interview took a maximum period of 15 minutes. Structured interview questions were used, with the interviewers playing the role of directing the mood of the discussion.

Results

Saeed Khoory, the CEO of ENOC, said that the company used the BSC to help it uphold the highest values across all the aspects of the organization.

In addition, the CEO said that using BSC was aimed at promoting excellence across all the entities by focusing on continuous improvement and adopting BSC as one of the best international tools for management. He further notes that the tool is a gold standard against which benchmarking of the companys growth goals id done.

Salah Galadari, the director of business planning and performance management at the company, reported that adopting the BSC concept was aimed at streamlining the companys strategic growth.

The six employees reported that they were satisfied with the new methodology because it encouraged them to work for the good of the organization as well as personal development as an employee. It provides them with an opportunity to be part of the organization process.

Conclusion

From the interview, it was found that ENOC uses several initiatives to implement BSC. The idea of Emiratisation program is developed and implemented through five levels that are supported by BSC- Mahaweb, Tadreeb, Ajyaa, Imtiaz and Tatweer. They focus on developing behavioral, managerial, professional and leadership skills for the national workforce.

The results indicate that BSC has huge benefits for the organization because it aids in aligning people, processes and resources towards enhancing production and performance. BSC has helped the company integrate employees, processes and customers in the vital focus on development and growth. Therefore, the company has attained some impressive milestones with BSC.

For instance, customer satisfaction, enhancing efficiency in operations and promoting Emiratization is some of the significant outcomes of the approach. The company uses balanced scorecard to articulate how it creates value for the government and the public by displaying some key priorities as well as relationships between the outcomes and the factors that enable performance.

References

Abushaia, J. A., & Zainuddin, I. (2012). Performance measurement system design, competitive capability, and performance consequences  A conceptual like. International Journal of Business and Social Sciences, 3(11), 184-193.

Akkermans, H., & von Oorschot, K. (2002). Developing a Balanced Scorecard with System Dynamics. Journal of the Operational Research Society, 12(2), 349-352.

Ashurst, C., & Doherty, N. F. (2013). Towards the formulation of a best practice framework for benefits realization in IT projects. Electronic Journal of Information Systems Evaluation, 6(3), 1-10

Frost, B. (2012). Measuring performance: Seven good reasons to use a scorecard. Performance perspective series, 3(2), 214-251.

Inamdar, N., Kaplan, R. S., & Bower, M. (2012). Applying the balanced scorecard in healthcare provider organizations. Journal of healthcare management/American College of Healthcare Executives, 47(3), 179-95.

Kaplan, R. S., & Norton, D. P. (2010). The balanced scorecard: translating strategy into action. Boston, MA: Harvard Business Press.

Kaplan, R. S., & Norton, D. P. (2011). Transforming the balanced scorecard from performance measurement to strategic management. Accounting horizons, 15(1), 87-104.

Kaplan, R. S., Norton, D. P., & Horv1th, P. (2006). The balanced scorecard. Boston, MA: Harvard Business School Press.

The current report presents a balanced scorecard for Spinner Pet Sitters. Based on the balanced scorecard and the companys performance, the report also provides recommendations for Shelly to improve its performance in the coming years.

Balanced Scorecard for Spinner Pet Sitters

A balanced scorecard is a strategic management tool, which is used to align a business performance and activities with its mission, vision, and objectives. Based on the information provided in the case study, the following balanced scorecard is developed for Spinner Pet Sitters:

Recommendations for Spinner Pet Sitters

Keeping in view the planned and actual performance of Spinner Pet Sitters and the gaps identified in the balanced scorecard presented above, following recommendations have been put forward for Spinner Pet Sitters to improving its performance.

• The quarterly profits were reported to be above the targeted level, which is a positive sign for the company. However, in order to maintain the continuous growth in profits, the company needs to achieve higher efficiency in its operations. On the other hand, the return on capital employed was considerably lower than expected. In the coming periods, this could be improved by investing additional capital resources for enhancing the operational efficiency of the business.
• As far as the customer satisfaction rate and customer recommendation rate are concerned, the actual results show that all expectations were met during the quarter. However, it is recommended that the business should keep its focus on delivering high quality and practicing effective customer care to ensure sustainability.
• The efficiency level in the companys processes should be improved in order to reduce the duplication of activities.
• Jobs should be enriched and job designs should be reconsidered to improve the overall job satisfaction level of employees.

Reference List

Balanced Scorecard Institute. (2013). Balanced Scorecard Basics. Retrieved from https://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard

Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard-Measures that drive performance. Harvard Business Review, 70(1), 71-79.

The main vision and mission of the Coors Brewery Company lies in returning to the basis of carrying out successful business, identifying target consumers, and introducing efficient distribution, promotion and pricing strategies. The companys goals also seek to address the consumer needs while increasing sales and gaining profits. Hence, the main strategy of the company is confined to development of advanced supply chain management through such fields as research and development, engineering, and purchasing. However, such an approach excludes the evaluation of employees work and fails to approach the efficient human resource management. Therefore, because the company chooses a person-centered approach, BSC project could be developed successfully as soon as employees environment is properly estimated. Another problem of Coors consists in introducing new brands of beers, which contradicts the companys traditional commitment to one brand only. Later penetration to the international market hampers the development of domestic sales. All these inconsistencies should be eliminated to integrate new strategies and gain profitability. In order to expand internationally, the company should develop efficient corporate culture that can meet the requirements of a multi-cultural environment.

With regard to the list of frequently asked questions, the BSC benchmarking targets should be related to several correction measures. To begin with, the company should introduce new training programs and innovation strategies that can reorganize the companys procedures and allow its managers to quickly adjust to fast-changing demands of consumers. Second, usability of new shipment terms should also undergo testing procedures to define whether they contribute to productivity. Third, understanding the importance of subsequent stages implemented to the process provides new dimensions for development. However, the quality assurance manager Ken Rider should be more concerned with prioritization of specific tasks that should be accomplished before the next step is achieved. Continuous improvement, therefore, is possible only when consistent approach is chosen. Finally, rewarding system introduced by BSC should also be reevaluated to assess the degree to which employees can enhance their motivation. Therefore, main target of BSC relates to the development of performance measurement schemes. All these approaches and objectives should be rearranged to define which ones are to be completed at first. Shifts in production should also be corrected with regard to employees skills and experience.

In order to ensure successful implementation of BSC, Coorss managers should consider the following FAQs:

1. How should the company implement expansion policy to compete at an international market?
2. What challenges will employee face when consumer base is expanded to various countries?
3. How do managers perform their testing procedures on the quality of the exported beer?
4. What training should the staff undergo to effectively use innovative technology?
5. What possible challenges will managers face while introducing new techniques and approaches to the production and supply chain processes?
6. How can efficient training programs contribute to the reduction of cost and waste during the manufacturing process?

In order to assess the performance measurement, the BSC should, first of all, focus on customers expectations that can stabilize the supply chain management and foster the development of change management strategies. As soon as the employees enter the training programs, the company can easily integrate new techniques and cycles contributing to flexibility and reliability of the project. Decision making process is also among the most crucial conditions that ensure the companys successful transition to a supply chain management.

Introduction

A balanced scorecard (BSC) is a performance management framework developed in the early 1990s (Bible, Kerr & Zanini 2006). It is used to monitor staff activities and the effects of their deeds. A BSC plan includes financial and non-financial data used to monitor performance. In addition, it focuses on the primary agenda of the corporation. Since its development, BSC has undergone various developments.

In this paper, the author will provide a report on an article about BSC. The article is written by Coe and Letza (2014). In the report, an analysis of the performance measurement tool and its development over the years will be provided. In addition, the pros and cons of BSC design and implementation will be discussed.

Two Decades of the Balanced Scorecard: A Critical Analysis

Inception and Development of the Scorecard

In the article, Coe and Letza (2014) state that the BSC was developed primarily because the existing financial measures did not produce the results sought by most companies at the time. Kaplan and Norton, the scholars behind the tool, realized that organizational value was no longer influenced by tangible assets. Intangible resources were the major drivers. In addition, they noted that most managers were not familiar with the impact of measurements on business strategy. To come up with a clear performance target, administrators needed a balanced presentation of both financial and operational measures (Lawrie & Cobbold 2004). Consequently, the scorecard was developed. The management tool entailed four viewpoints that brought together the performance of all employees. They included financial, customer, internal business, and innovation standpoints.

When the scorecard was first developed, most managers found it was effective. In spite of this, the tool had various defects. Initially, it entailed inserting 4-5 measures into four boxes (Bible et al. 2006). The major problem emerged when deciding the measures to place in each box and order of placement. According to Coe and Letza (2014), the entire process was vague. In addition, it was unclear how the strategy was connected to inserting measures in boxes. As a result, managers ended up setting incoherent measures and goals (Haksever et al. 1999).

Improvements and modifications of the original scorecard started in 1996 (Coe & Letza 2014). The revised version allowed administrators to associate long term premeditated goals with short term accomplishments (Lawrie & Cobbold 2004). The news aspects of the tool also enabled employees to view the companys plans. In addition, they could see how their efforts influenced the attainment of organizational goals. Consequently, the scorecard evolved from a simple to a complex tool.

Modernization of the Scorecard

The BSC has undergone through three generations. The switch from the first to the second generation positioned the tool as a device for supporting premeditated control (Coe & Letza 2014). The third generation included new features to provide improved functionality and planned significance.

The major enhancement in the card was the feature of the destination statement. The declarations were made at the end of the design procedure. Their main purpose was to encourage managers to examine the effects of the selected strategic goals on the organization (Bogetoft 2013). As a result, administrators could identify possible discrepancies in the profile of set objectives. Another key modification involved getting rid of the four inflexible perspective labels that were initially used. They were replaced with two new ones (Fitzsimmons & Fitzsimmons 2007). The two are activity and outcome. In spite of the changes, the primary principles of the scorecard were retained.

A Modern Case Study of the Balanced Scorecard

Currently, the third generation BSCs are designed and implemented by 2GC. The firm majors in premeditated performance assessment affecting modern businesses. It separates the scorecard into three components (Lawrie & Cobbold 2004). They include destination statement, strategic linkage model, and measures and targets (Coe & Letza 2014). The destination statement explains future goals. The period set for achieving the objectives is usually 3-5 years. The component provides details on how the company will look like after this period (Johnston & Clark 2005).

The strategic linkage model is next. It entails dispersing the selected goals into four categories. The two lower perspectives contain goals linked to the most important activities, such as productivity. The upper perceptions include objectives associated with the expected results of the activities carried out. Measures and targets monitor the initially set goals. The targets act as unique projects with a set start and end dates (Coe & Letza 2014).

The Future of the Balanced Scorecard

In their article, Coe and Letza (2014) state that changes on the scorecard are in line with technological innovations. The modifications allow for customization and computerisation (Bogetoft 2013). Currently, there are four performance measurement cards. Each has its unique design and mode of implementation. However, the strategic performance management scorecard is most preferred.

Pros and Cons of the Balanced Scorecard

Pros

The primary aspects of a BSC allow managers to have a precise picture of the entire companys performance (Lawrie & Cobbold 2004). Compared to the traditional approaches, the management tool provides the administrator with a full picture of whether the set goals are being met or not. It helps managers to look at the immediate future objectives. When setbacks arise, the suggestions made only target the current problems. However, with the use of scorecards, managers can evaluate short, medium, and long term goals at a glimpse (Coe & Letza 2014).

Cons

The use of a scorecard as a strategic planning tool can be costly and time-consuming. Its correct use requires a complete understanding of the processes (Bogetoft 2013). At times, organizations hire an external consultant. In addition, costs are incurred in purchasing software and maintenance. The effectiveness of a scorecard is determined by the value of information inserted in the specific zones. The tool can only work if the correct elements are selected. Incomplete information results in undesired outcomes (Coe & Letza 2014).

Conclusion

The article by Coe and Letza (2014) provides information on BSC and its development over the years. Modifications have been made to various aspects of the tool. The major improvements can be attributed to the weaknesses of the earlier designs. Todays scorecards are highly advanced compared to the original ones. However, more improvements are needed.

References

Bible, L, Kerr, S & Zanini, M 2006, The balanced scorecard: here and back, Management Accounting Quarterly, vol. 7 no. 4, pp.18-23.

Bogetoft, P 2013, Performance benchmarking: measuring and managing performance, Springer, New York.

Coe, N & Letza, S 2014, Two decades of the balanced scorecard: a review of developments, Poznan University of Economics Review, vol. 14 no. 1, pp. 63-75.

Fitzsimmons, J & Fitzsimmons, M 2007, Service management: operations, strategy, information technology, 6th edn, McGraw-Hill, New York.

Haksever, C, Render, B, Russell, R & Murdick, R 1999, Service management and operations, 2nd edn, Prentice Hall, New Jersey.

Johnston, R & Clark, G 2005, Service operations management: improving service delivery, 2nd edn, Prentice Hall, New York.

Lawrie, G & Cobbold, I 2004, Third-generation balanced scorecard: evolution of an effective control tool, International Journal of Productivity & Performance Management, vol. 53 no. 7, pp. 611-623.

Bizcom Limited is a medium-sized firm that specializes in clearing and forwarding services and has a number of strategically located offices with a head office carrying out administrative and management responsibilities. The firms local offices are dispersed across the nation with an international office abroad. Customers place orders at the various local branches, which are forwarded to the main office for onward dispatch to their international office.

The customers pay a fee for this particular process. Bizcoms management is employing the balanced scorecard to assess the financial, customer, internal processes, and innovative and learning perspectives, which are typical components of the balanced scorecard to assess the viability of an internet-based application that will allow customers to scrutinize their order status.

The financial perspective

The financial perspective relates to the financial objectives and obligations of a company (Kaplan & Norton, 1992). In this particular case, the financial perspective will involve Bizcom Limited. Measurement techniques such as net present value, return on investment, economic value added (EVA), and investment rate of return can be used to assess the financial perspective of Bizcom. A cost-benefit analysis of the internet-based application will enable the management to make the right decisions in relation to the operations and processes at Bizcom. Bizcom Limited is sourcing part of the project cost internally, whereas the other part is covered by a bank loan.

The interest rates currently stand at 16%, and Bizcom has a repayment period of twenty-four months. While employing the EVA, the management has a positive EVA, an indicator that wealth has been created by the implementation of this internet-based application.

The internal process perspective

The internal processes perspective covers Bizcoms Limited goal, which is in part to provide satisfactory clearing and forwarding services at the most competitive price. An important question to ask concerning this perspective in relation to the internet-based application may be how the adoption of the internet-based application is going to improve the internal processes at Bizcom. It is very likely that the implementation of this system will improve the processes at Bizcom whereby employees productivity will be enhanced while the client service is greatly improved.

The customer perspective

Customer perspective is directly related to internal processes perspective (Bose & Thomas, 2007). The customer perspective affects the internal processing that must align it to meeting the customer expectation through expedient online order status inquiries at Bizcom, which is the desired feature of the internet-based application to be implemented. The application will enable the customer to run direct online order status inquiries, which is likely to positively contribute to customer satisfaction and increase profits for Bizcom through customer retention.

The learning and innovative perspective

The internet-based application will enhance all the processes and make Bizcoms service more efficient. The employees and customers will gain alike from the deployment of the internet-based application, which will ensure efficient service delivery by the employees as well as a more efficient order inquiry status for the customer. The most updated customer order status will enable Bizcom to address each customers requirement effectively and efficiently. The system will also encourage customers to learn and handle some processes of the system.

Central Theme

In their article, Kaplan and Norton summarize the concept of the balanced scorecard which they introduced several years ago to address the issues of strategic development of businesses. The central idea of the article is that existing measurements of success used by companies are mostly based on financial performance indicators, which is a framework that overlooks important aspects of business development and fails to determine whether companies pursue their declared goals effectively. Apart from the financial aspect (but without ignoring it), the authors suggest measuring performance from three additional perspectives: customers, internal business processes, and learning and growth.

Including these three perspectives in performance, evaluation allows not only obtaining a more comprehensive understanding of how businesses perform but also improving the management system. This is another point that Kaplan and Norton emphasize: the balanced scorecard is not only for evaluation but also for enhancing strategic planning and implementation. One of the main problems that businesses face in the context of strategic development is connecting vision, philosophy, mission statement, goals, and other aspects of their strategies to certain actions and decisions on lower levels. It is a challenge to ensure that everything a business does serves the purpose of achieving its strategic goals. Therefore, evaluating performance from the financial perspective solely is not enough, and this is where the helpfulness of the balanced scorecard for different aspects of development becomes evident. According to Kaplan and Norton, the scorecard facilitates the adoption of certain practices that help link short-term actions to long-term strategic objectives.

These practices are described through four processes: translating the vision, communicating and linking business planning, and feedback and learning. The first process includes generating a clear business vision and gaining consensus regarding this vision among all the top managers. The second process, communicating and linking, is about bringing this vision down to all other layers of a company so that goals are understood, and the role of everyone in achieving those goals is understood as well. Also, it is important to link certain rewards to good performance and complying with the vision. The third process, business planning, involves defining objectives, i.e. tasks and targets that are less abstract than the vision and need to be accomplished and attained respectively to achieve strategic goals. Also, business planning includes the distribution of resources and their allocation to certain objectives. Milestones need to be established to enable evaluation afterward. Finally, the fourth process, feedback, and learning are collecting feedback on strategic vision and ensuring that it contributes to improving the vision toward adequate compliance with detected needs and trends. Therefore, the fourth process influences the first one, which makes all four processes a cycle of strategic development enabled by the balanced scorecard.

Critical Analysis

At the beginning of the article, Kaplan and Norton go straight to the point, explaining what a balanced scorecard is, what additional measurements it brings to performance evaluation, and what processes they use of it launches within companies. Further, the authors provide more details and support their concepts and recommendations with examples. Although the article is not written as an academic one (e.g. there are no formal references), the authors do present research data, as they have analyzed the application of the balanced scorecard in many companies. Moreover, the article contains excerpts from interviews with managers who share their vision of strategy and their experiences of using the scorecard. All this makes the article look reliable and convincing.

The presence of examples is one of the strengths of the article. The simplicity of delivery is another strength. What can be considered a weakness is that the authors do not reveal their sources: studied companies and interviewed managers remain unidentified. Describing a certain company might be more appealing. From my perspective, I find the ideas of Kaplan and Norton very insightful and helpful. I agree that relying on financial indicators solely in performance evaluation is misleading. What I was particularly impressed by is that including certain perspectives in evaluation can create a new management system that promotes strategic development, and the authors of the article convinced me that it can.

Main Takeaways

Apart from the four processes described above, readers can also learn from the article how to employ in real life the scorecard and the strategic management system supported by it. Kaplan and Norton provide a step-by-step example. First, an executive team develops a balanced scorecard: all the members should agree on it and commit to the strategy. Then, the strategy is communicated to middle managers, and departmental scorecards are developed. After that, all existing investments that do not comply with the strategy should be eliminated, and corporate change programs should be launched.

These processes are expected to take approximately six months; within the next six months, the scorecard is constantly reviewed and updated based on feedback. After a year, the balanced scorecard is communicated to the entire organization, and individual performance objectives are established based on it. All the aspects of planning, including budgeting, are to be updated by incorporating the measurements established by the scorecard. Monthly, quarterly, and annual strategy reviews should be accordingly conducted starting from month 18. Finally, every employee is requested to link his or her performance to the scorecard. This is how the balanced scorecard helps build a new management system that ensures pursuing strategic goals more effectively.

In recent years, managers within the hospitality industry have witnessed a proliferation of expectations that must be met for businesses to remain relevant in the current competitive environment (Jones & Lockwood 2002). Hotel and resort managers, in particular, are often called upon to balance between the service expectations of customers and the financial expectations of the hotel owners.

The balancing of priorities has led managers to adopt a plethora of performance measurement models, including the balanced scorecard and the bottom-line approach (Phillips 2007).

The present paper purposes to demonstrate the suitability of the balanced scorecard in assisting hotel and resort managers to balance their priorities, hence refuting the claim that adopting the bottom-line approach is the way to go for these managers in balancing service quality expectations and financial demands of the owners.

Extant management literature shows that the balanced scorecard evaluates an organisation’s performance through four perspectives namely “financial, customer, internal operating processes and learning and growth, and lays emphasis on the comprehensiveness and integrity of evaluation” (Wang et al 2013, p. 25).

The bottom-line approach focuses more on an organisation’s net income and financial reports to determine its strengths and weaknesses (Jones & Lockwood 2002).

Owing to the increasing competitive phenomenon of the hotel and resort industry (Lau et al 2005), an effective and efficient measurement tool must draw on both qualitative and quantitative perspectives (Phillips 2007).

More importantly, such a measurement tool must have the capacity to expressively assess service quality attributes (Namkung & Jang 2008), as well as the financial performance based on the fact that financial management is the backbone of any business (Tsai et al 2011).

In this light, the balanced scorecard is better placed to assist hotel and resort managers balance the service expectations of their customers and the financial expectations of hotel owners as it employs multiple perspectives not only to measure organisational success but also to assist in the implementation of effective strategies for future success (O’Fallon & Rutherford 2010).

Unlike in the bottom-line approach which deals with a single indicator to measure operational success (Jones & Lockwood 2002), all the four perspectives of the balanced scorecard can be used to assist hotel and resort managers deal with the conflicting priorities that are largely predicated upon customer service expectations and the financial expectations of hotel owners.

For instance, under the financial dimension of the balanced scorecard model, hotel and resort managers should be able to know what types of financial performance they should provide to hotel owners and other stakeholders so as to be successful financially (Evans 2005).

Under the customer perspective, managers should be able to develop customer and service quality standards that enhance the vision and strategy of their respective service organisations (Cruz 2007). Again, under the internal business perspective of the balanced scorecard model, managers must have the capacity to develop and implement business processes that will enhance customer satisfaction and service quality.

Lastly, under the innovation and learning perspective, managers must develop strategies that will not only ensure the organisation’s ability to change and improve, but also its capacity to enhance service quality offerings and the attainment of financial expectations set by stakeholders (Evans 2005).

Available management literature demonstrates that excellent service quality within the hospitality industry not only enables an organisation to differentiate itself from its competitors in the marketplace, but also to achieve a sustainable competitive advantage and promote customer repeat intentions (Ladhari 2009).

Arguably, therefore, the bottom-line approach cannot be used by firms within the hotel and resort industry to evaluate these qualitative values since it concerns itself with measuring quantitative (financial) attributes at the expense of service quality attributes (Jones & Lockwood 2002).

Although the measurement tool has received praise for capturing the financial performance of an organisation, hence effectively serving the interests of owners (Tsai et al 2011), it is one-dimensional and backward-looking for its lack to include other performance indicators such as service quality and customer satisfaction (Evans 2005).

In the hotel and resort industry, it is imperative for any performance measurement tool to effectively illuminate the service quality and expectations of customers.

Available literature demonstrates that “the benefits of service quality include increased customer satisfaction, improved customer retention, positive word of mouth, reduced staff turnover, decreased operating costs, enlarged market share, increased profitability, and improved financial performance” (Ladhari 2009, p. 308).

The customer dimension of the balanced scorecard effectively measures five core variables that are intrinsically related to service quality, namely “customer satisfaction, customer winning, customer retention, customer profitability, and market and customer shares in the target segmentation” (Wang et al 2013, p. 26).

In contrast, the bottom-line approach has no capacity to measure service quality attributes despite the fact that they are immensely important in the hotel and resort industry, especially with regard to the factors and benefits mentioned above.

To conclude, it is important to underline the argument that the balanced scorecard is a more suitable measurement tool for hotel and resort managers, hence this paper refutes the claim that the hotel and resort industry is becoming increasingly bottom-line focussed.

While the bottom-line approach is only able to fulfil the financial expectations of the owners through its financial measures, the balanced scorecard takes into account the financial expectations as well as a host of other qualitative indicators, including service quality and customer satisfaction.

Reference List

Cruz, I 2007, ‘How might hospitality organisations optimise their performance measurement systems?’ International Journal of Contemporary Hospitality Management, vol. 19 no. 7, pp. 574-588.

Evans, N 2005, ‘Assessing the balanced scorecard as a management tool for hotels’, International Journal of Contemporary Hospitality Management, vol. 17 no. 5, pp. 376-390.

Jones, P & Lockwood, A 2002, The management of hotel operations, Cengage Learning, Stamford, CT.

Ladhari, R 2009, ‘Service quality, emotional satisfaction, and behavioural intentions: A study in the hotel industry’, Managing Service Quality, vol. 19 no. 3, pp. 308-331.

Lau, PM, Akbar, AK, & Fie, DYG 2005, ‘Service quality: A study of the luxury hotels in Malaysia’, Journal of American Academy of Business, Cambridge, vol. 7 no. 2, pp. 46-55.

Namkung, Y & Jang, S 2008, ‘Are highly satisfied restaurant customers really different? A quality perception perspective’, International Journal of Contemporary Hospitality Management, vol. 20 no. 2, pp. 142-155.

O’Fallon, MJ & Rutherford, DG 2010, Hotel management and operations, John Wiley & Sons, Hoboken, NJ.

Phillips, PA 2007, ‘The balanced scorecard and strategic control: A hotel case study analysis’, The Service Industries Journal, vol. 27 no. 6, pp. 731-746.

Tsai, H, Pan, S & Lee, J 2011, ‘Recent research in hospitality financial management’, International Journal of Contemporary Hospitality Management, vol. 23 no. 7, pp. 941-971.

Wang, YG, Li, YM, Jan, CL & Chang, KW 2013, ‘Evaluating firm performance with balanced scorecard and data envelopment analysis’, WSEAS Transactions on Business & Economics, vol. 10 no. 1, pp. 24-39.

The non-profit organization selected for Module 1 is Marie Stopes International (Marie Stopes) that is a leading non-profit organization based in the UK with its operations in developing countries. The organization’s objective is to help women in developing countries who do not have access to family planning. The organization provides guidance, support, and health services to women to live a better life. Its primary focus is on pregnant women or those women who are planning to start their sexual life. Furthermore, the organization undertakes research on issues related to general, sexual, and reproductive health of women. Its mission statement is “is to enable women and girls to have children by choice, not chance” (Financial Statements and Annual Report 2015, 2016, p. 9). The vision of Marie Stopes is “a world in which every birth is wanted” (Financial Statements and Annual Report 2015, 2016, p. 9).

The overall strategy of the organization is based on its ‘Power of 10’ strategic plan. It has been reported in the organization’s annual report that its strategy is focused on increasing the capacity and channels to reach women in different locations. The strategic plan indicates that the organization establishes performance targets every year related to the improvement in its capacity, channels, client profile, clinical quality, and clinical programs. The organization’s activities are governed by a set of policies and principles that ensure that its objectives are achieved in the period. If there is any shortfall in the organization’s performance, then its strategy may be revised for the next year. The organization’s consolidated statement of financial activities for the year ended 31 December 2015 indicated that its income comprises of “donations, charitable activities, investments, and other income” (Financial Statements and Annual Report 2015, 2016, p. 26). On the other hand, the organization incurred “expenditure on raising funds and charitable activities” (Financial Statements and Annual Report 2015, 2016, p. 26).

It has been argued that non-profit or government organizations can also use balanced scorecard as a strategy tool for achieving their objectives through the efficient allocation of their resources. The balanced scorecard of non-profit organizations is similar to for-profit organizations (Savkin, 2016). However, non-profit organizations use different terminologies for their customers including financial donors and recipients, and they make their strategic goals related to each customer group (Niven, 2008). Based on this distinction between the balanced scorecard of for-profit and non-profit organizations, the following objectives are drafted for Marie Stopes that can have a significant impact on its financial position.

Table 1: Financial Perspectives.

It could be indicated that the three objectives identified in the table provided above will assist Marie Stopes to improve its financial position in the next year. These objectives are developed after carefully analyzing the annual report of Marie Stopes for 2015 that clearly indicated that the organization aimed to increase its capacity and improve the quality of its services by investing further in developing programs for women in developing countries (Financial Statements and Annual Report 2015, 2016). These financial targets can support the organization to achieve its overall objectives set out in its ‘Power of 10’ strategic plan. The strategic plan of Marie Stopes indicated its objectives are related to “Choice and Channel, Capacity, and Connections” (Financial Statements and Annual Report 2015, 2016).

The organization can improve its connections by increasing the number of donors. It can achieve income growth and invest in improving the capacity and quality of its programs. The organization can mitigate the liquidity risk by improving its cash reserves. The effective management of excessive cash is crucial for the organization to achieve its strategic objectives (Matz & Neu, 2007). Finally, the organization can work on reducing its expenditure on raising funds and charitable activities. It will increase the reserves of Marie Stopes that can be invested in increasing its capacity and channels to help women in different countries and fulfill its mission and vision.

References

Financial statements and annual report 2015. (2016). Web.

Niven, P. R. (2008). Balanced scorecard: step-by-step for government and nonprofit agencies. Hoboken, NJ: John Wiley & Sons.

Matz, L., & Neu, P. (2007). Liquidity risk measurement and management: A practitioner’s guide to global best practices. Singapore: John Wiley & Sons (Asia) Pte Ltd.

Savkin, A. (2016). Balanced scorecard in nonprofit and government organizations. Web.

Introduction

Over the past years, a rapid increase in global competition brought about by technological change and product variety has created the need for continuous performance improvement as a strategic and competitive requirement in many organizations world wide.

In order for organizations to maintain and improve their competitive advantages, performance measures are widely used to evaluate, control and improve business processes. However, recent studies indicate that traditional performance measures that once sufficed and no longer able to provide the desired results. As a result, other approaches to measuring performance are necessary.

Among others, the balanced scorecard has been used widely by many organizations to measure the performance of information systems and to provide a means of assessing how best they can be used strategically to gain a competitive advantage (Cannon 12). The balanced scorecard, developed by Kaplan and Norton, is a framework for the communication and implementation of strategy (Kettunen & Kantola 263).

It provides managers with a means to navigate to future competitive success (Kaplan & Norton 2). It is also regarded as a performance measurement system that translates an organization’s mission and strategy into a set of performance measures with a view to providing a comprehensive and balanced framework for strategic measurement and management (Kamhawi 475).

In the present business environments, industrial age competition has been replaced by the information age competition. While the adoption of technology really mattered during the industrial age completion, this is no longer the case when it comes to the information age era.

It is now obvious that companies can not gain sustainable competitive advantage by simply deploying new technology into physical assets rapidly by excellent management of financial assets and liabilities like they did during the industrial age (Kaplan & Norton 3).

Therefore, considering that organizations today are competing in very complex business environments, an accurate understanding of their goals as well as the methods for attaining the goals is very critical.

This paper looks at how an organization may use the balanced scorecard approach in information systems setting to gain a competitive advantage. It also provides measures that may be used to the benefit of using the scorecard.

Perspectives of the Balanced Scorecard

Although the balanced scorecard places greater emphasis on the achievement of financial objectives, it also includes the performance drivers of the financial objectives and measures organizational performance across four balanced perspectives: financial, customers, internal business processes, learning and growth.

Subsequently, it the balanced scorecard enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets needed for future growth (Kaplan & Norton 2). Typical examples observed in companies that have adopted the balanced scorecard approach include the following (Kamhawi 476):

1. Financial – puts emphasis on shareholder satisfaction, key goals and measures here generally involve gross and/or net profitability, return on capital employed, residual income, economic value added, sales growth, market position and share, and cash flow among others.
2. Customer – the focus here is more on the external customer satisfaction. Key goals and indicators in this perspective typically stress common customer concerns such as delivery time, quality, service and cost.
3. Internal business – The key goals and measures should highlight critical skills and competencies that are required, processes and technologies that will deliver current and future organizational success.
4. Learning and growth – underpinning the other three perspectives, the key long-term goals and indicators in this regard typically relate to improving flexibility and investing for future development and new opportunities.

There are also important relationships that are present between the four perspectives with innovation and learning being the driving force to deliver success in the internal business processes, which then in turn will meet customer and consequently, shareholder needs. Figure 1 shows the four components of the balanced scorecard and how they are related.

Figure 1: Balanced Scorecard with Four related Perspectives (Kamhawi 476)

The Balanced Scorecard Applied to IS

According to Pearlson and Saunders (84), the application of the different categories of the balanced scorecard to information systems requires a much broader interpretation. With this approach, for example, a customer is a user within an organization and not an external customer.

Cannon (64) argues that although the balanced scorecard methodology is common outside the information systems environment, information systems can greatly benefit from applying it if it implemented by the Chief Executive Officer (CEO). This suggests an inclusive approach to the implementation of the balanced scored technique.

While some organizations have been successful in using the balanced scorecard approach, many have terribly failed. The failure has been largely linked to the fact the implementations are run by people in the organization other than the Chief Executive Officer (Cannon 64). This is mainly because the top leadership sets the agenda that must be followed by all within the organization.

From this argument, it follows that a scorecard used within the IT department will senior IS managers understand their organization’s performance, and measure it in a way that supports its business strategy. The information system scorecard is linked to the business scorecard, by making sure that the measures that are used by information systems are those that support the organizations business goals (Pearlson & Saunders 84).

Generating Measures for Information Systems

Table 1 gives an illustration of how the balanced scorecard approach may be used to generate performance metrics for an information system.

Table 1: Balanced Scorecard applied to an Information System department

As can be seen from figure 1, the balanced scorecard technique is not self sustaining. It only conveys goals and measures of success. There exists no formal statement of the actions needed to reach the identified goals. To overcome this problem, a set of critical success factors (CSFs) and the required information to reach each goal are attached to it.

Critical success factors are considered to be activity areas that must be receive constant and careful attention from management. The current status of performance in each of these areas should be continually measured, and that resultant information should be made widely available (Pearlson & Saunders 87).

According to Cannon (69), CSFs should be determined only when the business objectives have clearly been identified. Critical success factors are then identified against each objective and a prioritization of the achievement of the critical success factors is then provided depending on the number of objectives sharing the critical success factor.

Later, the importance of information to the achievement of the objectives is considered. Finally, a Strengths, Weaknesses, Opportunities and Threats analysis of an information system is generated. It is advisable to have each objective associate with a reasonable number of critical success factors. Figure 2 shows how the critical success factors are integrated into the balanced scorecard.

Figure 2: Integrating Critical Success Factors into the Balanced Scorecard (Pearlson & Saunders 87)

Consolidating the Balanced Scorecard and Critical Success Factors Analysis

A comprehensive set of IS requirements may therefore, be obtained by combining the output of the balanced scorecard and the critical success factors. The balanced scorecard links measures to business objectives while the critical success factors analysis identifies what is critical to achieving the intended results.

The combination of these techniques makes it possible to achieve a thorough assessment of prioritized IS opportunities. Table 2 shows an example of how the balanced scorecard analysis approach may be used to derive improvements to information system operational activities and to identify both internal and external information requirements for the activities.

Table 2: Application of the Balanced Scorecard Analysis

From the analysis of the balanced scorecard, each of the identified objectives is then subjected to a critical success factor analysis.

From the analysis of figure 4, the information and systems requirements that will support the critical success factors include; a new analysis of stock-turn to separate fast-moving and slow-moving items, an improved stock forecasting based on more accurate sales forecast against the actual and a new stock replacement algorithm for different stock types.

However, it is important to note that the decision about which system should be developed largely depends upon the organization’s business priorities.

Figure 3 shows how both the balanced scorecard and the critical success factors analysis may be used for strategic reasons to address an organization’s information system requirements while figure 4 gives a clear indication of the outputs of the balanced scorecard and the critical success factors analysis.

Figure 3: Using the Balanced Scorecard and Critical Success Factors Analysis for strategic reasons

Figure 4: Outputs of the Balanced Scorecard and the CSF Analysis

Conclusion

The balanced scorecard creates strategic awareness among the members of the organization and aligns the strategies of different administrative units. It helps to create a shared understanding about the efforts and steps needed for change.

The balanced scorecard translates the strategy into tangible objectives and measures. The experiences of this study testify to the applicability of the balanced scorecard as a basis for a campus-wide management information system (Kettunen & Kantola 272).

When properly implemented, the balanced scorecard concept enforces better alignment by defining the details of strategic business objectives. Using the scorecard is meant to eliminate activities that are of little or no strategic value (Cannon 64).

The use of the balanced scorecard can be continuously monitored openly by everyone in the organization. The trends and development of operations can be monitored and evaluated in order to make necessary changes to achieve the desired strategic objectives of the business (Kettunen & Kantola 273).

As organizations endeavor to implement the balanced scorecard for information systems, it is important to note as earlier pointed out, that on its own, the balanced score card can not deliver the intended results. It critical to look at other factors that are key contributors to ensure the scorecard works as intended.

Some of the critical factors that must be considered include; the need to ensure that the implementation has total support from the organizations’ top management and that it also receives support from other available approaches to measuring performance.

Usually, it is important to assign the custody of the balanced scorecard to a person within the organization who will be solely in-charge of making sure that it works to the benefit of the organization. For most organizations, the custody of the balanced scorecard is left with the finance function mainly because of its place at the center of the organization’s information processing and distribution.

Works Cited

Cannon, David L. CISA Certified Information Systems Auditor Study Guide. Hoboken, NJ: John Wiley & Sons, Inc., 2011.

Kamhawi, Emad M. IT and non-IT factors influencing the adoption of BSC systems: a Delphi study from Bahrain. International Journal of Productivity and Performance Management, 60 (5) 474 – 492. 2011.

Kaplan, Robert S. & Norton, David P. The Balanced Scorecard: Translating Strategy into Action. Boston, MA: Harvard Business Press, 1996. Print.

Kettunen, Juha & Kantola, Ismo. Management information system based on the balanced scorecard. Campus-Wide Information Systems, 22 (5) 263 – 274. 2005.

Pearlson, Keri & Saunders, Carol. Managing and Using Information Systems: A Strategic Approach. Hoboken, NJ: John Wiley & Sons, Inc., 2006. Print.