The Balanced Scorecard Approach Implementation

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Table of Contents

BSC Summary and Main Challenges
BAE Systems’ Approach
Evaluation
Conclusion
References

The Balanced Scorecard (BSC) approach is a tool used for measuring and managing the employees’ performance, as well as the organization’s overall efficiency (Mafini, Pooe, & Nqcobo, 2014, p. 1540). The implementation of the method requires substantial changes to the daily functioning and structure of an organization, which is why the application of the BSC is considered to be a challenging initiative. This paper aims to analyze the case study of BAE Systems’ attempt to implement the BSC approach by comparing the company’s introduction method to the traditional one and evaluating the efforts that contributed to the effectiveness of the process.

BSC Summary and Main Challenges

The BSC approach was developed in 1992 by Kaplan and Norton to “overcome the inadequacies of the traditional financial-based performance measurement tools” (Awadallah & Allam, 2015, p. 91). Molleman (2007) explains the three types of the BSC approach. Type I is the most basic form of the BSC, which contains a framework for measuring performance based on financial and non-financial measures (Molleman, 2007, p. 2). Type II has been expanded to include describing the strategy through cause-and-effect relationships, whereas type III adds the plan for implementing the strategy through defining objectives, action plans, and results specific to the BSC (Molleman, 2007, p. 2). The approach has gained many supporters worldwide and remains one of the most popular managing tools today (Madsen & Stenheim, 2014, 121). However, it has also received a lot of criticism because many attempts of implementation turned out to be unsuccessful (Awadallah & Allam, 2015, p. 91).

Mafini et al. (2014) examine the factors contributing to the weak implementation of the BSC to find more efficient ways of introducing and using the tool. They found that some of the main weaknesses of the companies that failed to introduce the BSC approach effectively were the lack of suitable qualification of the project team members, unclear objectives and planning of the project, poor communication of the BSC purpose and features, and problems with execution, such as lack of special software (Mafini et al., 2014, p. 1544-1547). Donovan (2008), on the other hand, explains that certain steps have to be taken to achieve success in any large-scale organizational change. For instance, it is needed to create a sense of urgency, a qualified project team, a clear plan, which is consistent with the company’s vision, communicate the features and implications of the project to all employees, generate opportunities for small wins, consolidate every implemented change, and evolve the organization’s culture in accordance with the new vision (Donovan, 2008). Therefore, addressing the risk factors and following the proposed steps would help to achieve a successful implementation of the BSC in many organizations.

BAE Systems’ Approach

In BAE Systems, the implementation of the BSC approach was carried out as part of a larger culture change process: “It supported the cultural change project by reinforcing its five fundamental values and encouraging behaviour that was consistent with the company’s goals and values” (Murby & Gould, 2005, p. 27). Other areas of change included replacing the 1979 conglomerate with interlocking businesses to achieve competitive benefit, as well as reducing the reliance on the managerial authority by narrowing work divisions (Murby & Gould, 2005, p. 27). The introduction of the BSC, therefore, became one of the central changes in the company’s structure that would promote the planned culture change. The change process to the BSC was thoroughly planned and divided into eight distinctive steps. Reviewing the competitive position of BAE Systems was the first step, followed by the involvement of senior employees in the process (Murby & Gould, 2005, p. 28).

The third step was to create a shared vision that would organize the efforts and describe the new direction in which the company would move (Murby & Gould, 2005, p. 28). The next step was concentrated on communicating the vision to the employees in the form of a values statement that addressed the company’s culture change. The statement became the basis on which the company’s use of the BSC approach would be built. The management also outlined the importance of value creation, strategy making, and human behavior in the introduction process. The second half of the plan started with creating short-term objectives and performance goals to avoid the loss of momentum. Due to the company’s specifics, it was determined that project reports and accounts would be used to measure performance rather than the traditional six-month accounts statements (Murby & Gould, 2005, p. 28). Step six was to embed cultural change by creating specialized value teams to implement the proposed changes. The final step was concentrated on justifying the need for cultural change and its link to competitive success.

Evaluation

As can be seen from the previous section, the implementation of the BSC approach in BAE Systems was tightly linked with a fundamental cultural change, which distinguishes BAE Systems’ method from the traditional way of implementation. According to Mafini et al. (2014), connecting the BSC approach to the company’s values and vision raises the chances of success (p. 1545). Moreover, this feature has also given BAE systems an opportunity to eliminate other risk factors with regards to the process. For instance, the involvement of senior management is a step that the majority of other companies’ approaches lack (Mafini et al., 2014, p. 1544). This was an important factor in achieving success with the BSC approach, as the incompetence of the project team members is one of the primary risk factors affecting such a large-scale change (Mafini et al., 2014, p. 1544). Another strength of BAE Systems’ approach that differed from the traditional method was communicating all the strengths, purposes, and implications of the BSC model to the employees. All of the above, coupled with a thorough plan of clear short-term objectives to define the milestones for progress has positively affected the introduction of the BSC into BAE Systems.

Nevertheless, there were some weaknesses in the plan that could be eliminated for a smoother implementation of the BSC approach. For example, the urgency of the change was not established, which is a huge gap in a large-scale change process, according to Donovan (2008, para. 1). Due to the lack of urgency, some unnecessary procedures were present: for instance, as Murby and Gould (2005) note, “Rather than identifying and examining non-financial value drivers, the company tended to measure what could be measured, rather than what should be measured” (p. 30).

Conclusion

Overall, the implementation of the BSC approach in BAE Systems was set up in accordance with the recommendations to avoid risk factors and encourage a successful outcome of a large-scale change process. The case of BAE Systems thus proves the impact of factors such as management involvement, the establishment of clear objectives, and employee empowerment in the process of substantial organizational change. The experience of BAE Systems can be used as a model for successful implementation of the BSC approach as it addresses the main weaknesses that undermine the success of the endeavor in the companies that use a more traditional method of application.

References

Awadallah, E. A., & Allam, A. (2015). A critique of the Balanced Scorecard as a performance measurement tool.International Journal of Business and Social Science, 6(7), 91-99. Web.

Donovan, M. (2008). The eight stages of successful large-scale change.Harvard Business Review. Web.

Madsen, D. O., & Stenheim, T. (2014). Perceived problems associated with the implementation of the balanced scorecard: evidence from Scandinavia. Problems and Perspectives in Management, 12(1), 121-131. Web.

Mafini, C., Pooe, D. R. I, & Nqcobo, H. (2014). Factors contributing to the unsuccessful implementation of the BSC in a South African Provincial Treasury Department. International Business & Economics Research Journal, 13(6), 1539-1550. Web.

Molleman, B. (2007). The challenge of implementing the Balanced Scorecard. Web.

Murby, L., & Gould, S. (2005). Effective performance management with the Balanced Scorecard: Technical report. Web.

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The Balanced Scorecard Approach Implementation

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