The research paper focuses on the study of the balanced scorecard as a tool to generate the optimum standard cost benchmarks. Further, the research centered on the effect of Ron’s faking of his performance during the research on the balanced scorecard results and the establishment of standard costs. Furthermore, the research focused on the effect of Ron’s lackluster performance on the Company, Camden. Lastly, the research spotlighted implementing a better-balanced scorecard and standard cost level research process.
Discussion
Niven emphasized that the balanced scorecard process measures work performance as a basis for establishing realistic standard cost benchmarks. The process focuses on the effect of Ron’s lackluster performance on the establishment of standard cost levels (Niven, 2006). A correctly executed balanced scorecard research ensures the establishment of the optimum standard cost levels.
Further, Smith reiterated that Ron greatly benefitted from his lackluster work performance. Consequently, Ron can easily reach his performance goals using lesser effort when compared to complying with a higher performance benchmark. Ron must work harder to reach a higher standard cost benchmark if he displayed his normal performance during the balanced scorecard research. After reaching the unchallenging performance benchmarks, Ron can reduce his work output. Ron’s advantage is due to the erroneous setting of a lower than normal standard in areas of financial performance, internal processes, customers, learning, and growth factors (Smith, 2007).
Consequently, Smith theorizes that Ron’s employer, Camden Manufacturing Company was harmed by Ron’s intentional work slowdown. In terms of the balanced scorecard strategy, the company’s financial performance, internal processes, customers, learning, and growth factors were understated. The Camden Manufacturing company had to erroneously set the objectives, measures, targets, and initiatives of each factor because of Ron’s fake performance. Under this situation, the company loses net profits and revenues equal to the difference between Ron’s fake actual performance level and the true performance level (Smith, 2007).
Furthermore, Fraedrich emphasized that Ron was unethical in the way he performed during the study. Ethics states that a person should not violate moral standards. Moral standards include avoiding acts that may hurt or infringe on the rights of other persons. By faking his real performance, Ron violated ethical standards because the balanced scorecard-based standard results are erroneous. Consequently, the company will be hurt in terms of lower revenues and lower net profits from Ron’s unethical performance during the balanced scorecard performance research (Fraedrich, 2009).
Furthermore, Smith proposed that the company should implement steps to successfully gather valid and relevant data to ensure the implementation of the correct performance-based balanced scorecard. One important measure is for the researcher to avoid informing the research subjects they are being observed. This will prevent employees from doing faking their performances. Next, the researcher can secretly observe a minimum of 70 % of the entire workforce doing the same redundant jobs. The average job performance results covering 70% of the population will be used to generate a more credible standard cost level. This research strategy will generate a better standard cost performance benchmark as compared to studying only Ron’s fake performance (Smith, 2007).
Conclusion
BRIEFLY, the balanced scorecard tool is used to determine the optimum standard cost benchmarks. Ron’s faking of his performance during the research is advantageous to Ron because he can easily achieve performance goals with less effort. Consequently, Ron’s substandard performance reduces the company’s profits and revenues. To prevent fake performance, a minimum of 70 percent of the total workforce doing a similar job should be secretly observed to generate more realistic results. Further research can focus on the exact number of subjects needed to make a more convincing balanced scorecard research outcome. Indeed, the balanced scorecard research should be effectively implemented to generate the optimum standard cost benchmarks.
References
Fraedrich, J. (2009). Business Ethic.New York, N.Y.: Cengage Press.
Niven, P. (2006). Balanced Scorecard Step by Step: Maximizing Performance and Maintaining Results.New York, N.Y.: J Wiley & Sons Press.
Smith, R. (2007). Business Process Management and the Balanced Scorecard.New York, N.Y: J. Wiley & Sons.
Over the years, researchers and practitioners in the field of business have developed several different tools and standards for performance evaluation and management. The present paper examines one of the most popular strategic planning and measurement methods – the Balanced Scorecard (BSC), which aims to align the organization’s operations and activities with its strategy, mission, and goals. The first part of the report provides an overview of the principles of BSC, considers the method’s advantages and drawbacks, and examines the reality of its implementation, with a specific focus on the United Arab Emirates. The second section of the paper is dedicated to examining the links between BSC, leadership, and information technology.
Literature Review
The Balanced Scorecard was first introduced by researchers Norton and Kaplan in the early 1990s (Kaplan, 2010, p. 2). The authors recognized the importance of performance measurement to companies and their managers, and they also noticed the problem experienced by the organizations whose value creation models primarily relied on intangible assets. Thus, Kaplan and Norton came to realize that the most frequently used measures of performance – that is, financial indicators – do not always reflect the value created by some companies (Kaplan, 2010, p. 3). Having recognized the existing gap in performance measurement, Norton and Kaplan aimed to address it by developing a comprehensive tool that would take into account not only the company’s financial performance, but would also consider such intangible parameters as the organization’s mission, strategy, values, and interests.
The two researchers consequently worked on operationalizing an organization’s strategy and mission into tangible and quantifiable objectives and performance measures (Assiri, Zairi & Eid, 2006, p. 938). Their primary goal was to develop not merely a set of metrics. Rather, they intended to create a system of indicators and measures that would reflect the complexity of a company’s performance and demonstrate the intricate cause-and-effect relationships between the different activities and units of an organization (Assiri et al., 2006, p. 939). Norton and Kaplan were not necessarily the first to recognize and attempt to operationalize the BSC’s underlying structure as similar models existed in France, Japan, and other countries, business sectors, and companies (Kaplan, 2010, p. 7). However, it was the BSC that gained widespread popularity in the management community.
Principles of the Balanced Scorecard
The BSC can be thus best defined as a “strategic planning and management system” or framework that helps organizations examine their performance in the context of their vision and strategic goals (Assiri et al., 2006, p. 938). The BSC is broadly used in private, public, and non-profit sectors alike, and its popularity is not limited geographically. Currently, more than half of large companies in the United States have adopted this approach, and this number is equally high in Europe and Asia. As Western business practices spread to the economically growing Middle East and Africa, the BSC is becoming increasingly popular in these regions, as well. It is the fifth most commonly used global management practice and the management’s satisfaction level is quite high for this tool: it typically receives a score of four on a five-point Likert scale (Lueg & Vu, 2015, p. 307).
The design of a balanced scorecard has to include at least four basic elements. It does, first of all, retain the financial performance indicators, even though it aims to supplement them with other measures. Three additional perspectives are included in the BSC. The first one is the focus on the customers, the second – on internal processes, and the third dimension deals with the organization’s learning and growth. Norton and Kaplan have identified these metrics to be essential for creating long-term value for the company’s shareholders (Kaplan, 2010, p. 4). While these categories are rather broad, each organization needs to develop the specific objectives, measures, and indicators to analyze how well it is achieving its goals: for instance, it can be the level of customer satisfaction and retention for the customer-focused dimension (Assiri et al., 2006, p. 938). Depending on the specific metrics included in it, the BSC can be used for different levels of analysis, be it the entire organization, its departments, or even particular individuals (Assiri et al., 2006, p. 939).
Practical Perspectives of the Balanced Scorecard Implementation
Thus, it is quite clear how and why the Balanced Scorecard came into existence. While its merits and benefits are rather evident, the actual implementation process may not be necessarily easy and without obstacles. Implementation of different management practices and tools has been widely researched in the business literature, with other terms such as adoption, integration, or organizational change being used to denote this phenomenon. Regardless of how one refers to it, implementation of new practices, by definition, brings significant changes and, consequently, risks and challenges to the organization. However, if the process is carried out correctly, it has the potential to bring about positive benefits for the company, so this trade-off is justified. The success of the implementation process depends on several structural, organizational, environmental, and managerial factors, and it can only be evaluated when the practice is fully adopted by the organization (Lueg & Vu, 2015, p. 309).
As far as the implementation of the BSC is concerned, there is no one clear strategy as to how the practice should be introduced to the company. However, one can say that the implementation approaches that have been developed over time are largely consistent with the six-stage model proposed by Kaplan and Norton themselves in 2008. The first step of the implementation model concerns the development of the organizational strategy. In fact, Kaplan and Norton have also emphasized the importance of strategy mapping not only at this stage but also before it (Assiri et al., 2006, p. 938). The second stage is dedicated to detailed planning of the strategy that has been formulated. The next two stages deal with the alignment of the organization, in general, and its activities and operations, in particular, with the strategic goals and objectives of the company. During the fifth stage, the organization should monitor the BSC and gather feedback for continuous learning and improvement. Finally, the last stage is dedicated to testing the framework and fine-tuning it in line with the observations made during the preceding step (Lueg & Vu, 2015, p. 309).
Pros. Given the extensive reach of the BSC implementation in an organization, it is clear that this process is likely to bring significant changes to the company. Depending on how well the organization is prepared to begin the implementation – that is, how supportive the management and employees are of the initiative and how many resources are allocated for this project – the outcome may bring either benefits or disadvantages to the company. For instance, the BSC implementation plan frequently includes an almost complete overhaul of the entire organizational strategy, mission, and value system. This process gives the organization an opportunity to reconsider and re-evaluate its foundations in the contemporary context and identify and eliminate any outdated notions and assumptions. The implementation process can also help boost employee engagement, satisfaction, and productivity if the top management actively involves the employees in the process. Consequently, this kind of a “team-building” activity can help improve the overall morale and strengthen the organization’s corporate culture (Lueg & Vu, 2015, p. 315). In many cases, both employees and managers will find themselves needing to develop new skills and gain new knowledge to successfully adapt to the changing environment. If the company provides adequate training and support, the process will considerably contribute to the employees’ learning and professional growth (Lueg & Vu, 2015, p. 314).
Cons. At the same time, the BSC implementation process may also bring about some undesirable consequences and disadvantages. As far as the employees’ motivation and morale are concerned, they can, in fact, go down as a result of organizational changes. Typically, people are prone to resisting change as they are likely to be skeptical about the perceived benefits of the overhaul. Thus, unless the employees are well-informed about the process, they may feel alienated as a result of the occurring changes. Moreover, if they are not able to embrace the changes – that is, they do not have the skills necessary for it – training can prove to be rather time-consuming and expensive (Lueg & Vu, 2015, p. 314).
As a matter of fact, resources may be a considerable challenge for the company implementing the BSC. If the organization is not ready to commit its resources to the change, the transition will not be smooth and quick. The BSC implementation process is a complex, lengthy, and resource-consuming procedure that requires full support from both top management and employees. Unless the organization has realistic expectations about the associated expenditures and necessary time commitment, the implementation is likely to be unsuccessful (Lueg & Vu, 2015, p. 316).
Use of the Balanced Scorecard in the United Arab Emirates
Research indicates that strategic planning becomes more prominent in the United Arab Emirates, impacting both small and large entities in private and public sectors (Elbanna, 2010, p. 26). Quite expectedly, the BSC approach is gaining popularity, as well: a 2010 study of 112 organizations revealed that the BSC is the thirteenth most popular strategic planning tool, outperforming such methods as the stakeholder analysis, scenario planning, and even Michael Porter’s five-forces analysis. Less than a quarter of the surveyed organizations’ representatives claimed to be unfamiliar with this tool. On average, larger entities used the BSC more frequently, but it is consistent with the general findings of the study, as large companies tend to have more resources that allow them to adopt organization-wide changes (Elbanna, 2010, p. 34). Interestingly, the BSC is especially popular in the public sector, being the fourth most commonly used strategic planning tool in government agencies, both at federal and local levels (Elbanna, 2013, p. 432). The BSC’s popularity in the private sector is somewhat lower than in the public sector (Elbanna, 2010, p. 34).
Student’s Reflection
Balanced Scorecard and Leadership
Given the literature review provided above, the research on the BSC implementation has several important practical implications for the top management in public and private institutions. As an executive, I will focus on the following areas in the BSC implementation. First of all, evidence indicates that transformational leadership helps facilitate the adoption of the BSC at an organization (Yang & Islam, 2012). Essentially, this leadership style describes the kinSd of behavior whereby the leader works closely with their employees to identify the areas in need of change and develop the steps necessary to implement the changes. Thus, I will strive to adopt a transformational leadership style. Such an approach would help enhance employee satisfaction and improve their productivity and morale.
Secondly, I will make sure to encourage employee engagement and participation in decision-making at all stages. For instance, at the first stage of the BSC implementation, I will encourage the creation of employee focus groups to solicit their response regarding the direction and strategy that the organization should adopt. Finally, I will also try to provide adequate and consistent support throughout all the stages of implementation, since leadership’s engagement is believed to be a crucial factor in determining the implementation’s success (Lueg & Vu, 2015, p. 316). What it means in practical terms is that I will ensure adequate financing and planning of the implementation process. Moreover, I will seek to identify the skills and knowledge necessary for the employees to make a successful transition, and I will implement training programs designed to address any gaps in their knowledge.
Balanced Scorecard and Information Technology
Finally, given the advances in the modern information technology, it is essential for the management of an organization to take full advantage of the existing opportunities related to the implementation of the BSC. There are several ways in which an organization can adopt information technology to facilitate organizational change. First of all, most evidently, there are several software tools that allow automating the BSC implementation process. For instance, the Balanced Scorecard Institute (n.d.) advertises one particular software program that helps the organization structure its data and information in such a way that it becomes easier for it to implement the BSC approach. Thus, such programs are essentially a one-stop-shop solution for those organizations that would like to adopt the BSC method but are not sure as to where they should start.
At the same time, software programs do not necessarily need to fully automate the BSC implementation process. In fact, many tools not designed for such purposes specifically can still be used to facilitate the process. For instance, virtually any data collection, calculation, and analysis software will be useful for the organizations adopting the BSC method. Such programs help the company and its employees by collecting and treating large amounts of data that may be difficult for humans to process. Thus, organizations can use these calculations for their decision-making purposes. Apart from that, several useful software solutions can help coordinate and structure the company’s internal communication which is especially important in the times of change. For instance, online surveys can be used as a mechanism to gather feedback from the employees.
Conclusion
To sum up, the BSC is one of the most popular strategic management tools that still continues to gather support in the Middle East and other regions. Adoption of the BSC method can yield several benefits for the company, ranging from increased employee motivation to growth and learning. However, the process should be conducted carefully, as the implementation plan that has not been thought through can, in fact, harm the organization rather than help it. Currently, information technology offers several valuable software solutions that can the BSC implementation process at an organization.
References
Assiri, A., Zairi, M., & Eid, R. (2006). How to profit from the balanced scorecard: An implementation roadmap. Industrial Management and Data Systems, 106(7), 937-952.
Elbanna, S. (2010). Strategic planning in the United Arab Emirates. International Journal of Commerce and Management, 20(1), 26-40.
Elbanna, S. (2013). Processes and impacts of strategic management: Evidence from the public sector in the United Arab Emirates. International Journal of Public Administration, 36(6), 426-439.
Kaplan, R.S. (2010). Conceptual foundations of the Balanced Scorecard. Web.
Lueg, R., & Vu, L. (2015). Success factors in balanced scorecard implementations: A literature review. Management Revue, 26(4), 306-327.
Yang, Y., & Islam, M. (2012). The influence of transformational leadership on job satisfaction: The balanced scorecard perspective. Journal of Accounting & Organizational Change, 8(3), 386-402.
The Balanced Scorecard is a strategy management framework used to examine an organization from four perspectives to facilitate the development of high-level organizational objectives, measures, and initiatives. From a financial perspective, the organization’s financial performance and the use of financial resources are considered. Profit and revenue are key profit indicators (KPIs) that most companies include in this perspective (Baldegger, 2012). Other objectives comprise profit margins, cost-saving and efficiencies, and revenue sources (Marr, 2020b). On the other hand, from the customer perspective, organizational performance is examined from the standpoint of critical stakeholders or consumers. These can comprise KPIs such as market share, brand awareness, and customer service and satisfaction. In the context of global expansion, the company should consider the growing market share in the intended country.
The internal process perspective regards the efficiency and quality of an organization’s performance concerning products, services, or other major business processes. This constitutes the processes that the business has in place and the internal operational goals and objectives that it should implement to drive performance (Marr, 2020b). Examples of KPIs related to this perspective include process improvements (streamlining internal processes), quality optimization (decreasing manufacturing waste), and capacity utilization (employing technology to improve efficiency). Lastly, the learning growth perspective encompasses a broad spectrum of intangible performance drivers, including infrastructure, human capital, culture, technology, and other capacities central to breakthrough performance.
Other Strategic Management Frameworks for Global Expansion
In addition to the BSC, other strategic management frameworks can be used for global expansion, and they include the Objectives and Key Results (OKR) and the PEST model. The OKR is relatively similar to the BSC as both are focused on top strategic priorities, which are objectives and metrics. However, the difference between the two is cadence. In the BSC, the objectives and measures are designed to last at least a year, whereas, with OKRs, they are changed quarterly (Marr, 2020a). Furthermore, unlike the BSC, the OKR does not utilize the four parameters for creation. The PEST model is established around forces that influence the political or legislative, economic, socio-cultural, and technological aspects of the prospect countries on the organization’s health. This tool is particularly useful when starting a new business or entering a foreign market. This will enable the company to identify the macro-environmental factors that affect its operations in becoming more competitive in the global market (Baldegger, 2012).
Importance of Combining Different Strategies When Pursuing Global Expansion
Every strategic management framework has distinct advantages and disadvantages. Therefore, by combining them when pursuing global expansion, an organization can override the disadvantages and facilitate the acquisition of comprehensive findings that encompass every business aspect. For instance, combining the OKR and BSC will result in the former having a more improved visualization, and the latter, having regular cadence. Overall, this blending approach provides a more successful way of framing and executing high-level strategies. Furthermore, upon the inculcation of the PEST model, the organization will have a deeper understanding of external processes, such as legislation in other countries that might be relevant to the business, economic factors affecting sales and profits, social factors influencing consumer buying behavior, and technological factors that could affect processes. Considering the analytical findings of these three frameworks, the organization will be able to successfully establish its operations in prospective countries and yield significant revenue.
References
Baldegger, R. (2012). Management in a dynamic environment: Concepts, methods and tools. Springer Gabler.
Marr, B. (2020a). OKRs vs BSC: What is the difference? Web.
Marr, B. (2020b). The four perspectives in a balanced score card. Web.
Innovation, such as telehealth or LiveHealth is the primary focus of the company;
Revenue in 2017 is estimated at $90 billion (“Anthem 2017 annual report,” 2017);
60% of the reimbursement is connected to value-based programs.
A balanced scorecard is an approach to measuring a company’s performance over a specific time frame that helps executives define goals consistent with the current strategy. This is especially important in the healthcare industry where the challenging environment requires organizations to locate innovational models of service provision that cannot be evaluated using standard accounting methods. This presentation aims to introduce Anthem, review the company’s performance using the balanced scorecard approach, and offer four recommendations that will help this company achieve its targets.
The selected organization is Anthem, a nationwide health insurance company that provides a variety of services to consumers across the US. According to the 2017 performance report, the company’s insurance was purchased by 1 out of 8 citizens in the US (“Anthem 2017 annual report,” 2017). Thus, this organization serves as a health care organization to many Americans, and it is its responsibility to develop value-based care practices that will help improve the quality of medicine. One of the strategies that Anthem declares is applying innovation in its work to improve the approaches to treatment that are currently used (“Anthem 2017 annual report,” 2017). This is facilitated through the Blue Cross telehealth program. It can be argued that the current strategy of the company emphasizes innovation and value in medical services.
Balanced Scorecard – Financial Perspective
Goals:
Improve profitability;
Increase revenue;
Market share;
Use new opportunities for capitalization (“Business strategy,” n.d.);
Measures (and acceptable ranges for performance):
The increase of margins (by 1-2%);
Total sales and expenses (improvement by 10-20%);
Percentage of Anthem’s presence in the insurance business (20-30%);
Revenue (increase by 10-20%).
The first element of the balanced scorecard is financial performance. One of the issues that can be reviewed in this section is the shareholder’s opinion of the company based on its financials (Kaplan & Norton, 1992). In general, this perspective allows one to evaluate whether the existing plans contribute to the bottom line. One of the most important goals that Anthem has and that is reflected in its mission, vision, and values statement is a choice to develop innovational healthcare services and use them to improve the revenue of the company (“Business strategy,” n.d.). Other components include profitability, market share, and the number of sales.
Currently, the company experiences difficulties due to a decrease of its operating revenue, which was estimated at $8,843 million in 2018 for the commercial business sector that is an 11,6% decline when compared to the 2017 numbers (“Anthem reports fourth quarter,” n.d.). However, the overall operating revenue has increased due to the enhanced performance of government business sector. The operating margin in 2017 was 0,7% while in 2018 it was 3,6% that indicates a significant growth (“Anthem reports fourth quarter,” n.d.). Thus, the balanced scorecard analysis indicates that Anthem currently aims to improve its performance by using innovation that will help increase revenue and margins. Risk management issue, in this case, is the decrease in profitability due to a change in consumer preferences and low quality of care, which will require the company to pay more in reimbursements.
Balanced Scorecard – Customer Perspective
Goals:
Present new services that apply information technology to healthcare;
Improve quality using value-based care;
Simplify healthcare services;
Measures (and acceptable ranges for performance):
Number of clients using applications and signing up for new programs (50-80%);
Patient satisfaction rate (88-99%);
Number of patients receiving consultations through new models (50-70%).
The next perspective is customer experience, which is crucial for Anthem because the company emphasizes the need to shift towards value-based care. According to Kaplan and Norton (1992), this component allows examining a company from the viewpoint of its clients with “time, quality, performance and service, and cost” being crucial elements (para. 5). While Anthem is an insurance company that sells plans to its clients, the issue of services quality provided by its partners is a concern for the organization as well. The important aspect in this regard is the ability to increase accessibility of care and enhance outcomes of treatment for patients. This corresponds with the mission and vision of Anthem that focuses on “simplifying healthcare” (“Mission, vision, and values,” n.d.). Thus, the primary objective that is reflected in the balanced scorecard is to ensure that customers have good access to healthcare services.
Currently, Anthem works with 74 million individuals within the US, that use a variety of services, including Medicaid and Medicare plans (“Corporate fact sheet,” n.d.). This can be improved by simplifying access to care services through the application of information technology. Thus, Anthem’s balanced scorecard from the customer perspective involves improving the standards and approaches that are prevalent in the industry. The range of performance indicators for the customer perspective of the balanced scorecard is stated in the table.
Balanced Scorecard – Innovation and Learning Perspective
Goals:
Become number one provider in telehealth;
Focus on applications and webpages that allow patients to access providers;
Measures (and acceptable ranges for performance):
Number of patients that use telemethdicine from 20% to 50%;
Number of individuals utilizing these models 40%-70%.
Training perspective is crucial for Anthem, based on its mission and strategy to apply innovation in healthcare. Moreover, the company already uses a lot of novel models such as telehealth, applications, and online healthcare services to improve the accessibility and affordability of services. However, this model accounts for a small percentage of Anthem’s revenue and sales. Thus, it is necessary to dedicate more attention to these methods, including an increasing number of providers that support applications and the number of customers using these services. Kaplan and Norton (1996) state that the value of a company comprises of its ability to change and adapt its products in accordance with changes that occur within its industry.
It is evident that Anthem is aware of this issue because the company developed services such as LiveHealth Online that provides access to medical professionals through a smartphone or a laptop. Additionally, IBM Watson is an artificial intelligence solution that allows physicians to scan through a large number of publications and locate relevant data that will help create a treatment plan for their patients (“Innovations at Anthem Inc.,” n.d.). These components indicate that Anthem is fully committed to revolutionizing the healthcare industry. The ranges for measures that can be applied for examination of these components are connected to the number of Anthem’s clients that choose to use the new developments. Based on the data provided by Halpren-Ruder, Chang, Hollander, and Shah (2018), and the trends it can be concluded that most of Anthem’s clients will choose to use information technology applications in their interactions with healthcare providers. Thus the range of measures was developed based on this assumption.
Balanced Scorecard – Internal Business Perspective
Goals:
Manage internal information technology;
Minimize risk connected to the loss of client data;
Measures (and acceptable ranges for performance):
Ensure that 80-90% of branches have insurance covering data breaches;
Provide additional education to 60-70% of the personnel.
Internal processes perspective is designed to determine the strategies that the company applies to manage its operations. Kaplan and Norton (1992) state that this element is connected with the customer experience because the approach that an organization employs to build its internal processes directly affects the services that clients receive from it. The main component that affects this is the cycle time, quality of care services, professional knowledge of the personnel, and overall efficiency of work. Anthem states that its mission and business strategy is connected to delivering efficient services to communities and applying innovation which will allow the company to obtain profits (“Mission, vision and values,” n.d.). Therefore, technology and its application is an essential component of this scorecard measure.
Critical technology that Anthem requires to operate is also part of this balanced scorecard component. This includes information systems that process reimbursement claims and new developments, which are used to simplify patient-provides cooperation. The financial risk that is connected to the internal processes is reflected in the amount of investment that the company makes in developing the technology. Additionally, cybersecurity is a major concern for Anthem because the organization spent approximately $230 million on mitigating the outcomes of the data breach that happened in 2015 (McGee, 2017). This included payouts to customers who filed lawsuits against this company and investments that Anthem made to improve its information technology.
The scorecard goals described above are connected to the company’s mission and strategy because this organization aims to create value for all the stakeholders involved in the operations. By improving its internal processes, the company will be able to achieve that goal. The acceptable ranges for measures and performance indicators, in this case, are connected to the information security assumptions.
Recommendation 1 – Financial
Appropriate management of the supply chain;
Cost per patient measurement;
Control of readmission rates;
Standardized processes to reduce costs.
The first objective that arises from Anthem’s balanced scorecard is the need to improve revenue. According to Kwon, Kim, and Martin (2016), this can be done by assessing the supply chain management indicators and creating strategies that can help improve quality and reduce costs. The authors argue that it is necessary to dedicate additional attention to the cost per patient and readmission rates, as those are likely to affect Anthem’s reimbursements. Kwon et al. (2016) suggest applying “supply chain community surplus.” (p. 422). The supply chain can be managed through better cooperation with the insurer’s partners – hospitals and medical centers. This will allow Anthem to account for financial measurements such per patient better and tailor its strategies in regards to the results. In this regards, capital investment application should be the main focus, because according to Kwon et al. (2016) most healthcare organizations fail to have appropriate strategies for metrics such as warehouse utilization.
The issue of most healthcare organizations in the US is the inability to manage costs efficiently. The industry can save approximately $1.2 trillion if standardized approaches were implemented (Kwon et al., 2016). Moreover, this will help not only improve financial performance but also enhance the quality of services. However, it is also necessary to consider innovation as part of Anthem’s economic strategy because the company cites it as part of the vision and mission. Development of innovational methods to care provision is a high-risk investment for Anthem. However, the challenging external environment and consumer preferences demand such actions.
Recommendation 2 – Customer
Improve cooperation with partner organizations to provide better healthcare services;
Evaluate communication with clients.
Based on the balanced scorecard evaluation it can be argued that Anthem dedicates a lot of attention to improving the experience of clients that use its insurance plans. Batalden et al. (2015) claim that “unlike goods, services are always coproduced,” which provides difficulties with the improvement of the customer perspective of the balanced scorecard. Therefore, Anthem should consider developing programs that would enable better cooperation and coordination with partners. The strategy can target existing reimbursement practices or overall collaboration regarding patient health assessment.
Additionally, patient-physician cooperation is crucial because it determines the outcomes of the chosen treatment. Batalden et al. (2015) state that treatment process is successful when “the clinician and patient communicate effectively, develop a shared understanding of the problem and generate a mutually acceptable evaluation and management plan” (p. 509). Therefore, in order to improve the value of services from the customer perspective Anthem should evaluate its current strategies of communication and review the approaches that its providers use when diagnosing individuals.
Recommendation 3 – Innovation and Learning
Value enhancing telehealth;
Additional quality control for digital tools;
Provider education connected to managing telemedicine patients.
One issue that Anthem should pay extra attention to creating applications, websites, and artificial intelligence algorithms that would simplify the healthcare service provision is the quality of the care. Thus, the primary risk, in this case, is that patients will be unable to obtain a quality diagnostics process due to limitations of the remote consultations. This aspect can lead to issues with medical negligence and significant financial losses. Koumpouros (2013) argues that this perspective’s primary goal is to enable consistent improvement in the long-term outlook. This requires specific practices and processes within Anthem that would allow for proper outcomes of treatments through its innovational approaches. Quality assurance systems and additional education for a medical professional that will inform them about the common risks and misdiagnosis dangers connected to application usage can be helpful in this case.
According to Halpren-Ruder et al. (2018), “forty-six percent of consumers are now considered active digital health adopters,” which provides a strong incentive for healthcare providers to adopt this strategy. However, the authors argue that there are serious quality concerns connected to this approach. It is due to evidence that suggests “less diagnostic testing and overuse of antibiotics compared with physician office visits” (Halpren-Ruder et al., 2018). Thus, it is recommended that Anthem develops quality assurance system and personnel training programs that would target telemedicine. Through this approach, the company will ensure that it not only simplifies access to care through innovation, which is part of its vision but also provides value to consumers and avoids risks connected to incorrect diagnosis.
Recommendation 4 – Internal Business Processes
Improved information technology safety measures;
Enhance the understanding of data and information technology of the employees;
Use big data when designing new services.
One primary aspect that requires additional attention from Anthem is its information technology management and safety of the data that this organization collects from its providers and patients. It is due to the data breach that occurred in 2015 where a hacker obtained personal information about 78.8 million of the company’s clients. Similar occurrences possess a severe risk for the organization because it affects that trust and reliability as well as leads to possible lawsuits and financial losses. Thus, Anthem cannot provide clients with high-quality care without consideration for data safety.
The issue is especially evident considering that fact that Anthem is focusing its attention on digital health care services, which provides a risk of additional data breaches. Moreover McGee (2017) states that the occurrences happened because the personnel opened emails that contained malware. Thus, the strategy should include additional training for employees to ensure that they can manage information systems and applications that Anthem uses in its work. Wang, Kung, and Byrd (2016) state that “the health care industry has not fully grasped the potential benefits to be gained from big data analytics” (p. 3). More specifically, it is anticipated that companies in the industry will use big data and its analysis to tailor their services, which will enable better value through the application of patient-centered care (Wang et al., 2016). Thus, additional attention to this component as part of the internal operations is a necessity.
Conclusion
Financial Perspective:
Financial performance assessment of Anthem indicates that the company is profitable;
Managing supply chain can help Anthem improve its costs and margins;
Customer Perspective:
Currently, the company provides services to 74 million Americans;
Customer perspective can be enhanced by reviewing cooperation practices;
Internal Processes Perspective:
Technology is the crucial component of the internal process management for Anthem;
Internal processes perspective can be improved by dedicating additional attention to information security and employee training;
Training and Innovation Perspective:
Currently, Anthem devotes a lot of attention to developing new models of patient-physician communication;
Quality assurance and additional education can help mitigate risks of misdiagnosing telehealth patients.
Overall, the review of Anthem’s performance through the balanced scorecard allowed enhancing the understanding of this company’s current performance. In general, this tool is designed to help executives, and stakeholders review the most critical components of operations through four perspectives – financial, customer, innovation and training, and internal processes. The review of Anthem’s operations provided an understanding of the existing vision and strategy, which focus on simplifying care and using technology to improve revenue. Anthem’s vision and strategy connect to the four elements of the scorecard because each emphasizes the need to provide value-based care and apply innovation to improve access to health care services.
The main recommendation includes improving supply management techniques that this organization uses because the literature suggests that this component is often overlooked by healthcare establishments. Additionally, the company should improve cooperation practices with partners and patients and enhance information technology safety. Finally, Anthem should ensure that it provides sufficient quality of services to the clients using telemedicine or applications through specifically designed systems.
References
Anthem reports fourth quarter and full year 2018 results reflecting strong core performance. (n.d.). Web.
Kaplan, R. S. & Norton, D. P. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review, 70(1), 71-79.
Kaplan, R. S. & Norton, D. P. (1996). Linking the balanced scorecard to strategy. California Management Review,39(1), 53-79.
Koumpouros, Y. (2013). Balanced scorecard: Application in the general panarcadian hospital of Tripolis, Greece. International Journal of Health Care Quality Assurance, 26(4), 286-307. Web.
Kwon, I., Kim, S., & Martin, D. (2016). Healthcare supply chain management; Strategic areas for quality and financial improvement. Technological Forecasting and Social Change, 113, 422-428. Web.
McGee, M. K. (2017). A new in-depth analysis of Anthem breach. Web.
Wang, Y., Kung, L., & Byrd, T. (2018). Big data analytics: Understanding its capabilities and potential benefits for healthcare organizations. Technological Forecasting and Social Change, 126, 3-13. Web.
Many organizations in the twenty first century usually use the balanced scorecard to align their strategies and visions. This is usually one of the strategic plans within such Companies. This concept is also usually incorporated by non profit organizations and government bodies.
It is also usually used in the measuring of overall performance of organization in relation to set goals. Some businesses usually use it to enhance their external and internal communications. (Atkinson, 2006)
This concept is mostly known to have been initiated by Kaplan in the early 1950’s but started being implemented in the nineties. This model is mostly used to analyse employees’ activities throughout the year.
This concept is usually praised for its advantages as a management framework within organization. It is also highly criticized for its various limitations experienced by users. This paper looks in-depth at the pros and cons of a balanced scorecard framework of performance management. (Kaplan and Norton, 2004)
Merits
Balanced view of organizational performance
Just like any other framework of managing performance within organizations, the balanced scorecard has its pros and cons. One of the merits of the balanced scorecard is that managers are able to have a view of organization’s performance that is usually balanced in nature.
This is comparing to other traditional methods that were used to analyse Company performance. In most cases, the methods would give financial aspects of the business only. They usually overlook other aspects that are part of organizational performance. (Kaplan and Norton, 2004)
The balanced scorecard looks at all the features in the light of Company objectives. This enables management team to ascertain whether Company objectives are being met or not. This is considering the fact that an organization may be performing spectacularly in financial terms but has poor organizational development. (Neely, 2007)
This also could include very poor customer satisfaction. It is also possible for an organization to be making enviable profit while its communication systems are poor and processes outdated.
A balanced scorecard helps managers to analyze all these aspects and to have an overall view of the Company performance. Through the use of a balanced scorecard, there is a comprehensive view of the organization. (Pandey, 2005)
This tends to overturn the conventional idea of organizations having separate departments and isolated functions. It helps to show that all units within organizations are correlated. Analysis of all essential departments helps management team to correct areas that require change. This also includes putting rectification measures in time before the Company’s performance is adversely affected. (Zanini, 2006)
Helps in implementing organizational development
Through the use of a balanced scorecard, it is easy to implement organizational development. Organizational development is usually implemented in an official and organized way. It involves, coaching and instructing employees in areas of need. It also helps in accomplishment of organizational goals. Majority of the goals are usually long term in nature.
Organizational development is known to be part of the strategic plan in many Companies. This is where staffs are trained and educated on various areas such as customer care and resource management. The use of a balanced scorecard may show the customer care levels to be very low within the organization.
This usually indicates that staffs need training on customer care. Through this method, staffs easily trained on areas shown to have a deficit in service delivery. Research shows few managers implement strategic planning. (Atkinson, 2006)
The use of strategic maps as part of the balanced scorecard helps the organization to know its participation in achievement of strategic goals. The balanced scorecard in itself can be used to educate staffs on different organizational aspects.
Through the balanced scorecard, it is easier to show staffs on the essence of incorporating more training and development. Staffs get to know the effect of training on overall performance of the organization both in the short term and long term. (Neely, 2007)
Benefits of long term performance remedies are enjoyed
Further analysis of the balanced scorecard shows that it is quite advantageous as compared to other traditional methods. Other traditional methods of performance management analysed financial situations in the Company.
This usually resulted in incorporation of short term remedies on handling the problem. For instance, an organization in financial performance would have short term corrective measures put in place. These usually included an increase in prices among other interventions. (Pandey, 2005)
Most of the times the short term remedies never worked in the long run resulting in a situation where organizations still had the initial problem to solve. When using a balanced scorecard, managers analyse both the short term and long term effects of remedies.
This usually helps as managers are able to put in place strategies that work well for the organization even in the long term. Organizations that usually utilize the balanced scorecard as a framework of managing performance benefit from long term interventions of improving performance. (Zanini, 2006)
Flexibility
Analysis of the balanced scorecard shows that it makes it very easy to make amendments to the organization when need arises. This makes the system to be highly portable and quite flexible to use. Global and local business markets are usually known to be very unpredictable with changes occurring on a day to day basis.
Such changes in the business environment usually necessitate organizations to make internal changes. A balanced scorecard usually helps to make necessary amendments in case of such changes in the business environment. A balanced scorecard helps to make changes in objectives and day to day measures so that strategic goals within the organization can be achieved.
Clear map that is strategic in nature
Research shows that the balanced scorecard clearly illustrates the strategic and operational features in an organization. In most cases, organizational measures, actions and day to day decisions tend to waver away from the organization’s strategy. The management team in the organizations usually assumes that they are usually working on strategic goals while this is not usually the case. (Neely, 2007)
The incorporation of the balanced scorecard as a framework of managing organizational performance helps in this realization. It usually provides a clear map that is strategic in nature. This also usually includes the cause and effect features of every action.
These usually include measures taken on a day to day basis in relation to organizational goals. These strategic maps are simple and can be interpreted by any of the staffs within the organization. This is even those who may not have any prior knowledge in strategic management. (Zanini, 2006)
Planning tool
A balanced scorecard is usually very essential in organizations since it can be used by managers as a planning tool. As earlier on illustrated, the business environment is highly characterized by uncertainty. Despite this, a balanced scorecard can be used to put in place a rational budget for a business’ financial year. It can also be used for resource allocation. This is more so financial and material resources within an organization.
This is usually based on the fact that a balanced scorecard provides a fact based and systematic management framework. This usually helps to replace planning based on intuition. It usually helps managers to anticipate future outcomes. This is usually because of leading indicators in a balanced scorecard. The simulations and cause –effect features of the balanced scorecard make planning easier. (Neely, 2007)
Facilitates improvements within an organization
A balanced scorecard is usually known to facilitate improvement within an organization. A balanced scorecard raises the visibility of managers on what is going on within the organization. This is because it shows areas that are currently performing well and those that are performing poorly. At one glance, managers can identify areas that need to be worked upon. (Neely, 2007)
Through this, managers easily identify areas that require urgent changes. This spurs improvements to be carried out within the organization. Managers are usually able to identify best practices within an organization through the use of a balanced scorecard. Proponents of this model assert that a balanced scorecard helps to create more innovation opportunities within organization hence improvement of service provision and overall performance in organizations. (Zanini, 2006)
Enhances accountability
Unlike other traditional frameworks of performance management, the balanced scorecard is more comprehensive in nature. Various features within the organization are thoroughly analysed and not just financial aspects.
This tends to encourage accountability of stakeholders within the Company. This is founded on the fact that the work done in every department has to be analyzed. This in most cases is not just the accountability of employees but also that of the management team. (Pandey, 2005)
Some organizations tailor the balanced scorecard such that time management of all staffs and management team is analysed. This also usually includes the way they relate to other staffs within the organization. Employees and management team tend to be more responsible as they go about their duties. (Kaplan and Norton, 2004)
Essential in benchmarking
Balanced scorecard helps managers to identify areas that are performing poorly within the organization. Benchmarking is part and parcel of strategic management. Many businesses are incorporating benchmarking in order to enhance efficiency and effectiveness. An essential step in benchmarking is identifying processes within an organization.
Generally, benchmarking gives a different view of handling quality issues within an organization. It actually acts against any resistance to change whatsoever. This entire process can be carried out by an organization as an individual venture or as a joint undertaking between organizations. (Kaplan and Norton, 2004)
A balanced scorecard makes it easy for managers to identify the process within the Company. It also makes it easy to compare the performance of various processes and departments. This allows improvement of quality of production, service delivery to be improved through benchmarking process. It is also essential to note that the balanced scorecard can be used for comparing performance of processes and departments between organizations. (Neely, 2007)
Break down of measures at the corporate level
A balanced scorecard is usually known to help in breaking down measures at the corporate level. This is such that managers at local levels clearly understand their role in enhancing organizational effectiveness. This also includes the role of the rest of the employees within the organization in improving overall corporate effectiveness.
This makes stakeholders take their positions and roles since they get to understand the organizational measures in their respective levels. This means that the organizational strategy is usually made operational through overall translation into targets and measures for each group of staffs. (Zanini, 2006)
Limitations
Scorecard metrics
There are also some limitations of using a balanced scorecard as a framework of managing performance in organizations. One of limitations is the fact that the metrics in the framework do not relate to all organizations.
It means that the balanced scorecard metrics cannot be used for all organizations that would desire to use it. This usually leads to a situation where some organizations incorporate the balanced scorecard, use the metrics. These are usually not beneficial to the organization.
This makes the entire process of using the balanced scorecard meaningless as the organization may not benefit at all. It is usually recommended that managers tailor make metrics that are usually relevant to the organization before using the balanced scorecard. This would help analyse and improve current performance. (Atkinson, 2006)
Limited view of organizational performance
Critics of the balanced scorecard assert that it does not give a full view of Company performance. The scorecard has four major areas that managers use as a framework of analyzing performance. These areas in essence are mostly meant to show development and growth aspects of any business. The four areas, according to critics, do not who the overall picture of performance in an organization.
It is usually worth noting the financial metric on the framework is not comprehensive in nature. It is highly recommended that managers use the balanced scorecard as part of strategy that is bigger. There is mostly the need for organizations to incorporate comprehensive accounting models as part of the bigger strategy. This usually helps to have a more overall view of Company performance. (Atkinson, 2006)
Incorporation of non financial measures
For an organization to use the balanced scorecard, it has to tailor the metrics to the Company processes in order to enhance relevancy. This means that managers have to include non financial metrics in order to have an overall view of performance. This has been cited to be a complicated venture. This is usually based on the fact that organizations usually have many non financial departments.
It is mostly difficult for managers to identify non-financial metrics to be included and those that should be excluded. This is because the balanced scorecard cannot be effective if all dimensions within the organization have to be included in the framework. (Kaplan and Norton, 2004)
When the dimensions are very many, the balanced scorecard usually has high chances of failing. Critics of the balanced scorecard assert that it is challenging to track non-financial dimensions. This is because the dimensions are usually subjective in nature. The biggest challenge for managers is to include dimensions that are mostly related to outcomes that are usually defined in nature. (Neely, 2007)
Time consuming
While the balanced scorecard has been applauded for myriad advantages, it has one major limitation. It is usually a very time consuming process. This requires managers to burn the midnight oil trying to workout the balanced scorecard to suit their organizations. Collecting information concerning all the metrics on the balanced scorecard takes a lot of time.
Usually this involves collecting information from various stakeholders within the organization. The implementation of the balanced scorecard requires participation of both the management team and staffs. If any of them fails to participate then, the process can never be successful. This in the long run is usually quite time consuming. (Pandey, 2005)
Limited in scanning external environment
A balanced scorecard is an essential tool of analysing the internal environment in organizations. This tool is usually limited since it cannot be used to scan the external business environment.
This means that balanced scorecard cannot be used in scanning external environmental factors. It cannot replace external environmental systems used to analyse the environment. Managers need to incorporate other systems when scanning the external environment. (Pandey, 2005)
Resistance in initiating balanced scorecard
Researchers assert that there are various challenges commonly faced when managers try to implement a balanced scorecard. It is usually resisted by some of the staffs during the initiation process. This is usually because they do not see the holistic picture.
This requires total commitment of top management. In most cases, employees tend to resist the new system, since they perceive it as a tool that is mostly used to show underperformance. Some staffs tend to perceive it as unnecessary addition of administrative tasks. (Atkinson, 2006)
Conclusion
A balanced scorecard is usually incorporated as part of a Company’s strategies. It mostly used to align strategies and visions in organizations. It is also usually used in the measuring of overall performance of organization in relation to set goals. This concept is mostly known to have been initiated by Kaplan in the early 1950’s but started being implemented in the nineties.
This model is usually used to analyse employees’ activities throughout the year. The model has various advantages and limitations. A balanced scorecard gives balanced view of organizational performance. It enhances flexibility when amendments need to be made. It also usually encourages accountability of staffs and even the management team.
It is useful to benchmarking process and helps in implementing organizational development. A balanced scorecard also has its limitations. This includes the fact that it is time consuming. It requires a lot of time to include all the metrics in the framework of performance management. It is quite challenging for managers to include all the metrics in the balanced scorecard.
It is limited in scanning external environment. This means that it can only be used in scanning the internal environment in organizations. Critics of the balanced scorecard assert that it gives a limited view of organizational performance. This is because it is not all inclusive in terms of relevant metrics in organizations. All in all, balanced scorecard is quite instrumental in organizations and the merits far outweigh the limitations.
References
Atkinson, H. (2006). Strategy Implementation- A role for the Balanced Scorecard: Management Decision. 44, 10: 141-1460.
Kaplan, R., and Norton, D. (2004). Measuring the strategic readiness of intangible Assets: Harvard Business Review, 82(2): 52-63.
Neely, A. (2007). The search for meaningful measures: Management Services 51, 2:14-17.
Pandey, I. (2005). Balanced Scorecard Myth and Reality: Interfaces, 30, 1: 51-64.
Zanini, M. (2006). The Balanced Scorecard here and back: Management Accounting Quarterly, 7, 4: 18-23.
For modern organizations, it is essential to have methods for collecting data and making decisions based on the strategic objectives that lead to the achievement of competitive advantage. The balanced scorecard (BSC) represents strategic planning and management that companies use for communicating their intended accomplishments, aligning everyday procedures with the formulates strategy, monitoring progress, and prioritizing projects. In general, BSC is used for measuring and providing feedback to organizations, with data collection being crucial to the provision of quantitative results. This data is interpreted by managers and executives who make further decisions for an organization.
The concept of BSC was first introduced by Kaplan and Norton who received great praise for their research. The key principle behind the concept lies in finding balance across all functions of an organization since the majority of companies focus on financial measures such as growth and profitability, forgetting about such sectors as internal processes, customers, and organizational capacity. By looking at business across four perspectives (see Figure 1), organizations can understand causal relationships between investment and the financial outcome can be identified, measured, and managed. Therefore, BSC is not a regular scorecard but a methodology that enables organizations to look at both financial and non-financial objectives that are associated with strategic priorities. This means that organizations are forced to think about how they can measure their objectives and identify projects that will help drive those objectives.
Figure 1. Balanced scorecard perspectives (“The Four Perspectives in More Detail”).
To understand BSC further and proceed with its critique, it is essential to understand the four perspectives involved in it. The financial perspective is linked to the range of monetary objectives and measures that organizations use for answering the question of how a business looks to its shareholders. Usually, these objectives are the easiest to define and measure. Although, creating a financial objective, such as Improve Profit, is not enough for helping organizations understand how they can achieve these goals. The customer perspective is concerned with measures that are directly related to companies’ clients with a specific focus placed on their satisfaction. Organizations should answer the question of how their clients see them understand what they want and what can be done to fulfill their desires.
The perspective of internal processes is associated with objectives and measures which determine how well an organization is running as well as whether the offered products and services align with what customers require. This means that some of the costs can be reduced by streamlining some of the internal processes. Lastly, the organizational capacity perspective is associated with measures and objectives that show how workers within a company perform and how their skills align with the existing infrastructure and technology. Nevertheless, despite the range of benefits provided by BSC, the focus of the current discussion will be placed on determining the limitations of the principle.
General Issues of Balanced Scorecard Use
Generalization
Over the last two and a half decades, the use of BSC has become a common process in organizations’ practice and research. Its popularity among organizations is confirmed by vast research and published works. Ever since the emergence of the framework, its content has been used in multiple ways. At the earliest stage, the model was introduced as a measurement tool within which four perspectives interact to ensure the maximum performance of an organization. This led to the emergence of strategic maps that illustrate causal relationships between organizations’ components that should lead to long-term success.
However, the first issue with BSC use is linked to the generalization of content involved in them. Organizations usually interpret BSC differently based on their needs and expectations, which leads to the appearance of questionable concepts and arguments. Nørreklit and Mitchell stated that “as a result, the reader’ subjective interpretations of the text determine how they understand it” (3). Managers will have a wide scope for their interpretation of the concepts and theories of the BSC” (3). Thus, on the one hand, the openness of BSC principles allows for its widespread use in a variety of contexts. On the other hand, it means that its exposition provides inadequate guidelines for practice. This means that the effectiveness of BSC implementation relies on the abilities of users to make sound judgments.
It is noteworthy that the content of balanced scorecards leads to uncertainties not only among practitioners but also researchers. As the framework shifts depending on organizational contexts, it is challenging to study its practical use and implications. The accumulation of knowledge requires that the characteristics of measurement objects as well as their contexts are comprehensively defined. At this time, it is impossible to define the attributes of balanced scorecards because they depend on the settings of their use and thus are highly variable.
Assumption of Cause-and-Effect Relationships
The assumption of cause-and-effect relationships is another issue associated with the use of BSC. The approach of management control that is embedded in the balanced scorecard system is linked to the idea that operating causal relationships are pre-existing and are waiting to be revealed by organizations’ top management. However, cause-and-effect relations are not supported by mechanical laws; rather, they are the result of social constructs that exist in nosiness. Companies are successfully run through the development of several sets of construct causalities that are based on the combination of features of nature and human constructions (Nørreklit et al. 5). If to apply the principle of pragmatic constructivism to the discussion, it is necessary to mention that a sufficient environment for implementing an endeavor is associated with the integration of the following dimensions:
“A factual observational basis” (Nørreklit et al. 5);
A series of possibilities the occurrence of which is based on facts;
Values and goals that can reflect the range of subjective values, which motivate the people involved in the process;
Communication should include the integrated structure of facts, values, and possibilities of everyone involved.
Special issue documents that explain causalities are used and worked upon locally. Researchers who studied the use of balanced scorecards at organizations revealed the construction of causalities in local operations. For instance, Seal and Ye found that the model itself is constitutive for decentralized actors that work with it (466). In such a context, a dialogue is used for creating connections between different tiers and measurements. According to the scholars, workers involved in the study accepted the use of BSC as a system of measurement but did not agree with the idea of a natural law form of causal relationships (Seal and Ye 466). In addition, Francioli and Cinquini mentioned that cause-and-effect relationships were created and managed on a local basis (486). With the help of interactive links between departments and individuals, it is possible to find BSC measures and formulate objectives. However, both Seal and Ye and Francioli and Cinquini revealed that managers did not subscribe to the assumption associated with natural law causality (466, 486).
Lack of Construct Validity and Empirical Validation
The four factors proposed by Kaplan and Norton lack construct validity in the sense that they are vague and are not clearly defined (61). For example, it is uncertain from the standpoint of research what ‘perspective’ denotes and how it should be treated in scholarly literature. It may refer to a critical success factor or an area of concern or even a driver for the financial performance of an organization. In their 1992 article that gave a start for further explorations of balanced scorecards, Kaplan and Norton identified ‘innovation and learning’ as being an important perspective (62). However, in their later work, this perspective was replaced with ‘learning and growth’ without an explanation for such a change (Kaplan and Norton 45). This shift challenges the validity and utility of the BSC model because ‘learning and growth are greatly different from ‘learning and innovation.’
To further challenge the construct validity of the model, it is worth mentioning that the earlier version of the model uses the term ‘customer’ while the updated variation applies the concept of ‘customer perspectives.’ Similarly, the 1992 article uses the term ‘internal business perspective’ while the 2000 book uses ‘internal business process’ (Kaplan and Norton The Strategy Focused Organization). The same principle applies to this change – the concepts that were used interchangeably are different. This points to the casual use of terminology without the application of validation or empirical testing. Therefore, the validity of Kaplan and Norton’s perspectives remains unclear, which is why many organizations fail to reach positive outcomes when integrating BSC.
In addition, to construct validity issues, it is also important to mention the lack of the model’s empirical validation. To be useful, the success of the model has to be sufficiently comprehensive to explain all of the key factors that contribute to organizational success. Also, if companies are to rely on scorecards, there should be evidence that the implicit success model used by them is valid. However, the four perspectives, although representing a step in the right conceptual direction, do not satisfy the criteria for validity.
Issues with Implementation at Organizations
Generalizations and the implication of cause-and-effect relationships represent general limitations of BSC use. However, in day-to-day use, some problems prevent organizations from accessing necessary data and make decisions based on them. The key issue with balanced scorecards is that they do not offer practical guidance for deployment and too many users view it as a ‘quick fix that can be easily integrated into the processes within organizations. Besides, many managers fail to understand that the implementation of a balanced metrics system is an evolutionary process and not a one-step task that can be quickly marked as ‘completed.’ If managers do not recognize this issue related to BSC implementation, they are more likely to fail to dedicate efforts to long-term positive results for their organizations. As a result of the implementation of BSC at organizations, it became possible to identify issues in their use and reasons that contribute to the failure of balanced scorecard initiatives.
Inadequately-Defined Metrics
In organizational contexts, metrics refer to measures used for assessing the performance of workers, activities involved in the accomplishment of corporate goals, and general behaviors that exist within companies. Metrics are used for measuring how well an organization is doing and whether it accomplishes the established objectives. This means that measures should be relevant to the environment in which they are applied. To ensure that workers understand the expectations of their achievements, metrics should be depicted as visual indicators as well as should be collected at a perfect frequency for decision-making. In addition, measures should be defined in such a way that they can be consistently used across all departments of a company, even in cases when their performance targets differ from one another. A system that has inconsistencies in the definition of metrics is highly likely to be vulnerable to criticism from employees who want to avoid accountability.
The Absence of Efficient Collection and Reporting
One of the main reasons behind companies over-emphasizing their financial metrics at the cost of other important variables refers to the already existing systems of collecting and reporting financial measures. Organizations that intentionally plan to define several crucial metrics and dedicate resources for automating data collection and its subsequent reporting usually achieve positive results. However, in the majority of companies, if the process of data collection takes too much time, even the most vital metrics will not be captured. This explains the need for prioritizing key performance indicators (KPIs) in an organizational context to ensure that organizations’ investment in metrics is concerned with gathering relevant information that will be vital to improving performance (Schrage and Kiron). Therefore, BSC requires executives to invest in efficient data collection and measurement procedures for the successful integration of the model in the everyday tasks of organizations.
Excessive Focus on Internal Processes
Balanced scorecard methodology has received extensive criticism due to its specific focus on internal processes within companies. Although, this issue is associated not with the method itself but rather with the way that it is being put into practice. For companies to avoid this limitation of BSC, it is recommended that managers start with an external focus to view organizations as a system. In this case, the goal is achieving a balance of enterprise-level metrics as organizations assess their market, competitors, shareholders, employees, and stakeholders.
It is also recommended to collect and assess data in regards to a company’s strengths, weaknesses, opportunities, and threats (SWOT). A SWOT analysis should be incorporated in the measurement of the well-being of a company because it accounts for both internal and external components that contribute to the competitiveness of an organization. As applied to BSC, SWOT indicators will guide organizations to identify enterprise-level metrics that will be used for later analysis (Hagos). By combining both internal and external factors that affect companies, it is possible to test the alignment of metrics that influence the shaping of performance drivers. However, when companies use BSC without paying attention to external factors that influence their success, they risk suffering from the limitations of balanced scorecards that make them focus on internal processes, which are not enough for achieving competitiveness.
The Absence of a Formal Review Structure
Formal organizational reviews represent ways to guide in regards to the organization structure, culture, as well as building and managing work in teams. Assessing the organizational structure of companies is essential for businesses of any type and size because they offer clarity and guidance on specific human resource issues, including managerial authority (Ingram). Small-scale businesses are also recommended to consider their formal structure to ensure the sustainability of processes at the growth stages of their business. In regards to the use of scorecards, their effectiveness relies on frequent reviews to make a difference. If the value of metrics changes regularly and the variables within the management’s control can be affected daily, such measures should also be frequently reviewed. Besides, meetings that focus on metrics review should follow a standardized agenda, with clearly defined roles for everyone involved in them. This can result in positive outcomes as all relevant metrics are monitored while all actions are agreed upon within the collaborative environment.
It is also worthy of mentioning that reviews of metrics should be cross-functional and include peer groups that have a shared responsibility for process results. For BSC systems to work effectively, those involved in process reviews should participate in the creation of a new system of measurements. This calls for significant behavioral change as early as possible to aid companies to define, automate, and deploy metrics measurement. Overall, to overcome the challenges of BSC implementation, organizations should establish formal review structures first and integrate the system based on the findings of these reviews.
Issues with Achieving Positive Outcomes
Companies have been challenged by the issue of balanced scorecards not resulting in positive outcomes. This problem is associated with the fact that many managers treat the framework as if it is a technical solution for providing measures. Therefore, not much attention is given to the social aspect of information collection and assessment as well as how this information can influence the decision-making process. Many BSC initiatives are implemented without significant progress being made, which means that they do not change what they were intended to change. In some cases, BSC integration results in negative outcomes such as decreased productivity of workers who were resistant to change.
Limitations in the achievement of BSC success are often associated with the latter not contributing to informed decisions. Thus, if the management of organizations has scorecards that are collected and reported on but that are never used for making relevant decisions about the businesses, then BSC has been implemented incorrectly (Wiersma 239). The key purpose of BSC integration into business processes is associated with making good decisions and then executing them correctly. It is suggested for managers to look at the model that they have integrated into the workplace setting and identify points that will make the processes better. Looking at the bottom line when implementing balanced scorecards is imperative: companies spend a lot of money on their integration, which means that all processes involved in it should go smoothly without any time and effort being wasted.
Conclusion
To summarize, the implementation of BSC represents a challenge to organizations despite its usefulness in some scenarios. The model’s validity and reliability are challenged by the lack of empirical evidence to support its implementation. Because of this, companies that use balanced scorecards may not always achieve the expected results. Also, the model’s orientation on solely internal procedures limits the success of organizations that use BSC regularly.
Works Cited
Francioli, Francesca, and Lino Cinquini. “Exploring the Blurred Nature of Strategic Linkages Across the BSC: The Relevance of ‘Loose’ Causal Relationships.” Journal of Accounting and Organizational Change, vol. 10, no. 4, 2014, pp. 486-415.
Kaplan, Robert, and David Norton. “The Balanced Scorecard: Measures that Drive Performance.” Harvard Business Review, vol. 70, no. 1, 1992, pp. 61-66.
The Strategy Focused Organization. Harvard Business School Press, 2000.
Nørreklit, Hanne, and Falconer Mitchell. “Contemporary Issues on the Balance Scorecard.” Journal of Accounting & Organizational Change, vol. 10, no. 4, 2014, pp. 1-8.
Nørreklit, Hanne, et al. “The Rise of the Balanced Scorecard! Relevance Regained?” Journal of Accounting and Organizational Change, vol. 8, no. 4, 2012, pp. 490-2012.
Seal, Will, and Linna Ye. “The Balanced Scorecard and the Construction of a Management Control Discourse.” Journal of Accounting and Organizational Change, vol. 10 no. 4, 2014, pp. 466-485.
Wiersma, Eelke. “For Which Purposes do Managers Use Balanced Scorecards?” Management Accounting Research, vol. 20, no. 4, 2009, pp. 239-251.
Mobil allowed the individual business units to create their own Balanced Scorecards, including the measures and targets. that would be used to determine the managers’ compensation. Additionally, the individual managers could assign weights to the various measures to determine how much each would contribute toward the calculation of the manager’s bonus. What are the advantages and possible problems with this method?
The Balanced Scorecard is a tool utilized in corporations for the purpose of compensating workers in a way that is beneficial for both the management and the workforce. The Balanced Scorecard technique aids assessment of corporation performance in terms of monetary and nonmonetary aspects. Connecting compensation to the Balanced Scorecard is useful because it acts as an equitable way of evaluating performance of companies by utilizing similar standards.
The connection between company profitability and the amount of reward motivates employees to improve their performance. Realization of company’s goals is possible with the implementation of Balanced Scorecard and compensation. Usually, achievement of the goals and objectives of the company depends on the productivity of workers.
Utilization of the Balanced Scorecard motivates workers to improve their performance and in turn achieve rewards. The linkage between the Balanced Scorecard and compensation operates well within the organization which possesses established quality programs, for example, the Mobil Corporation has implemented quality programs facilitating the efficient integration of Balanced Scorecard. Assimilation of the Balanced Scorecard and compensation employs tactics and visions in which the company has to define its goals and objectives.
People create their own unique methodologies to achieve the set goals. Utilization of Balanced Scorecard enables managers to improve performance in sections that act as bottle necks. The use of performance factor based on the complexity of the target is significant to employees. This is because it separates difficult tasks from those which are easy to achieve. This does not only motivate employees but also helps in the achievement of corporate goals.
Disadvantages of linking the Balanced Scorecard with compensation are evident because the implementation becomes complex due to the time factor. The process of implementation is time consuming; maintaining the linkage between the Balanced Scorecard and compensation for a long period is difficult. The use of scorecards with compensation can allow the wrong use and definition of measures. Poor definition of measures can lead to unfair rewarding because performance attained by workers may be insensible. There is a difference in compensation between a normal employee and a senior executive. Even when the employee works harder than the executive does, their salaries cannot be similar.
The reward system may rely on the amount of salary that the employee receives. This becomes unfair when lower paid workers are more productive as compared to those with bigger salaries. It negatively affects people working in a developing company because at this level, the performance of the company in terms of profitability is low, thus workers receive low compensation. The Balanced Scorecard method lacks sufficient tools to measure performance of the company at a rebuilding phase, thus contributing to unfair compensation for workers.
Assume the company previously based bonuses on the financial performance of the business unit. How would you suggest the company handle the transition from the previous method of determining compensation to one based on the Balanced Scorecard?
In order for the company to change from the previous method into another one that utilizes the Balanced Scorecard, it must ensure assessment of the entire business plan. The company is to work out various business procedures, goals plus objectives. It should indicate the rank measures that are suitable for the progress of the organization in attaining its goals and objectives. The company has to employ strategic planning with the management for the purpose of reaching a consensus on goals, visions and objectives of the business. The company can handle the transition by purposely forming a committee for devising company aims. Utilizing the Balanced Scorecard as a communication tool is vital in this process because the members have a chance to comment on the progress of the committee.
A requirement exists for a revision of the scorecard followed by a passage of information regarding the contents of the revised scorecard. Every person should form one’s own Balanced Scorecard for the purpose of achieving goals and objectives. The planning committee should review individual scorecards and compare them with those of the corporation. The management should develop a long term plan for the corporation by considering the Balanced Scorecard. Through evaluation of the Balanced Scorecard for each employee in the organization, the company can make necessary recommendations concerning the rewards of the workers. After identification of objectives, the organization has to create performance measures for every goal.
The measurements will be useful for monitoring the success of the company plans and exposing possible gaps that may emanate between the present and expected performance. Initiatives emphasizing on strategic objectives should be in place. In the process of linking the Balanced Scorecard with compensation, there should be a connection with the team as well. This is fundamental in aiding responsibility for performance.
An organization implementing the Balanced Scorecard system should ensure proper reporting of various measures with regard to performance. This ensures that required data reaches the proper partiers in a timely way. The company should ensure that all the individuals in the organization are aware of the transition which is to occur. They should have a proper understanding of the significance of the Balanced Scorecard to the company. This knowledge will enable employees to respond positively to strategies aimed at transforming the organization into a user of the Balanced Scorecard. The process of connecting compensation to the Balanced Scorecard requires the collaboration of the executive and lower level managers.
The Balanced Scorecard is one of the important ways of specifying, presenting, and implementing the supply chain strategy to form a tool to assess its performance adequately. This concept contributes to the probability of implementing the intended supply chain strategy (Harmon, 2019). One of the strengths of the balanced scorecard is that it serves as a platform for integrating a wide variety of frequently used supply chain management elements (Bowersox, 2019). Instead of a disjointed list of indicators, strategic supply chain goals are presented as KPIs. Strategic goals are developed based on the existing vision and strategy and have the status of decisive supply chain goals (Harmon, 2019). To plan and deliver the goals, relevant financial and non-financial indicators are developed for each of them, for which, in turn, target and actual values are defined. Implementation of the balanced scorecard has allowed many firms to significantly improve the quality of their logistics, leading to commercial success.
Operations
Amazon is a company that, guided by the principles of a balanced scorecard, has been able to achieve significant success. Among the objectives of internal processes are same-day delivery and the creation of a virtual assistant. The key metrics are the number of purchases in new product segments and customer interaction with the new tool (a virtual assistant). Amazon’s separate, powerful analytics system calculates the most economical way to deliver packages. It calculates the shortest route for each package, so the company saves millions of dollars on fuel and manages to deliver packages ahead of schedule by several hours and sometimes days.
To cut shipping costs and reduce the fees that intermediary shipping companies have to pay, Amazon is developing its own shipping system. This includes courier services and vehicles and the creation of a fleet of drones and aircraft, on which the company plans to spend about $1.5 billion soon. Year after year, Amazon reduces the delivery time, and in China, it takes one day to transport the goods to the buyer. Besides, Amazon’s virtual assistant conducts product research, processes orders, and performs other important tasks, saving customers valuable time. It is statistically proven that 75% of customers will continue to shop with a brand that provides a consistent service experience across all platforms (Amazon Listing Service, 2021). Due to the implementation of Virtual Help, Amazon has been able to improve its KPIs.
Customer Service
In terms of customer satisfaction, the company’s objectives were to build customer trust and improve the shopping experience. To do this, Amazon used metrics such as the number of returning users with a purchase and an estimate of the customer loyalty index based on a typical shopping session. In the 1990s, the company invented the visitor feedback system and product rating and then created the loyalty program with paid subscriptions. Today it is enjoyed by more than 140 million customers in the U.S. alone (Rodríguez, 2021). A retention rate is consistently over 90%, which is a record among competitors (Rodríguez, 2021). Achieving such impressive successes becomes possible using personalized return customer experience, free shipping, refunds, and bonuses for regular customers.
Financial Performance
The conversion rate on Amazon Market Place is a metric that is evaluated in the financial performance category. High conversion rates mean more sales, fewer customer losses, and a greater return on one’s advertising investment; that is why increasing conversions is Amazon’s objective. Currently, the average rate of this kind for Amazon ads is 10-15% (EcomCrew, 2022). For Prime members, the conversion rate is much higher at over 70% (EcomCrew, 2022). The number of clicks determines how many deliveries are made, that is, how many products are purchased. Evaluation of key indicators in this category makes it possible to assess how effectively Amazon is functioning.
Learning and Growth
Increasing the quality of human capital is a goal from the category of learning and growth. Such a measure as an increase in productivity is used to assess this parameter. So far, Amazon has struggled to maintain workplace standards for its employees. Monotonous work and a well-developed penalty system do not help to reduce employee turnover. Therefore, measures are needed to improve employee satisfaction, such as higher wages and shorter working hours. However, due to a balanced scorecard, all of these shortcomings can easily be taken into account and adjusted.
Conclusion
To succeed in today’s dynamic environment, companies must be able to adapt quickly to changing market conditions and outperform their competitors in quality, speed of service, product breadth, and price. Only by obtaining information about a company’s operations quickly will management be able to make timely decisions. At the same time, the company’s operative actions should be coordinated and directed to achieve certain long-term goals; otherwise, there is a risk of falling short. Implementing the analytics approach helps Amazon track key metrics, which increases customer satisfaction and boosts profits.
References
Amazon Listing Service. (2021). Where to find the right Amazon virtual assistant for your business? Web.
Bowersox, D. (2019). Supply chain logistics management. McGraw-Hill Higher Education
Harmon, P. (2019). Business process change: A business process management guide for managers and process professionals. Elsevier Science.
EcomCrew. (2022). Amazon conversion rate: Everything you need to know. Web.
Rodríguez, M. (2021). How Amazon maintains over 90% customer retention? Beamer. Web.
Established in the year 1856, the Burberry Group PLC is a leading multinational corporation within the United Kingdom. The company has a series of products ranging from fragrances, sunglasses, fashion apparel, cosmetics, and cloth distribution. The company has had a very healthy financial performance in the last ten years. In fact, despite the global recession of the year 2008, the company has never made any loss for the last decade. This analytical paper presents the mission and strategy from a financial perspective to establish the sustainability of these strategies. The treatise presents a Balanced Scorecard and a resulting strategic plan for the company.
Vision
The company has a vision of enhancing “consumer resonance and operate more effectively through exacting use of brand assets and coordinated action across the global organization” (Burberry Group Plc, 2017, par. 8). The vision has internalized the aspects of quality services, affordable products, and long culture of reliability.
Strategy
The business strategy of the Burberry Group functions within the parameters of brand momentum, market innovation, and product excellence. Under the brand momentum, the company has created an effective system for maintaining purity and product strength to position the Burberry brand as a market leader. As a result, the elements of beauty, digitalization, brand recognition, and direct market interaction have become part of the company’s business culture. As indicated in the 2013/2014 financial report, the Burberry Group “finished the year as the most followed luxury brand on Facebook, with nearly 15 million fans. Total lifetime YouTube video views reached nearly 24 million and the brand’s combined Twitter following was over two million. Burberry was also the leading luxury lifestyle brand on Instagram” (Burberry Group Plc, 2017, par. 11).
Balanced Scorecard and Plan
The Proposed Balanced Scorecard
Irrespective of a line of business, all companies need a strategic Balanced Scorecard. Reflectively, a Balanced Scorecard is a strategic component of management since it tracks and measures the performance of different business strategies against set goals and targets (Pearce & Robinson, 2014). Basically, a Balanced Scorecard may give an organization a clear picture of its business environment, performance, efficiency, and changes that should be implemented to ensure business sustainability (Proctor, 2015). For the Burberry Group, there is an urgent need for a Balanced Scorecard to help the management team in fast-tracking its long term business plan of expansion and improvement of the digital business platform. Thus, the proposed Balanced Scorecard will address the challenges currently facing the Burberry Group through setting business objectives, performance indicators, targets, and explicit action plans for each objective from a financial perspective.
Since the Burberry Group operates in the dynamic and highly competitive fashion industry in the UK and across the globe, it is important to develop an explicit Balanced Scorecard that captures the company’s key success factors such as enhancing learning and innovation, internal business process, financial, and customer management (Pearce & Robinson, 2014). The proposed Balanced Scorecard in summarised in the tables below for each success factor.
Part 1: The Balanced Scorecard and the Financial Perspective.
Objective
Measure (key performance matrix)
Target
Action
Sustainable financial management
The business ethics and professionalism in reporting financial reporting
Improving the performance ratios
Creating a tight financial reporting channel
Improving the daily returns tracker
The financial performance per day
Constant growth in returns by a positive value
Returns management system
Expanding the profitability
Improvement in the annual profitability within the set target
Growth in the profit margin after every three months of active business
Stability of the performance ratios
Rationalized financial investment
Proactive financial plans
The success of the long term investments
Financial planning system
From the above scorecard, the company should improve the daily returns tracker through implementing a sustainable financial planning system. For instance, there is a need to create a tight financial reporting channel to ensure that returns are tracked and proactively managed within sustainable levels. Maintenance of the market status is dependent on the company’s strategic policies that are applied to reduce the cost of production. A company that effectively invests in a constructive research process stands a higher chance of discovering new opportunities that can be exploited (Proctor, 2015).
Flexibility and the Customer Perspective
Burberry Group has been very successful in managing the customer perspective of business through market stratification, customer demand management, continuous customer satisfaction, and live feedback tracking. The company has strategies that are aimed at improving customer loyalty as part of market sustainability for proactive financial performance. This is achievable through implementing the current strategic customer retention strategies such as offering attractive discounts and other after-sales. Besides, the company has outsourced an IT company to develop and manage the feedback system to get accurate data on customer satisfaction and repeat sales (Williams, 2013). Some of the critical customer factors include roles of the employees, new processes and technologies, organizational skills, and public interest objectives such as protection of minors among other factors. There are four types of critical customer success factors. These are industry, environmental, strategy, and temporal critical success factors within the short term and long term strategic plan as integrated into the company (Eugene & Michael, 2014). The balanced scorecard for flexibility and the customer perspective is summarized below:
Objective
Measure (key performance matrix)
Target
Action
Stratification of different market segments
Positive records of new and old customers in comparison to preset targets
Micromanaging the different branding strategies to meet the demands of the customers
Implementing the current strategic customer retention strategies such as offering attractive discounts and other after-sales services
Management of customer demands
The increase in the number of positive compliments from customers
Creating a sustainable customer base
Offering persuasive and attractive services to customers through the current promotional channel
Customer satisfaction
Frequency of the same customers
Creating a sustainable customer base
Management of the customer loyalty program
Relationships with other objectives
Sustainability in the financial management and general wellbeing of the company
Revisions (if any) to Part 1 Objectives
Objective/Module
Measure
Target
Action
Strategic market segments
Number of the new repeat customers against the same number before
Strategic branding strategies
Modification of the current customer retention strategies to become more holistic
Customer demand sustainability
Current customer feedback against previous feedback
Creating a sustainable customer base
Offering persuasive and attractive services
Customer satisfaction
Frequency of same customers after every two months
Building a strong customer base
Modifying the customer loyalty programs
From the above scorecard, it is apparent that the company should merge the strategy with advertisements since this group of consumers has access to social media. Due to exposure to information sources such as newspapers, television, radio, and magazines, product announcement through these avenues will come in handy.
Implementation and the Internal Business Process Perspective
The company’s market innovation strategy functions on the pillars of actual market expansion through innovation, brand connection, and leveraging the content of its brands. As a result, the Burberry Group has been a market leader in digital engagement and outdoor investment to ensure that its stores are strategically located. The element of product excellence ensures that the company is in a position to create and maintain quality in its stores through a continuous focus on core icons of heritage and innovative design. The product excellence strategy has been successfully implemented in outwear apparel, male wear, and product hierarchy control. For instance, in the year 2013, the “investments in infrastructure saw increased product and marketing excellence in men’s outerwear, London, and Brit. As the fastest growing product division, the male apparel represented 24% of retail/wholesale revenue” (Burberry Group Plc, 2017, par.13). The summary of the business process is presented in the scorecard table below:
Objective
Measure (key performance matrix)
Target
Action
Efficiency in the internal audit channel
Improvement in the business development process and reporting
Proactive internal audit reports
Offering training on the required business process auditing and creating a secondary team to audit the reports generated
Micromanaging the audit and management units as dependent functions
Optimal management reports
Creating a rationale internal control system
Offering mandatory training and performance review for the managers and auditors
Effective services with regards to actual and reported business activities
The actual performance report against preset targets
Continuously managed within the company’s decision making organ
Reinventing the company’s approach towards customer’s expectation management
Relationships with other objectives
Creating a sustainable business environment for sustainable financial performance
Revisions (if any) to Part 1 and/or Part 2 Objectives
Objective/Module
Measure
Target
Action
The proactive internal audit process
Improvements in the financial reporting and internal process
Auditing of performance and financial reports
Training and facilitating of internal and independent audits
Continuous audit and management as dependent functions
Optimal management reports
Rationalizing internal control system
Offering mandatory training and performance review for auditors
Balancing the actual and reported business activities
The actual performance report against pre-set targets
Implementing a planned channel of reporting
Planning for each activity against company goals and visions
From the scorecard, it is apparent that the company is effective in managing its supply chain, balancing the internal audit functions, streamlining the factors of production, and fast-tracking major business activities. However, there is a need for sustainability management through employee performance reviews and proactive quality planning. These recommendations would go a long way in influencing the positive and sustainable planning of different human resource inputs, production materials, and efficiency in the general performance of the company. This approach will be successful towards dominance as it offers a variety of options to consumers, while at the same time, maximizing benefits of economies of scale to the company (Pearce & Robinson, 2014).
Strategy Mapping and the Learning and Growth Perspective
The Burberry Group has a long term strategy of market expansion and development of the digital platform for its vertical integration strategy. As indicated in the 2015/2016 financial year, the Burberry Group has put in place a management team to facilitate the implementation of this strategy through the live feedback channel. This system tracks input and output ratio and measures the intrinsic efficiency of the employee and manager in line with set targets. Besides, the aspect of efficiency is introduced to ensure scarce resources are optimally exploited (Noreen, Brewer, Peter, & Garrison, 2013). The consideration of this strategy is based on the optimal gain from every decision that is made towards ensuring that the organization continues to gain a competitive advantage in the market (Burberry Group Plc, 2017). However, there are several lapses in the decision structure, especially for the implementation of the short financial plans at the Burberry Group. The balanced scorecard for the learning and growth perspective is presented below:
Objective
Measure (key performance matrix)
Target
Action
Business environment improvement
Performance of the decision science
Emerging the supply chain and the marketing department
Streamlining the supply chain and marketing departments on the basis efficiency
An effective and organized workforce
Performance of the employee review system
Micromanaging employee performance through a series of constructive training
Developing a series of employee training modules within the business scope
Outsourcing a training consultant or expert
Improving the digital business platform
The number of recorded visits on the company’s online portal
30% of the private and corporate online visits within a month
Recruiting a digital marketing support team as part of the workforce
Relationships with other objectives
Improvement in the strategic learning approach for optimal performance of employees and general financial well-being of the company
Revisions (if any) to Part 1, 2, and/or 3 Objectives
Objective/Module
Measure
Target
Action
Strategic planning improvement
Performance of the decision making science for each set of action against the previous model
Merging all business processes into a single decision chain
Streamlining the decision making organ on the basis efficiency
The effective and organized workforce in terms of role allocation
Performance of the employee review system as reported in the 360-degree feedback
Continuous evaluation of employee performance through a structured performance tracker
Creating a self-regulating performance tracker to measure actual and expected performance
Improving the input-output business platform
The output for each bundle of inputs against the same previously
The production cycle and the distribution network
Introducing optimal performance tracker through quality control and assurance
In order to improve efficiency in the strategic management within the Burberry Group, it is necessary to improve efficiency through balancing the control systems, structure, and scope of the strategic management system to ensure the sustainability of the long term goal. In order to achieve a sustainable level of efficiency and flexibility, it is important to incorporate product positioning through value delivery, value addition, and creativity within the company’s business environment (Williams, 2013). Reflectively, these concepts are techniques and tools essential in the art of efficiency in strategic management. In addition, this process is inclusive of the scientific aspects such as a technical process of understanding the strategic operations and evaluation criteria in monitoring and managing the logistics behind the Burberry Group’s internal control.
Conclusion
Since the operations management system determines the success of business decisions, the company should introduce a micro auditing unit for internal decision making rather than depending on the macro market environment. As a result, the success benchmarking initiative will remain relevant during the process of implementing the strategic map. The business should invest more in technology and internal audit system to sustain its current operations management strategy, in terms of financial sustainability. Through the involvement of the employees, the Burberry Group will be in a position to successfully implement the proposed Balanced Scorecard and strategic plan.
References
Burberry Group Plc. (2017). About Burberry. Web.
Eugene, F., & Michael, C. (2014). Financial management theory and practice. New York, NY: South-Western Cengage Learning.
Noreen, E., Brewer, P., Peter, B., & Garrison, R. (2013). Management accounting for managers. London, UK: McGraw-Hill.
Pearce, J., & Robinson, D. (2014). Strategic management: Formulation, implementation, and control. New York, NY: McGraw-Hill.
Proctor, R. (2015). Managerial accounting: decision making and performance improvement. London, UK: Pearson Education.
Williams, C. (2013). Re-thinking the future of work: directions and visions. New York, NY: Palgrave.
Traditionally, managers and other organizational heads have used the budget as a means of achieving the organizational objectives. Kaplan and Norton (1996) developed a balanced scorecard for organizations as a tool that guarantees that the strategic objectives in organizations are measured more accurately. As a result, the measurement of these strategic objectives has produced poor results in many organizations.
A balanced scorecard considers the financial aspects of the organization in setting and assessing strategic organizational goals. The scorecard is unique in that it incorporates non-financial aspects such as the relationship between a company and its customers, the key internal processes, and intensification. This paper discusses the balanced scorecard for Wits Beach Hotel based on the company’s vision, mission, values, and outcomes of the SWOTT analysis. The balanced scorecard spells out the various areas that will be important in ensuring that the organization is successful in terms of realizing its goals and objectives.
Introduction
The following is a balanced scorecard for Wits Beach Hotel based on the company’s vision, mission, values, and outcomes of the SWOTT analysis.
Financial Aspects
The financial means of measuring the strategic objectives in an organization are basic since they provide reliable information on an organization’s overall performance (Thompson, Gamble, & Strickland, 2006). Wits Beach Hotel has the vision of being a leader in the specific industry in which it operates in Kenya. The financial measurements are crucial to the assessment of this performance.
Strategic Objectives
The first strategic objective will be to increase the shareholder values at the Wits Beach Hotel. This strategy will ensure that the business achieves its desired mission and visions of growth and dominance in the industry. The second strategic objective pertaining to financial measures will be to decrease costs at the hotel since the SWOTT analysis showed an increase in operational costs. According to Pearce and Robinson (2009), organizations need to focus on lowering their operational costs to remain profitable and viable. The third financial strategic target is to increase revenue in the organization.
Metric
The metrics described here represent a means of measuring the strategic objectives (Thompson, Gamble, & Strickland, 2006). The first financial strategic objective of increasing shareholder value will be measured by the financial value of the shareholders. The measurement of the second strategic objective will be the operating costs in the organization, while the third strategic objective will be measured through the amount of revenue generated.
Target
The target in the financial aspect of the organization is to increase the market share by 4% each year for the next five years. The organization also targets to achieve more than 10% growth in revenue for the same period.
Initiative
The main initiative that the organization wishes to achieve is the acquisition of a competitor offering similar services. The organization is also in the process of producing employee efficiency through the discarding of excess staff members.
Customer
Strategic Objectives
The first objective in the customer values is to improve the brand image so that customers have access to the organization and the services it offers. The organization is looking to increase its presence on the various market avenues. The second strategic objective for Wits Beach Hotel is to increase customer retention while a growing number of international customers.
Metric
Several methods can be utilized to measure the strategic customer objectives that the organization has set (Thompson, Gamble, & Strickland, 2006). Measures that will be used include the brand awareness score that the organization will get from independent companies that conduct quality surveys in the region. The organization will also use the market share to measure strategic customer objectives.
Target
The target for the organization is to have an increase of more than 10 points on the brand awareness score in the survey that will be conducted annually. The company also targets to boost its market share by 4% per annum for the next five years.
Initiative
Some of the measures that will be important in ensuring that the mentioned targets are achieved include the development of a customer reward program. Loyalty programs are a recognized source of ensuring that customers remain faithful to the brand. The organization will also expand on the internet and in other regions around the coast of Kenya.
Internal Business Process
Strategic Objectives
The strategic objectives in internal business processes that are related to Wits Beach Hotel include increasing the efficiency of the economies of scale (Pearce & Robinson, 2009). The other objective is to improve the card offerings for the organization, while the third strategic objective is to improve marketing in the hotel.
Metric
The first measure that will be used to measure the efficiency of the economies of scale in the organization is the measurement of the percentage decrease in redundancy in the organization. The revenues collected from the card programs will also be used as a gauge, while the marketing performance audit score (MPAS) will be used to measure marketing in the organization (Thompson, Gamble, & Strickland, 2006).
Target
One of the targets in the measures of internal processes is at least 2% increase in the MPAS annually for the next five years. The other target is growth in revenue of at least 5% over the same period.
Initiative
The initiatives that will be taken to ensure that the targets are achieved include the launching of a new market campaign on the internet and the local media. The company will also acquire an integration program and start a new card program (Pearce & Robinson, 2009). These measures will ensure that the company experiences growth on the marketing platform to stabilize its internal processes.
Learning and Growth
Strategic Objectives
The employee is considered the most important asset at Wits Beach Hotel. This observation is in line with the organizational goals. From the learning and growth perspective, the company’s first objective is to ensure workforce optimization. The second strategic objective is to improve the company’s use of technology in most of its operations, especially in the supply chain. The third strategic objective is to increase the knowledge and skills of the company’s workforce.
Metric
The three strategic objectives will be measured through appropriate methods. For workforce optimization, the productivity index will be the most appropriate metric to measure it. The other measure for the utilization of technology is the Technology Gap Analysis Score (TGAS), which will be utilized in the company (Thompson, Gamble, & Strickland, 2006). The Training Effectiveness Index (TEI) is another measure that will be used to measure learning and growth in the organization (Pearce, & Robinson, 2009). Specifically, it will measure the changes in the knowledge and skills of the workforce.
Target
The target for learning and growth perspective in the origination is to see an annual growth of more than 10% in all the scores described above for the next five years.
Initiative
The main initiatives that will be important in ensuring that the objectives set in the learning and growth aspects in the organization are achieved include the use of staffing optimization analysis, the use of e-commerce, and the institution of service training at the organization (Pearce & Robinson, 2009). These measures will improve organizational performance.
Reference List
Kaplan, S., & Norton, P. (1996). The Balanced Scorecard: Translating Strategy into Action. Boston: HBS Press.
Pearce, A., & Robinson, B. (2009). Strategic management: Formulation, implementation, and control. New York, NY: McGraw-Hill.
Thompson, A., Gamble, E., & Strickland, J. (2006). Strategy: Winning in the marketplace: Core concepts, analytical tools, cases. New York, NY: McGraw-Hill.
