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Aim- The objective of this paper is to exhibit the factors affecting the sucessful implementation of a Balance scorecard.
Introduction- A brief idea about balanced scorecard,definition & operation. Literature Review and and Analytical framework- Detailed Analytical review of the researchers , on the factors affecting sucessful implementation of BSC.
Conclusion - A summary of the above topic and recommendations .
Balance scorecard is a strategic planning and management system that is used extensively in business and industry, government, and non profit organization worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.
The first balance scorecard was invented by Art Schneiderman(an independent consultant on the management of processes) in 1987 at analog devices, a mid sized semi conductor company Later on it was restructured by Robert Kaplan and David P. Norton in the use of balance scorecard in their 1992 article on balanaced scorecard.(The balance scorcard)
The balance scorecard was made for the improvement in organizational performance and competitiveness. (Arthur M schneiderman)
Traditional performance measures are inadequate to measure performance and guide organizations in rapidly changing, complex economic environment. Organizations need to link performance measurement to strategy, and must measure performance in ways that both encourage positive future results and replicate past performance.
Robert S. Kaplan and David P. Norton, among the proponents of these strategic concepts, give a better definition:
"Balanced scorecard provides managers with the instrumentation they need to navigate to future competitive success. Today, organizations are competing in complex environments so that an accurate understanding of their goals and the methods for attaining those goals is vital. Balance scorecard translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system.
It retains an emphasis on achieving financial objective but also includes the performance drivers of these financial objectives,"
(The Balanced Score Card: Translating Strategy into Action, pp. 1-3)
The introduction undertaken discusses first of all how the BSC evaluated with the course of time the need for the same. Then in the literature review a thorough discussion and viewpoint of the authors of articles are taken into consideration followed by a criticism. In the conclusion a proper summary and what the research has produced will be discussed highlighting the importance, need and factors affecting the successful implementation of BSC would be discussed.
In the last eleven years, balance scorecard has play an vital role for implementing strategy and monitoring performance. Creating a strategy focused organization (the phrase coined by the founders of the Balanced Scorecard methodology) is a significant, challenging culture change for many organizations. Success in achieving this change requires:
Regular executive support and involvement.
Education, communication, and visibility of the strategy and measurements of its effectiveness throughout the organization.
To review the stragy so that constant feedback is obtained.
Tools to enable non-technical users to understand the key drivers of the measures.
Translation of the strategy to operational terms so that alignment to strategy and implementation of it occur at all levels of an organization.
Process of BSC
We have to view the organization from four perspectives in order to relate strategy to achieve organizational goals :
Organisations objective will be to earn higher profits by applying all the resources . Kaplan and Norton regards traditional need for financial data.
In any business, importance on customer focus is relevant for organizational growth if the customers are not satisfied the revenues will be lowered and as a result return on investment will decrese.
Internal business perspective
The internal process refers to quality production , timely delivery wich will retain the existing customers and also will improve to find new customers
Learning and growth perspective
Here employee is trained and motivated ,and improved learning skills are provided To improve the work process, which will improve the quality of the product and alsoTimely delivery.
The four perspectives is shown below in form of chart :
Factors affecting successful implementation of Balanced Scorecard:
Strategy Implementation and control: Here author has stressed the importance about formulation and implementation . Once the strategy has been devised, major problem Is to implement the BSC Scorecard. The most frequent problem include underestimating the time needed for implementation and uncontrollable factors in the external environment.( Helen Atkinson pp.1443,1444)
Another author (Ulf johanson et. Al) also argued about idea of BSC implementation.The concept does not allow for an open invitation to participate in learning and development process.Trying to force the objectives on another is risky.
Senior management style, is another factor author has bought to the notice . Here he argues that without proper senior management support and delegation it is difficult to properly implement balanced scorecard.
Strategic control systems : Strategic control system provides the short term targets that deliver long term goals. Strategic control are required to provide a balance between long term organizational goals and short term operational demands. (Helen Atkinson pp.1446). Thus he sees that there is a need to establish co-ordinated strategic and management control objectives. Furthere more, he points that issues relating to employee and suppliers are not co-related to performance management. Translating vision into strategy,is difficult process as its time consuming & focuses on much wider change in the organization.(Helen Atkinson pp.1449)
Organizations that have successfully implemented the Balanced Scorecard have achieved remarkable transformations in their financial performance, in many cases vaulting to the top ranks in their industry groups.
Many aspects of Balanced Scorecard development and deployment depend on effective use of technology to be successful. Numerous software packages have been developed to help automate the Balanced Scorecard, but it is very difficult to deliver the needed capabilities in a single software package. Therefore, the Microsoft Balanced Scorecard Framework has been developed to allow organizations to:
Develop and deploy a scorecard economically using an existing infrastructure.
Manage and display the data and knowledge pertinent to Balanced Scorecards.
Facilitate analysis of measures so that prompt corrective action can take place.
The framework provides a comprehensive, flexible, cost-effective way to deploy the Balanced Scorecard and deliver superior returns on people, processes, customers, and technologies.
Management involvement and endorsement- Without the full personal support and endorsement of the executive team the transformation would be impossible. Communication of Balanced scorecard needs to be focused as ,it delivers top management ideas, views on strategy to lower level( Anthony A. Atkinson et al.)
Floor level employees are the ones who will achieve the targets, so they should be aware of the objectives and targets provided to them.(Meena Chavan)
Scorecard is prepared as one time event .In most cases, Top executive team spends much more time in designing and launching the BSC, as a result there lacks some missing measures at the time of start of project and launch time. Here BSC implementation fails which lacks in considering the review of BSC. (Anthony A. Atkinson et al.)
Critical Analysis of the Literature:
Referring to Helen Atkinson on strategy implementation and control it is backed up in the sense that without proper implementation of the project, objectives will not drive further. Once the vision is set clear , proper strategy should be chalked out so that Objectives will be achieved without any hindrance.
As Atkinson said full involvement of top management is essential in order to achieve organizational goals with the help of balanced scorecard by adopting four perspectives.
Morever, internal process plays a vital role in increasing return on investments if, it is properly backed up by employee training and growth. Employees should be provided adequate training to do the job. Many, consultants criticizes that it does not provide a final score or view with proper recommendations or suggestions. It is a simply list of metrics. For Example employees cannot view their score with respective to their objectives.
Most of the organisations follows the four perspectives and doesn't allow scope for external perspectives. They should take into consideration external factors according to the needs of the situation and change. Various researchers and authors have critically bought most important issues that will affect the implementation of BSC. We should take their consideration as a review so that BSC will run smoothly in achieving organisational objective
In balance between Goals and accountability- I agree with meena chavan, in the sense that all the people should take responsibility of the goals they are given. Unless they take accountability and responsibility goals will not be achieved
There are certainly all elements which forms the basis for a good scorecard , however it is important to add some extra detail to the perceptions. The quick consideration of the scorecard should lead to a very specific understanding of the strategy of the organisation . Furthermore, it should not be over financial. Financials are usually,though not always,the measure of success or failure.
The balanced scorecard is treated as a consultancy project. It is implemented as a consultancy project rather than management project. By treating it as a consultancy project , time is spent and also cost is increased. In addition, the senior management team will be overpassed , to whom their will be no idea about strategies, objectives of the organization.
BSC viewed as short term project - No organisation likes to deviate from the objectives and run the same for short period. They insists that whatever strategy they developed should work for long term. This is baseless factors.
BSC should be developed as an instrument for change.To grasp the importance of intangible resources in the value creation process and mobilize the attention and action of middle management , BSC should be developed with its emphasis on management control and non-financial indicators.
Balanced scorecard was designed to measure organizations performance against strategic goals. It use has been made by most of the fortune 500 companies. For designing of BSC four perspectives are important . Various researches have indicated that BSC should also include others factors in the perspectives such as environment, Job security. Focusing on one measurement of business success can lead to hazardous.
In the Literature and books that I have reviewed, while designing the major factors that are responsible for implementation are , formulating strategy,setting up of proper perspectives, formulation of team, communication of the Strategy and objectives and poor score card designs.
Furtheremore, balanced scorecard approach requires some major changes in culture within the organization. The balanced scorecard requires understanding commitment and support from the top executive level. Different organizations have different needs, markets, products and services For which balanced scorecard will differ. It has also to consider the various perspectives.
Properly designed Balanced scorecard, will address the key problems with strategy implementation, the performance of the organization ,the communication, the role of middle management and existing control systems.
Balanced scorecards have been implemented in corporations, government organizations ,non profit organizations and schools.
In conclusion , balanced scorecard is a management system , which has overcome the traditional measurement system enables the organization to illuminate their vision and strategy and interpret into action..It provides feedback internal business & external business process in order to continuously improve strategic performance and results.