The Balanced Scorecard
Introduction
Since its introduction by Robert Kaplan and David Norton, the balanced scorecard has become a strategic planning and management system that is increasingly being used in business to ensure that its activities are in line with its strategies.That is to say it has been extensively used to ensure that an organization’s strategic goals do not become derailed as a result of poor organizational performance.
Part A
Diana, memorial fund balanced scorecard
Kaplan et al. (2001) gives this memorial fund as a good example of perfect use of the balanced scorecard. It is a charitable Organisation in the memory of Princess Diana, the princess of Wales. It came up with a balanced scorecard as a result of the need and importance of demonstrating and performance and effectiveness in the various projects it was supporting.
Description of the balanced scorecard approach they took
Diana memorial fund started by a definition of objectives taking each perspective into consideration. It deliberately avoided starting with measures as this means in essence that you will only concentrate on the management of only those things which you think are measurable.By starting off with objectives this charity fund could easily tell the reason for measuring the organizations particular aspect. The funds strategy map was an important in defining the objectives which were used on each perspectives development. In this charity fund, the objectives were broken into three main categories. These included beneficiaries, partners as well as financials.In the beneficiaries’ objectives, it looked into change of policy which defined the funds desired achievement areas with managers coming up with an explanation on how the firm’s activities would bring about change to peoples lives. This is what was well defined in the strategy maps.The correlation between objectives helped the charity fund to determine what will bring about change.
Assessment of the benefits of the balanced scorecard
The balanced score card brought several benefits to Diana, princess of Wales memorial fund. These benefits included the development of a framework in which to come up with strategy. It lead to the understanding of how to use resources economically as well as efficiently by showing the way complimentary roles aspects came about as a result of development of different strategies for the achievement of other objectives which were different.Managers cited this tool as a timely way to assist them in the management and implementation of tasks.
Quick mart’s balances scorecard
This mart is in the retail industry and it had relied on its financial performance for a long time and this combined with the over reliance on the retailers management processes hindered it from seeing a looming problem. As Kaplan et al. (2001) notes, the main problem was the retailers continued support and reliance of the work without a realization that its very success was to be undermined by actions set up earlier. And these actions in the earlier setup were side effects.The use of cause and effect model of the balanced scorecard helped the company to avoid over reliance on financial results or management systems in place at that moment
Assessment of the benefits of the balanced scorecard
By quick mart using the balanced scorecard, it identified the issue to scrutiny. This scrutiny brought about the incorporation of corrective action and adoption of ways to ensure the successful management of the project streams.The retailer was also able to align its various business divisions behind its well developed strategies. This has made it possible for the store to make quick decisions on whether to come up with problem solutions first or exploit available opportunities.
Part B
Measures of performance for each of the goals and objectives of Zenon Medical Instruments Company (ZMIC) include:
$11. Maintaining strong financial health
ZMIC here could use such measures as operating income or economic value added.
$1· Operating income
Operating income is basically a forecast of a firms earning power for operations that are considered ongoing. It however expenses such as cost of goods sold that are considered operating expenses. ZMIC can use this measure of performance strong financial health maintenance objective.
$1· Economic value added
ZMIC can use this measure to evaluate its financial performance. It gives the residual wealth which can be found by a deduction of Cost of capital from the operating profit.
$12. Provision of excellent service to customers.
ZMIC can use perfor5mance measures like customer satisfaction and retention or market share in particular segments that are targeted.
$1· Customer satisfaction
It can gauge the customer satisfaction by carrying out a survey on how its various products satisfy customer needs. It can be measured by the number of referrals they get or the number of repeat customers.
$1· Market share
This is the percentage of the market segment the company controls. A higher market share is a performance measure that shows that ZMIC is meeting its provision of excellent service to customer’s objective.
$13. An industry leader in product as well as process innovations.
In this respect the performance measures ZMIC can use include measures to do with cost as well as quality.
$1· Cost
A reduction in cost without a compromise in the quality of its goods and services means that ZMIC can utilize its resources in an effective and efficient way. This cost reduction can be at the production, procurement or even the selling levels.
$14. Development as well as maintenance of an efficient state of the art production processes
In this objective, the company can use performance measures such as employee satisfaction as well as employee retention.
$1· Employee retention and satisfaction
This is an important performance measure that involves looking at the levels of employee turnover amongst a range of other important issues. This is what will tell ZMIC of its objective of developing and maintaining efficient, state of the art production processes progress.
Conclusion
It is good to note that the above perspectives are interconnected and hence do not act independently. It is their interconnection that leads to better financial performance.
References
Kaplan, R.S & Norton, D.P. (2001). The strategy-focused organization: how balanced scorecard companies thrive in the new business environment. Harvard Business Press
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