Wednesday, March 25, 2015

How a balanced scorecard helps, even in student organizations. :)



I have been haunted for a long time about the idea that we should abandon financial measurements. On the one hand, I agree that any organization’s ultimate goal should never be purely financial, which is not sustainable. On the other hand, without revenue growth or financial support, a company can easily go out of business. The Balanced Scorecard article helps me rethink about this seemly contradictory nature of financial measurements and actually solves some of my puzzle. A balanced scorecard covers four parts:

  • Customer
  •  Internal business (, which has the greatest impact on customer satisfaction)
  •  Innovation and learning
  •  Financial

The article uses an example of an electronic company, who demonstrated an improved operational performance but still had a disappointing financial result. It claims that measures of improvements are derived from a particular view of the world. Those perceptions and views may not be right. Organizations should connect those internal and operational improvements not only with their company mission but also with their financial results. Only then, the company communicates the value message to both employees and outsiders. Or, the financial results will follow the improved operational measurements, only when they are well-connected. If the improved operations create idle production capacities, companies should actively seek out for more clients for the increased production (revenue-generation) or cut off the wasted resources (cost-reduction).



Why BSC?

Furthermore, a BSC is not a simple list of attributes. My key takeaways from the BSC focus on its capability of:

  • Strategic alignment with organizational vision. As in the case of City of Charlotte, controllers and managers need to actively participate in the generation of a BSC. This process also helps them revisit the visions and goals, and come up with right measurements.
  • Motivating and inspiring employees. With more focused but fewer measures, employees can get clearer messages from the top. And also, employees are more motivated, when they understand the value of their work to the city and their citizens in this case.

More importantly, its implementation requires dedication and will not be an easy organizational change. In the Charlotte case, the change process took months and about one-third to one-half of Elloitt’s time (a full-time budget analysis time and energy). And controllers need to actively engage in discussion and implementation. After implementation, it still requires continuous discussion, improvements, and adjustments to better serve the goal.



Application

A BSC can even help student organizations to attract and retain student members by looking at four perspectives, using measurements like:

  • Attendance for different types of events (customer)
  • Grant and sponsorship (financial)
  • Time to develop new events (innovation)
  • The number of idea executed (internal business)

Currently, there are few innovative ideas, which have been successfully marketed to the student body at Carnegie Mellon. And student organizations often fail to have a long-term goal, since committee members are replaced annually. By utilizing the BSC, they have an opportunity to look internally, find their values, and make their organizations sustainable.

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