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SCORECARD
PhD Student Oana Adriana GICĂ
Assistant PhD Ovidiu Ioan Student MOISESCU
Babeş-Bolyai University of Cluj-Napoca
Abstract:
The Balanced Scorecard concept has been adopted by all types of
organizations (manufacturing and service, for-profit and not-for-profit, private
and public) in virtually every developed and developing nation in the world
and it has evolved from its initial purpose of an improved performance
measurement system to become the basis of a new management system,
one that aligns and focuses the entire organization on implementing and
improving its strategy. Niven’s opinion is that Balanced Scorecard means
three things: measurement system, strategic management system, and
communication tool. The paper talks about the Balanced Scorecard
philosophy and the issues that need to be solved for a successful BSC
implementation an provides recommendations for the formulation and
implementation of the Balanced Scorecard.
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Balanced Scorecard philosophy successful Balanced Scorecard
Sandy Richardson considers implementation.
essential for the successful
implementation of Balanced Scorecard Number 10: Premature Links to
the establishment of organization’s Management Processes
Balanced Scorecard philosophy in the The transition from a measurement
early stages of BSC development. This system to a strategic management
will ensure also ensure consensus system is a natural evolution for a
between the Balanced Scorecard team successful Balanced Scorecard.
members, senior management, and the Embedding the Scorecard into
organization. management processes such as
A Balanced Scorecard philosophy budgeting and compensation allows
is simply a clear statement that organizations to tap the full potential of
describes what your Balanced this dynamic framework. However,
Scorecard will look like, how it will premature attempts to forge these links
operate, how it will be built, and how the may cause a swift decline in Scorecard
organization will use it. momentum.
The author suggests eight
questions that need to be answered in Number 9: Lack of Cascading
order to define organization’s Balanced Organizations of any appreciable
Scorecard (B.S.) philosophy: size, must cascade the Scorecard from
1. Which of our core values do we top to bottom if they hope to gain the
want to build our B.S. philosophy on? advantages offered by this system.
2. How do you want to build our Front-line employees are so far
B.S./ the measures? removed from organizational strategy
3. Who will use our B.S.? that a high-level Scorecard, while
4. How will they use it? providing a modicum of learning and
5. How will employees access our motivation opportunities, will do little to
B.S.? shepherd daily activities. It is only by
6. How will results data get into cascading the Scorecard to all levels of
our B.S.? the organization and allowing every
7. How will we ensure data employee to describe how they
quality/integrity? contribute to the organization’s overall
8. How will business performance success that true alignment can occur.
results be communicated within the
organization? Number 8: Terminology
Defining Balanced Scorecard Everyone needs to be speaking
philosophy is an important aspect in the the same language if measurement is to
process of BSC adoption as it be used in guiding change within an
constitutes a solid base for a successful organization.
Balanced Scorecard development,
implementation and for management Number 7: No New Measures
decision as well. Many of the measures needed to
tell the story of the strategy may already
Balanced Scorecard be present, but in the vast majority of
implementation issues cases they must be supplemented with
In his book “Balanced Scorecard new and innovative metrics to ensure
Step by Step- Maximizing Performance the execution of strategy.
and Maintaining Results”, Paul Niven
identifies ten issues of Balanced
Scorecard implementation. These are
barriers that need to be passed for a
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Number 6: Consistent simply because it seems like the right
Management Practices thing to do. Certainly, it is the right thing
The Scorecard, as reflected by its to do, but that in no way excuses an
name, represents a new paradigm of executive team from determining the
balance within an organization: specific objectives it has in mind when
balancing the needs of internal and turning to the Scorecard. With no clearly
external stakeholders, balancing short- articulated goal for the program, it can
term opportunities with long-term value be easily misunderstood and ultimately
creation, balancing lag and lead ignored until it simply fades from view.
indicators of performance, and, of
course, balancing financial and Number 3: No Strategy
nonfinancial indicators. Effective use of It is extremely difficult to implement
the Balanced Scorecard dictates a a strategic management system without
genuine commitment to developing and a strategy. At the very core of the
engaging in managerial processes that Scorecard concept is the organization’s
are consistent with the holistic goals strategy—guiding all actions and
inherent in the Scorecard itself. decisions, and ensuring alignment from
top to bottom. A Scorecard can be
Number 5: Timing developed without the aid of a strategy,
Some organizations will not unveil but it then becomes a key performance
their new Scorecard until every indicator or stakeholder system, lacking
measure has been developed, data in many of the attributes offered from a
sources confirmed, and results ready to true Balanced Scorecard.
pour in. Scorecard benefits such as
collaboration, information sharing, and Number 2: Lack of Balanced
group learning do not depend on having Scorecard Education and Training
every single measure in place. The In their haste to build Scorecards,
Scorecard should be launched once a the vast majority of organizations
critical mass of performance measures sacrifice the up-front effort of providing
is available. The dialogue that ensues meaningful and detailed Scorecard
from reviewing Scorecard results more training to those expected to use the
than compensates for the lack of a system. Awareness sessions are held,
complete card. Reaching consensus on during which the Scorecard is
strategy, translating the strategy, trumpeted as a measurement system
developing objectives, measures, and featuring financial and non-financial
targets – they all take significant effort. measures, but little is offered regarding
Often, the best results are achieved the many subtleties and complexities of
when organizations take the necessary the model. It is often the deceptive
time to let the ideas and discussions simplicity of the Scorecard that makes
germinate, moving from concept to people very susceptible to the false
reality, and in so doing producing notion that in-depth training is not
innovative new measures and solutions. required. Believing that the Scorecard
can be simply mastered, the
Number 4: No Objectives for the organization will sponsor high-level
Balanced Scorecard Program training and then trust their employees’
As organizations around the globe business instincts to kick in and fuel the
experience the multitude of benefits development of powerful new
from Balanced Scorecards, the concept performance measures. The cost of this
has gained wide acceptance and decision will manifest itself in poorly
approval as a management tool. With its designed Scorecards, lack of use, and
heavyweight status confirmed, some weak alignment within the organization.
organizations will adopt the Scorecard Take the necessary time at the
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beginning of the project to develop a component in an integrated business
comprehensive Scorecard curriculum performance management process that
that includes background on the revolves around business strategy;
concept, your objectives in • start with a clear vision for your
implementing it, typical problems, balanced scorecard;
success stories, and project details. • extend the balanced scorecard and
make it "the way we work". Successful
Number 1: No Executive BSC organizations deepen alignment by
Sponsorship mirroring their balanced scorecard
With tenacious leadership and framework and categories in as many
support a Scorecard project could business activities as possible: reward
ultimately succeed despite a lack of and recognition programs, individual
training at the outset. Without executive goal plan formats, incentive
sponsorship, however, the effort is most compensation plan formats, strategic
likely doomed. plan categories and format, etc.[4]
Many Scorecard elements will take “Balanced Scorecard Interest
place in stages—first strategy is Group” based on their personal
deciphered and translated; objectives, experiences and insights from
measures, targets, and initiatives are presentations by a wide variety of
then developed; the Scorecard is federal agencies compiled a list with ten
cascaded throughout the organization; key factors of the four key stages of a
and, finally, it becomes embedded in successful Scorecard effort: design,
the organization’s managerial develop, implement and sustain its use
processes. Executive support and (Table No.1)
sponsorship is the common thread that Specialists’ opinions are rather
connects the entire end-to-end process. diverse when talking about the success
Without a strong and vocal leader factors of Balanced Scorecard. Some of
present at each and every juncture, the them though sharply synthesize. Letza’s
effort can quickly stall. opinion is that the balanced business
We can add to the first two lists the scorecard should [5, pg.74-75]:
following recommendations for a • deliver information which is the
successful Balanced Scorecard backbone of the strategy;
formulation and implementation: • function as the cornerstone of both
• articulating the firm's business the organization’s current and future
vision and strategy; success by balancing short-term,
• identifying the performance essentially financial performance, with
categories that link vision and strategy long-term growth opportunities;
to results; • balance internal and external
• developing effective measures and perspectives by ensuring that
meaningful standards (both short- and comparison against current competitors
long term; leading and lagging); is undertaken, in addition to comparison
• deploying appropriate budgeting, IT, with the organization’s own past
communication and reward systems; performance;
• viewing the BSC as a continuous • highlight performance by adopting a
process, requiring maintenance, broad perspective: financial, business
reassessment and updating; processes, customer/market interfaces
• believing in the BSC as a facilitator and employee motivation;
of organizational and cultural change. • act as an integrating tool, both
• understand that the balanced horizontally (across functionality) and
scorecard is part of a bigger process vertically (through levels of
that starts with strategy. The balanced management), by communicating the
scorecard framework forms one (key) business strategy and the organization’s
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priorities; serve as a dynamic, • redefine strategy and measures
continuous process used to evaluate based on results.
performance;
Table 1
Ten key factors of a successful Scorecard effort
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Conclusions implement a balanced scorecard
In today’s business environment approach, four elements are vital: focus,
strategy has never been more validity, connectivity, and integration.
important. Yet research shows that Focus and validity ensure that a
most companies fail to execute strategy balanced scorecard contains vital
successfully. The Balanced Scorecard metrics that will move the organization
assists organizations in overcoming two in the right direction. For performance
key issues: effective organizational measures to have the desired impact,
performance measurement and however, two more things must happen.
implementing strategy. First, each manager and workgroup
The starting point in adopting must be connected to their scorecard in
Balanced Scorecard is to define ways they understand and can
Balanced Scorecard philosophy influence. Second, scorecards must be
describing how the Balanced Scorecard integrated into a company's
will look, how will be used, who will be performance management practices or
using it and how it will be build. they won't change managers' or
The Gallup Organization has employees' behavior.
observed that when companies
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