OPM61 International Logistics and Finance
Introduction
The balanced scorecard was developed by Robert Kaplan and David Norton in 1992 to help businesses translate their strategic vision into measurable objectives. The balanced scorecard is a useful tool for helping employees grasp the company’s strategic direction (BSC). When workers know what the firm wants to accomplish, they may work toward that end (Kaplan and Norton, 1993). According to Drury (2004), the BSC is used as a management tool to disseminate and assess the organization’s goal and strategy.
Niven explains the BSC as a strategic management system and evaluation tool (2003). The BSC may help a business integrate its vision and strategy into measurable goals. The BSC helps employees learn more about the company’s long-term goals.
If workers know exactly what the organization wants to accomplish, they will be more equipped to help get there. Additionally, according to Niven (2003), the balanced scorecard may be used to convert an organization’s stated goals and objectives into a systematic evaluation of its success. In other words, it’s a strategy for improving a business’ productivity by focusing on the correct key performance indicators.
Strategic management tools, a means of communication, and a framework for evaluating performance are all part of the integrated management system. The primary tactics of a company are what provide the numbers that matter. Strategy is updated, long-term goals are linked to annual budgets, strategic initiatives are identified and aligned with the overall plan, and performance assessments are conducted using BSC.
According to academics Kaplan and Norton (1996), the four BSC perspectives may be used to strike a balance between short-term and long-term objectives; “lagging indicators,” can be used to assess desired outcomes, while “leading indicators.” can be used to monitor performance drivers.
The aim of this report is to present a clear evaluation of the role of the BSC for the DYX Distribution Plc and provide practical examples for its use. Based on the theoretical perspectives and the advantages that this can bring for the company final recommendations for its use in the company has been provided in this paper.
Role of Balanced Score Card
Theoretical perspective
One of the major benefits of the BSC, as stated by Drury (2004), is that it improves internal communication and inspires workers to have an active role in the creation and execution of the organization’s strategy. Managers may consider every facet of their company’s operations with the help of the BSC. They can determine if one area of improvement came at the price of another.
Many companies’ attempts to implement BSCs fail because of poor design and application methodologies (Cokins, 2005). According to Lynch (2003), one of the problems with the BSC is that it puts too much emphasis on the measurable and not enough on the strategic value of getting people to care and take action.
Executives’ understanding of the BSC and its purpose also lacks uniformity. This is evident in the various answers one obtains when asking these questions to various high-level CEOs (Cokins, 2005).
Despite the fact that a balanced scorecard has been successfully adopted in many firms, many others have attempted and failed to establish one. Research conducted by professor Claude Lewy of the Free University of Amsterdam found that 70% of scorecard initiatives failed. He claims that while the idea of a balanced scorecard is powerful and straightforward, many businesses discover that actually putting one into practice is a lengthy and costly process. Lewy admits that a company’s many divisions may have a deeper understanding of the company’s overall strategy with the help of a balanced scorecard. Having a well-defined objective and the willingness to commit the necessary resources are prerequisites for a successful implementation of the balanced scorecard methodology.
BSC as a Management Tool
In light of recent efforts to improve corporate performance management, the balanced scorecard has emerged as a valuable management tool. There are several positive outcomes that can result from using the balanced scorecard in management. The Business Success Center (BSC) is an organization-wide system for planning and improving processes based on feedback from customers. Its primary goal is to facilitate transformation by tracking key performance metrics. The BSC is crucial in setting goals, formulating a plan of action, and carrying it through.
One way in which strategy is translated into an interconnected collection of measurements is through the use of financial and non-financial indicators (Chan, 2004). A company’s strategy for achieving its goals and objectives is based on the company’s vision, mission, objectives, and goals. Without buy-in and commitment from upper management, a company’s plan will not be put into action. Kaplan and Norton can be consulted for further details (1996). Leaders of the company work with their subordinates to determine the company’s raison d’etre and core principles. The adoption of a balanced scorecard connects an organization’s long-term strategy with measurable outcomes. Organizations may use it to develop and implement plans, as well as gather and respond to input. This quantitative input is used to assess the strategy’s success in terms of its ability to create value, use key strengths, satisfy customers, and generate a return for investors.
If the company wants to survive in the long run, it must use the BSC to give its employees a say in how the business is run. The information presented in this book is helpful for establishing controls that get the company closer to its goals and vision. Therefore, daily operations are based on a commonly held ideal for the company’s future. The company’s future course of action is crystal clear and easily understood by everybody. Therefore, workers will be more open to ideas and eager to put them into action (Kaplan and Norton, 1998).
Kaplan and Norton suggest the following factors for a successful scorecard implementation: (2001). By using a balanced scorecard and a management style that emphasizes communication at all levels, an organization may ensure that strategy is at the forefront of every employee’s daily responsibilities, from the top down. The BSC should be incorporated into organizational processes, it should be built into the planning and budgeting process, and new reporting frameworks and structures for management meetings should be developed to ensure that personal goals and objectives are reinforced and that variable compensation is tied to the achievement of these target goals.
Advantages of a Balanced Score Card
In order to oversee and monitor the organization’s plan and its success, a balanced scorecard is used. It’s useful for controlling the internal workings of a business as well as the results that it sees in the outside world. DYX Distribution Plc might use a balanced score to connect its stated purpose with measurable goals and the value of its human and financial resources. It monitors “customer value performance, innovation performance, and internal business process performance” in addition to financial measurements, which helps to strike a healthy work-life balance. If you believe what Marr (2021) has to say about the value of balanced scorecards as a management tool, you’ll know that they’re crucial to good business practice. Like PLCs, organizations using the balanced scorecard method benefit in the ways listed below.
Better strategic planning
Griffiths (2021) argues that in order for businesses to succeed, they need to devise a plan of action. An organization’s ability to take a holistic view of itself, identify areas that need attention, and capitalize on its strengths may be greatly improved with the use of a balanced scorecard.
Improved Strategy communication
It is crucial to have everyone on the same page while discussing the organization’s strategy. In a few concise sentences, a balanced scorecard may convey a whole strategy and all its major components.
Improved Measurement and Reporting
A balanced scorecard simplifies performance measurement with reports that incorporate all key performance indicators and organizational goals. It’s useful in figuring out how the company plans to go where it wants to go.
Aligning processes
Strategic policies, budgeting, risk management, and analytics are just some of the company operations that may be aligned with the use of a balanced scorecard. This is useful in developing a plan geared toward accomplishing the objectives of the organization.
Balanced Scorecard for DYX Distribution Plc
Balanced Score Card for the Executive Board
Balanced Score Card for the Distribution Division
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Recommendations ad Conclusions
Since a balanced scorecard is such a specialized instrument, it is advised that the organization adopt it for future management and control system improvement. While a balanced scorecard is most often employed at the enterprise level, it may be developed and executed at the departmental level as well. The company’s goal is to increase its market share by using a balanced scorecard, which it hopes to do. When a corporation uses this tool, it may more easily create goals and initiatives that will get it closer to realizing its vision and achieving its purpose. The tool may be tailored to a business’s unique challenges and aims, including areas like finances, customer support, internal operations, and employee development. Therefore, it is suggested that the business implement this technology for enhanced management and control.
References
Chan, L. (2004). Performance Measurement and Adoption of the Balanced Scorecard: A survey of municipal governments in USA and Canada. The international journal of public sector management, 17 (2/3):201-21.
Cokins, G. (2005). Performance Management: making it work: The promise and perils of the balanced Scorecard. Balanced scorecard report, 7 (1).
Drury C. (2004). Management and cost accounting, (6th ed.). Thompson learning. Johnsen, A. (2001). The balanced scorecard: theoretical perspectives and public management implications, managerial auditing journal 16(6): 319-30.
Griffiths, B. (2021). Strategic Planning and Management with Balanced Scorecards. https://www.leantransitionsolutions.com/Balanced-scorecard/Strategic-Planning-and-Management-with-Balanced-Scorecards
Jackson (2017). The Importance of the Balanced Scorecard for Large Organisations. https://www.clearpointstrategy.com/importance-of-balanced-scorecard-large-organisations/
Kaplan, R. and Norton, D. (2001a). The Strategy Focused Organizations: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard University Press, Boston.
Kaplan, R. S. and Norton, D. P. (1996). “Using the balanced scorecard as a strategic management system”, Harvard Business Review Jan – Feb pp. 75–85.
Lynch R. (2003). Corporate strategy, (3rd ed), Edinburg Gate Harlow: Pearson education Publishers.
Marr, B. (2021). 7 Benefits of a Balanced Scorecard. https://bernardmarr.com/7-benefits-of-a-balanced-scorecard/
Niven, P. (2003). The balanced scorecard step by step for government and non profit agencies, new jersey: John W. and sons, Inc.
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