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In today's business world, a large number of management strategy tools are available and popular in the industry. The chose of these tools would probably have different managing consequences for each organization. However, the Balanced Scorecard (BSC) is considered as one of the most important. This report will first briefly discuss some major features of a balanced scorecard, and then identify some key elements that the oversimplification case may miss in its implementing BSC process. Besides, the strategic management process of BSC will be addressed; finally this report will recommend some further procedures to the practitioners due to some shortcoming of the BSC.
The nature of the balanced scorecard briefly
A Balanced Scorecard can be defined as a management tool that provides senior executives with a comprehensive set of measures to assess how the organization is progressing toward meeting its strategic goals (Ralph F. Smith, 2007).
According to Kaplan and Norton, Balanced scorecard has modest numbers of measurements, concerns on the important elements for strategic success, it does not contain numerous objectives or overmuch information, it allows managers to look at the business from four important perspectives that are customers, internal business, innovation and learning, financial management (2007).
Missed key elements of BSC process
For the current oversimplification case, the reason for "oversimplify" is, of course, because it does miss some important key elements that helping achieve positive outcome of processing BSC.
As the major features of BSC describe above, the present case has broad-ranging since the CEO categories the objectives in to each perspective. But it is not clearly that whether the measurements and targets the CEO develop are complex or not, and whether its measurements have limited number, and whether it focuses on the important factors for strategic sucscess. However, even regardless these problems, there is still one thing for sure is that it does miss three important key elements of a successful BSC process. These are senior leadership involvement, well prepared a clear vision for the balanced scorecard at the start, and the communication (Kevin, Larry and Christine, 2004, p8).
The first missed key element is that the Leadership involvement. This is because top leaders have responsibilities to decide the key goals and drivers, values, and their company's competitive situation. Socialization, shared beliefs, norms, values and intrinsic motivation are the channels they maintain control (Toolpack Consulting, 2009). Therefore, in the present case the CEO needs to gain personal involvement into the process, no just simply drop the targets to other level managements. No top leadership involvement will become inefficiency to direct and control the process, which will lead to the managers of other levels do not have clearly strategic direction and then make the employees do not know what they should do to help the company become more successful. Instead, they may be doing things that are not productive.
The second missed element is a clear vision for the balanced scorecard. The balanced scorecard vision is a statement prepared by leader describes what the BSC will look like, how it will operate, how it will be built, and how the organization will use it (Kevin, Larry and Christine, 2004, p8). This is because it is a foundation that provides process focus and quick decision response when a sudden change of balanced scorecard decisions are required. Leader is required to construct the whole actual steps, not just the measures themselves, but what particular concepts will be measured (Toolpack Consulting, 2009). Thus, link to the present case, the CEO simply established the measures and targets and then drops these to other levels managers to make the initiatives, in other word, the CEO does not provide a statement that clearly describes what concepts will be measured but only provide the ambiguous measures and targets, so that company will be less ability to give quick decisions making, if there were any sudden external environmental changes.
The third missed factor is the internal communication. Well communication can improve the performance of the organization because all levels of employees understand what the actual strategies are (Sam Miller, 2009). While in the present case, it is noticeable that there is lack of internal communication, the CEO only drops the targets and measurements to other level of management, does not make a plan to ensure the regular BSC communication activities, such as mass email, or regular meeting. Therefore, the CEO should try using any possible communication method to ensure communication success.
In addition, it is notable that the CEO uses compensation for managers' performance. But the method seems has less efficient to help achieving the overall objective on time. Because each the manager may also be paid compensation if they just overachieve on a few objectives, but have many other objectives need to achieve. The CEO could establish some threshold levels for a few important strategic measures. There will be no one can earn any compensation if the business performance in a given period cannot reach any threshold. This requirement should motivate individuals to achieve a more balanced performance for each objective.
Can BSC effectively manage both intended and emergent strategy?
Intended strategy is a plan or an intended course of action thought to be most suitable for achieving predetermined corporate goals (Mintzberg, 1987). Emergent strategy refers to the decisions that arise from the complicated processes in which managers interpret the intended strategy and adjust to changing external circumstances (Mintzberg, 1987).
Whether the Balanced Scorecard can effectively manage both intended and emergent strategy is depend on how well the Balanced scorecard being applied to the strategic management process. While applying BSC to the strategic management process implies the use of four processes (Heila and Cecilia, 2000, p6).
The first process is translating vision, it is that top management discuss and bring together about the vision and strategy (Kaplan and Norton, 2008). For example, an organization had constructed an intended strategy providing that "achieve higher profits for target products", but the senior leaders should first need to discuss and then combine different views of what the targeted products were and what level of profits is called high.
Once the first process completed, if an organisation's "intended strategy" is considered to be succeed, the following step "Communicating and linking" will promote to all employees the objectives that need to achieved (Kaplan and Norton, 2008). Thus, after the vision and strategy pass to the down level of business units and employees, many diversified intended strategic objectives and measures will be selected into each appropriate group and individual.
The third process is the Business planning, it is about an organisation provides for the alignment of the intended strategic plans with financial and other resources, through converting its long-term objectives into quantity measures, setting a short period goals, and identifying some mechanisms that could be used to reach these objectives (Kaplan and Norton, 2000). This means that the managers may receive impossible goals from CEO; they will determine actions that can bring them toward the targets, consider the measures they may apply to the four perspectives' drivers, and also create short term goals that will tag their progress, link the company's financial budgets with intended strategic objectives.
The final process is Feedback and learning, it provides feedbacks of the intended strategy and is regarded as being the most innovative and most important aspect of the entire Scorecard management process (Kaplan and Norton, 1987). Since it provides feedbacks, so all feedback information can track to the BSC process, lead to the strategic optimization is made. Thus, at any point in the implementation, managers can have clear view that whether the intended strategy is functioning, if not, or if the external environment change, these will result to a immediate modification of strategies, come out to the emergent strategies.
Consequently, all of these form a cycle, the emergent strategies will be implemented by the BSC again back to the first process. So the Balanced Scorecard can effectively manage both types of strategies in the organization.
Although BSC is considered as an important strategy tool, it seems still has some shortcomings. The first one is that the BSC Ignored environmental issues. Companies need consider the impact the environmental problems during implementing the strategy. If not, the companies' reputation will be damaged by the local Community, due to the environmental problems, such as inefficient pollution.
Second, BSC ignored the competitors. Because in order to well-achieve the objectives, organizations need to keep watch over the business environment to chase the competitor's activity,. However, BSC does not monitor threats from the existing or future competitors.
Therefore, the practitioners should monitor its internal strategy measurements by using BSC on one hand, but on the other hand the practitioners should also need to monitor and control outside world's measurements. Make a well strategy concerns about both internal and outside world.
In conclusion, to success implement BSC process may not be a complex procedure, but cannot be oversimplify, like the present case which has misconducted and missed three successful key factors. Furthermore, the four processes of BSC form a repeating cycle, so it is to that it is able to manage both intended and emergent strategy existent on the organization. Besides, the practitioners should also focus on the outside world factors, especially those BSC ignored. Overall, the balanced scorecard should be considered as very useful as Kaplan and Norton describes that the Balanced Scorecard is used as a communicating, informing and learning system and is well suited to the type of many organizations are trying to become (1987).