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to performance measurement?
scorecard approach from a measure everything, and you might get what you
want philosophy?
The Balance Scorecard was created by Robert S. Kaplan and David P. Norton in 1992.
The Balance Scorecard allows organizations to implement strategy rapidly and
effectively by integrating the measurement system with the management system.
Therefore, the Balance Scorecard has been integral to the success of organizations
throughout the world.
The last few decades have seen the evolution of the information. The ability of an
organization to mobilize its intangible assets has become far more important than
investing. The intangible assets allow organizations to quickly respond to innovative
products and services desired by targeted customer segments. The traditional
approaches does not incorporate the valuation of a companys intangible and
intellectual assets, such as high quality products and services, motivated and skilled
employees, internal processes and loyal customers.
The problems with conventional financial performance measures are it is not actionable.
It means that the financial measures emphasis only one perspectives and the financial
measures provide limited guidance for future actions in which it will decrease both
shareholder and customer value. While contemporary performance measurement
systems includes non financial and financial measures in which it have a strategic
orientation that directly measure areas that provide competitive advantage. Therefore in
the Balance Scorecard it emphasizes that financial and non financial measures must be
part of the information system for employees and all levels of the organizations.
Balance Scorecard is more than a measure performance. It is a management system
that focuses the efforts of people, throughout the organization, towards achieving
strategic objectives. It gives feedback on current performance and targets future
performance. Besides that, it allows managers to track their own performance against
targets and take corrective action. By having the performance measurement, it can
evaluate subordinates performance and providing rewards to their subordinate.
Basically Balance Scorecard converts an organizations vision and strategy into a
comprehensive set of performance and actions measures that provides the basis for a
strategic measurement and management system. Four perspectives includes in
Balance Scorecard area are financial performance, customers, internal business
processes and innovations. These perspectives are aligning with the organization future
plan and strategy where these key nonfinancial leading indicators of financial
performance in the sense that improves financial performance in future while
decreasing in non financial indicators such as customer satisfaction and loyalty, process
quality and employee motivation generally predict decreased future financial
performance.
Q2: Develop the Balance Scorecard for the Norwalk Pharmaceutical Division of
Chadwick, Inc. What parts of the business strategy that John Greenfield sketched
out should be included? Are there any parts that should be excluded or cannot be
made operational? What are the scorecard measures you would use to implement
your scorecard in the Norwalk Pharmaceutical Division? What are the new
measures that need to be developed, and how would you go about developing.
Strategies or objective that are needed to be included in developing the Balanced
Scorecard for Norwalk Pharmaceutical Division are firstly, the financial strategies;
managing portfolio of investments, minimizing cost in executing business base,
maximizing return or yield on all development spending and investing in discovery of
new compounds. Secondly, the customer perspective where the strategy is to satisfy
customer needs. Lastly for innovation perspective, the strategy is to impose people
development and industry training.
In the financial perspective, to manage portfolio of investments, the driver to assess this
is the return on investment and in measuring this objective is by using percentage or
return in investments. To maximize return or yield on all development spending is
assessed by using sales growth and proceeds growth by distributors as drivers. As
stated in the case, Chadwick is fully aware on the fact that their long term success
depended much on the proceeds and how much money the distributors of their products
could make by promoting and selling Norwalks products. This goal will be measured
using percentage of both sales growth and proceeds growth by distributors.
In satisfying customer needs, the objective will be assessed by using reliability by
customer to the products as a driver. Products which give highest profit to the company
will be extensively promoted and thus, the company will receive many communications
and feedbacks from customers. As products offered by Norwalk are pharmaceutical
products, it is crucial for them to receive feedbacks from customer. They must make
sure that the customers have strong trusts towards the products and this will determine
their market placement in the industry. The will need to decrease percentage of
complaints coming back from the customers and make sure that there will be zero
defects or negative side effects happened which was not warned or informed to the
customers. Lastly, one of most definite measure is by measuring percentage sales.
In the innovation perspective, John Greenfield had list out objectives relating to
improving human skills by doing people development and industry training. Drivers can
be used to assess this are trainings provided by the company or provided for staffs.
Staffs skill improvement or people development can be measured by the number of
courses or trainings attended by staffs and staffs performance in terms of meeting their
Key Performance Indicators.
The strategy of driving responsibility to the lowest level might not be suitable to be
included in the balance scorecard. The drawback to this practice is it may create goal
congruence among staffs. Different departments or divisions will outline their own goals
and objectives. As responsibility to be drove to the lowest level, the differences will
conflicted their goals thus not be in line with the companys objective as a whole. There
was also a need of balance responsibility in the organization. As different departments
will be loaded with different weightage of responsibility, driving it to the lowest level will
create unbalance to it. As more responsibility to be given to staffs at lower level, the
possibility of top management in setting strategies for their own benefit and divisions
benefit is high as employee targets and incentives are closely related to divisions
performance. Discrepancies between organizational goals and division goals might
happen.
Q3: How would a Balance Scorecard for Chadwick, Inc differ from ones
developed in its divisions, such as the Norwalk Pharmaceutical Division? Do you
anticipate that there might be major conflicts between divisional scorecards and
those of the corporation? If so, should those conflicts be resolved, and if so, how
should they be resolved?
As objectives set for organization was done in scope as a whole it should be different to
the objectives set for a division or a department, thus a balance scorecard developed
for the organization will be different to that developed for a certain division or
department. Different measures will be used in the specific scorecards either for
divisions or he organization as a whole as for divisions, the objective will aimed
specially for that division. In the other hand, the objective of an organization comprises
goals which include objectives across the divisions of the company.
For Norwalk Division specifically, their objective will be developed mainly in the
pharmaceutical industry; customers in the specific market, staffs with skills mainly in the
field, and the distributors of their product, thus their balance scorecard will be developed
mainly in this scope as outline in previous question.
For Chadwick in the other hand, their goals and objectives will be outlined in the interest
of the company as a whole and for the benefit of cross divisions all together. As
example, as the company operates in many businesses mainly consumer products and
pharmaceuticals, the organizations overall objective is to produce high quality products
and markets them fast with lowest costs. This should generally be the objective which
could benefit the organization as a whole and also be in the interest of cross divisions.
For Norwalk division, their main aim is narrower, to increase the yield of new products
and reduce time and cost of the product development cycle. It is a subsection of the
organizational objective and became the focus in developing the balance scorecard.
A major conflict which may arise is when managers of specific divisions focus narrowly
only to their own divisions performance rather than efforts in attaining organizational
goals, thus lead to inconsistencies at the organizational level. To overcome this, top
management needs to allow decentralization to only a certain level or level and by
making sure that each division shares the same objective and aims the same goal as
the organization outlines.
References
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Organized Change. Retrieved April 28, 2013, from
http://www.organizedchange.com/balance
Benefits from using the Balanced Scorecard. (n.d.). the Balanced Scorecard. Retrieved
April 29, 2013, from http://thebalancedscorecard.com/benefits
Mehta, F. (n.d.). Understanding the Disadvantages of a Balanced Scorecard.Buzzle.
Retrieved April 29, 2013, from http://www.buzzle.com/articles/understanding-thedisadvantages-of-a-balanced-scorecard.html
teams., employees., & complete., t. p. (n.d.). Using a Balanced Scorecard Approach to
Measure Performance.OPM.gov. Retrieved April 29, 2013
What are the advantages and disadvantages of Decentralization?.
(n.d.). PreserveArticles.com: Preserving Your Articles for Eternity. Retrieved April 28,
2013, from http://www.preservearticles.com/2012030124270/what-are-the-advantagesand-disadvantages-of-decentralization.htm