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Overview of Balanced Scorecard methodology

Question:

Discuss about the Balance Scorecard of Great Persons Inc.

This report takes into account the prospects of Balance Scorecard and the ways organization has been implementing the same for their success. As per Boscia and McAfee (2014), the objective of this report is to focus on the implementation of Balance Scorecard and how successful it has been in organizations that have already done it. The main objective of this report is to develop a BSC for Great Persons, Inc, an American organization. A strategy map has also been implemented for the same organization for its overall improvement. Great persons, Inc needs to shift from its conventional form of financial apparatus for gaining information that is more relevant.

Balance scorecard can be described as a premeditated planning and supervision system used to support the activities of business with the organizational vision. According to Lakshmi and Rao (2017), in most of the cases pragmatically, a Balance Scorecard endeavors to interpret indistinct, virtuous hope of an organization’s statement of vision into the practicalities of administrating the business superior at every level.

Balance Scorecard advancement is to take a holistic view of a company and synchronize the MDIs in order to experience the level of efficiency by all the departments of the organization (Schalock et al. 2014). To go on board on the path of the Balance Scorecard an organization needs to know the mission and vision statement along with the strategic plan. The other things that should also be focused on are the organization’s financial status, the ways the organization is operating in the current scenario, the satisfaction level of employees and the expertise level of their employees.

Department Areas
Internal Process of Business

Amount of actions per function

Automation of processes

Alignment of processes (right progression for right sections)

Duplicate activities per task

Finance

Return on Investment (ROI)

Cash Flow

Return on Employed capital

Quarterly and Yearly Financial results

Growth and Learning

Finding the right level of expertise for job

Turnover of employees

Satisfaction in Jobs

Opportunities in Learning and Training

Customer

Performance of delivery to customer

Rate of satisfaction of customers

Rate of customer retention

Once the organization is through with the evaluation of the quantifiable results of the above stated factors they should be prepared in making the best use of the method of Balance Scorecard for improving the areas where there is existence of enough deficiency (Coe and Letza 2014). Along with it the metrics that should be set up needs to be based on SMART (Specific, Measurable, Achievable, Realistic and Timely) for improving the measuring standards.

In the present scenario, the managers need to identify the brunt that measures generally have on the presentation. However, they do not consider measurement to be an integral part of their daily strategy. For instance, managers may initiate fresh strategies and inventive processes in operating projected in attaining infiltrate performance along with continuation of the usage of short-term indicators of finance that have been used for decades like return on investment (ROI), growth in sales and operating proceeds (Perkins, Grey and Remmers 2014). These kinds of managers generally fail in introducing fresh measures in investigating new goals and procedures and in whether or not to continue with the old methods and relevancy of the innovative proposals.

Effectual measurement needs to be an essential part of the process of management. According to Kaplan, R. and Anderson, S.R., 2013, Balance Scorecard offers the managers a complete framework that interprets the strategic objectives of a company into a rational set of measurement of performance. Balance Scorecard is a system of management that helps in motivating infiltrate developments in certain critical areas like product, procedures and development of market.

Benefits of using Balanced Scorecard

Mecklenburg County, NC

There was lack of any sort of stability and sustainable loom to attain the vision in Mecklenburg County that did not have any sort of dependable model for making decisions regarding funding that is being based on precedence and reviewing the larger impact of those decisions. Mecklenburg required developing a model and structure for making decisions that could be unrelenting despite of the economic environment or ideology related to politics. They lacked any sort of way in predicting the long-term influence of the decision, but with the implementation of the system, it led to a penetration performance towards attaining the vision of County and presently it is in use in Mecklenburg County. It is a fundamental part of how the County is supervised that has become replica for other municipal governments across the country.

Balance Scorecard are needed by the non-profit organizations as it has been considered as a great implement for description of strategy and execution. Balance Scorecard assists in describing a policy, focusing on actions that matters and finally accomplishing the strategy productively. As per Knowles, Greatbanks and Manville (2016), non-profit organizations might encounter problems with an enunciation of the strategy, but just trying BSC would facilitate them to enclose their thoughts about strategy in the right possible way.

It also helps in talking the similar sort of language with those making donations. Certain donations that are being made to the nonprofit organizations are generally prepared by for-profit organization. Organizational executives make use of BSC for their premeditated planning. Non-profit organizations have an approach that can be well explained with the Balance Scorecard displaying more opportunities of getting required funding, as they talk with the financial donors in the same language of business (Rampersad and Hussain 2014). In most cases, for-profit organizations agree on the perspectives of BSC; 1. Financial 2. Customer 3. Operational, 4. Learning. However, in case of nonprofit organizations there has not been any such agreement

For-profit business organizations are those who have the habit of commonly of investing into the social programs of non-profit organization. They view financial indicators on their own scorecards and for the same they like to have a comparable way in tracking the performance of their investments that is social in nature in the non-profit organizations. Non-profit organizations prefer a standard order of their perspectives:

  • Standard order: Financial; Customer; Operational; Learning

However, it has often been seen that managers of certain non-profit organizations take care of finance as a source, which they do not want to have it at the top of the order. The challenge with this issue is that it would be hard to follow that sort of BCS’s cause-and-effect logic.

  • Finance at Bottom: Customer; Operational; Learning; Finance

For charities, the nucleus business is distributing on the mission- assuage  suffering, assisting people in getting back to work and saving the lives of the animals. Many non-profit organizations like Christian Children’s Fund of Canada have executed the method of Balance Scorecard within their organization in helping to manage their advancement in attaining their preferred outcomes. This Balance Scorecard approach have enables such non-profit organizations in measuring results and bringing in the obligatory changes to the varied marketing and operational programs in achieving their mission.

Case study: Developing a BSC for Great Persons, Inc

Six different standpoints can be suggested for the non-profit seeking organizations:

-Allocation of resources

-Donors

-Funding and revenue

-Internal processes and operations

-Learning & Innovation

The categories of internal processes/operations and learning and innovation are the most stimulating factors for the incorporated marketers- highlighting on technology factor and the required infrastructure and skills, culture and formation essential for the purpose of integrated marketing (Matthews 2015). While implementing the approach of Balance Scorecard, it is tough to disregard the impact of business-integrated marketing. Non-profit organizations have always been mission-centric, focusing entirely on the purpose they have set out. Cancer Society’s defining of success should not be ‘curing cancer’ but ‘dropping the deaths that have been caused by cancer’. This assists the cancer society in focusing less on the research work and more on early recognition and other deterrence practices.

Kaplan and Norton are the two famous persons that have in their credit the development of Balanced Scorecard Model in 1992. The main purpose behind the construction of the method was to provide organization something that could provide them a solid grip on the measurement of their financial performance (Chen, Chiang and Storey 2012). Within just ten years, 1000 of companies have are on their way to utilise the tool to measure their financial performance. The list of the companies is full of private, public and non-profit organizations. The traditional metric used for the financial performance of the Company was only aimed to measure the financial related sector of the Company. However, the model has enabled in adding some more metrics into the financial measurement techniques. The added metrics are such as customer, learning & growth and internal process (Biazzo and Garengo 2012).

Despite of all the popularities that the model has collected, it fell short in terms of its affectivity. This is because of the fact that results were varied from successful to unsuccessful to no tangible results. According to Neely et al., the model has limitations, as it does not cover the scholarship. The limitation can even reduce the effectiveness of the BSC model in measuring the financial performance of an organization (Rohm and Malinoski 2012). According to Madsen and Stenheim (2014), the advantages of BSC model; however, they also believe that not all the parts of the model are effective (Henderson, Pricewaterhousecoopers and Mittl 2012). They further argue that practitioners, business experts need to understand about the limit of values of the BSC model. They believe that it is not a mature concept. Because of the variations in it, it has resulted in different outcomes to different organizations. Basuony (2014) also finds this as an immature process that benefits smaller organizations but not as beneficial to the larger organization (Intelligence 2014). However, Casey and Peck (2004) have supported the BSC process. In their point of views, the process is beneficial to the organization. It benefits organization by providing the managers a source to have a deeper study on the financial performance of the Company (Loshin 2012). Nazim (2015) do also supports the BSC model. They believe that it is useful as it transforms strategies into tangible metrics that can easily be evaluated by the managers (Maltz et al. 2012). According to (Pessanha and Prochnik, 2006), the process is a serious failure once it is implemented in the organizational practices. It has high rates of failure in the implementation and produces variable answers in both its interpretation and practice.

Measuring key areas of success: Financial status, employee satisfaction, and customer retention

The BSC process is helpful in finding the financial performance of the smaller organizations. However, it is not that effective in case of larger organization (Rausch, Sheta and Ayesh 2013). This is because of the fact that this is still under the developing stages. This needs certain considerations and modifications in the light of authorial facts and the business experts to give it, the more fruitful effect. This is a good move by Kaplan and Norton as they had produced a good process to measure the financial performance of the Company. However, the process seriously lacks in its productivity in case of larger organizations (Person 2013).

BSC Table

Priorities for Strategies

Objectives

Measures

Targets

Initiatives

Financial

Making this financially strong

·         Utilization of assets

·         Profitability

·         Cost Leader

·         Profitable Growth

·         Cash Flow

·         Net margin

·         Volume Growth

·         Revenue

·         18%

·         $19 million

·         4 yrs

·         40%

·          

Asset Description program and C Store Alliances

Customer

·         Delighting the customer

·         Efficient service to the customer

·         Delighting the targeted customer

·         Building up a strong relation with the customers

·         Segment Sharing

·         Gross Profit Growth of Dealer

·         40%

·         25%

Dealer Committee and Feedback program

Internal

·         Making relationships with the franchise

·         Enhancement of customer value

·         Excellence in operation

·         Bringing innovative services and products to provide full satisfaction to the customers

·         ROI of New Product

·         Inventory Levels

·         Perfect Orders

·         18%

·         12% sales

·         95%

Review Program and Safety Training

Learning & Growth

Motivated and efficient bench of workforce

·         Action Climate

·         Competencies

·         Survey of Employee

·         Strategic Competency

·         More than 48

·         83%

Skills Program and Competency Development

Table 1: BSC Table

Source: (Created By Author)

The reason to make BSC table was to give Great Persons Inc. a firm control over its staffs. This is because of the fact that the existing financial measurement plan in the organization is only able to measure the financial performance of the organization. However, the Company was not able to have its control on the customer satisfaction. This is the reason the Company opted the process. The BSC does not provide effective scores control on the different stakeholders of the Company. However, it supports smaller companies and has effective results in balancing the scores at the different core sectors of the Company (Phillips, Brantley and Phillips 2012).

The above scorecard helps the Company in having a firm control over few of the proposed measurement sectors such as customer, financial, internal and learning & growth. The Company needs to take some useful initiatives to bring affectivity in the proposed scorecard. Rightly so, the above score card did propose some most effective initiatives for the achievement of the goal such as Asset description plan, C store alliances and many more (Porter and Tanner 2012).

The above strategy map is indicative only, the detail of which is covered in the BSC table. The strategy, which is in more detail elaborated in the BSC table, is for the reason that the Great Persons Inc. is suffering of its incapable control on the customers. BSC table is believed to produce effective results to smaller organizations, which is the main reason behind the proposal of the table. The table is designed strategically; however, its success relies heavily on its implementation (Price, Jorgensen and Knight 2013).

Conclusion

BSC table has received mixed responses from some of the authors and the business experts. It has les supports of authors, as it is only effective to smaller organizations. However, it is not helpful for those organizations, which are larger multinationals. BSC table helps in building up a strategy, which provides a firm control to the organization on some of other but important domains of business such as customers, internal and learning & growth. An organization can never prosper to fullest of its possibilities if it has no control on the strategies. Traditional system is only helpful in calculating the financial performance of the Company. However, it did not provide any solution for some other parts such as checking the impact on customers, the effectiveness of the products and many more. The Great Persons Inc. was following the traditional form of financial measurement tool, which can never provide any other information. This is for such reasons that companies tried to go for the BSC table in order to have a good control over its customers, internal growth and partnerships with franchisee. The Company is no different to other in terms of financial success; however, it has the desire to have a good control on the customer views on its service. Moreover, the Company believed to have prioritised the values of customers over its financial success. This has only prompted them in going for the BSC process for having control on some other important sectors.

Importance of effective measurement in management

References

Biazzo, S. and Garengo, P., 2012. Performance measurement with the balanced scorecard: a practical approach to implementation within SMEs. Springer Science & Business Media.

Boscia, M.W. and McAfee, R.B., 2014. Using the balance scorecard approach: A group exercise. Developments in Business Simulation and Experiential Learning, 35.

Chen, H., Chiang, R.H. and Storey, V.C., 2012. Business intelligence and analytics: From big data to big impact. MIS quarterly, 36(4), pp.1165-1188.

Coe, N. and Letza, S., 2014. Two decades of the balanced scorecard: A review of developments. The Poznan University of Economics Review, 14(1), p.63.

Henderson, D., Pricewaterhousecoopers, L. and Mittl, R., 2012. Balanced Scorecards: The Integration Point between Enterprise Information and Performance Monitoring.

Hope, J. and Player, S., 2012. Beyond performance management: Why, when, and how to use 40 tools and best practices for superior business performance. Harvard Business Press..

Intelligence, B., 2014. THE INTERNATIONAL JOURNAL OF BUSINESS & MANAGEMENT.

Kaplan, R. and Anderson, S.R., 2013. Time-driven activity-based costing: a simpler and more powerful path to higher profits. Harvard business press.

Knowles, B., Greatbanks, R. and Manville, G., 2016. Scorecards and Strategy Maps: The Top Ten Factors of Performance Measurement in Non-Profit Organizations. Third Sector Performance: Management and Finance in Not-for-profit and Social Enterprises, pp.189-192.

Lakshmi, S. and Rao, S., 2017. Implementation and Practicalities of Balance Scorecard: A Case Study.

Loshin, D., 2012. Business intelligence: the savvy manager's guide. Newnes.

Loureiro, M.G., Alonso, M.V. and Schiuma, G., 2015. Knowledge and sustained competitive advantage: How do services firms compete?. Investigaciones europeas de dirección y economía de la empresa, 21(2), pp.55-57.

Maltz, A.C., Shenhar, A.J., Dvir, D. and Poli, M., 2012. Integrating success scorecards across corporate organizational levels. Open Business Journal, 5, pp.8-19.

Martello, M., Watson, J.G. and Fischer, M.J., 2016. Implementing a balanced scorecard in a not-for-profit organization. Journal of Business & Economics Research (Online), 14(3), p.61.

Matthews, J.R., 2015. Assessing organizational effectiveness: the role of performance measures. The Library Quarterly.

Nerkar, A.D., Business Analytics (BA): Core of Business Intelligence (BI).

Perkins, M., Grey, A. and Remmers, H., 2014. What do we really mean by “Balanced Scorecard”?. International Journal of Productivity and Performance Management, 63(2), pp.148-169.

Person, R., 2013. Balanced scorecards and operational dashboards with Microsoft Excel. John Wiley & Sons.

Phillips, J.J., Brantley, W. and Phillips, P.P., 2012. Measuring Business Impact. Project Management ROI: A Step-by-Step Guide for Measuring the Impact and ROI for Projects, pp.107-129.

Porter, L. and Tanner, S. eds., 2012. Assessing business excellence. Routledge.

Price, C., Jorgensen, A. and Knight, D., 2013. Building Performance Dashboards and Balanced Scorecards with SQL Server Reporting Services. John Wiley & Sons.

Rampersad, H. and Hussain, S., 2014. Personal balanced scorecard. In Authentic Governance (pp. 29-38). Springer International Publishing.

Rausch, P., Sheta, A.F. and Ayesh, A. eds., 2013. Business intelligence and performance management: theory, systems and industrial applications. Springer Science & Business Media.

Rohm, H. and Malinoski, M., 2012. Strategy-based balanced scorecards for technology companies.

Schalock, R.L., Lee, T., Verdugo, M., Swart, K., Claes, C., van Loon, J. and Lee, C.S., 2014. An evidence-based approach to organization evaluation and change in human service organizations evaluation and program planning. Evaluation and program planning, 45, pp.110-118.

Stodder, D., 2013. Data visualization and discovery for better business decisions. TDWI Best Practices Report. Renton, WA: The Data Warehouse Institute.

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