Tuesday, March 28, 2017

The Balanced Scorescard: A useful planning and summary tool

The article “The Balance Scorecard, Measures that Drive Performance” (Robert S. Kaplan & David P. Norton, 1992) provides a deep and thorough introduction to Balanced Scorecard, not only what it is but more how companies can apply it into real-world problems. Personally, I find it amazing to view the balanced scorecard as a tool for both strategic planning and performance summary.

Starting from strategic planning, the balanced scorecard would be a detailed visualization form of companies’ strategic positions to articulate the business's vision and strategy (Bain, 2015). Instead of traditionally putting strategic positions into a two metric framework, the balanced scorecard broadens it with four perspectives or questions to explore. What would be very critical here is the priority of different perspectives during the strategic planning. For example, I learnt from my previous Business Process Modeling course that financial measure are somehow leggy, uninformative and short-term. Also, the article “The Real Value of Strategic Planning” (Sarah Kaplan & Eric D. Beinhocker, 2003) states that strategic planning review meetings should be taken first and separately before the financial budget meeting, so the long-term strategies can effectively guide companies long-term budget or other financial goals, on the balanced scorecard. In short, when companies use the balanced scorecard, they may need to consider other strategic goals like innovation (ex, the active and profitable pipelines for pharmaceutical companies) first, and then financial goals.

Next, the article talks about the importance of customer-based measures. The four terms are very old and familiar, cost, time, variety and quality, but the idea that companies need to evaluate those four measures not from their own perceptions but from customers’ views is very instructive. I recall the project I did when I interned in consulting firm. The consultants spent entirely two weeks to complete a customer survey that can get a good understanding of customers’ value proposition towards our client’s brand. Our client is a France auto brand, and it is interesting to see how customers interprets those different ones (all brands) and similar ones (our client and their competitors), even if some of them are really subtle.

I also like the idea that it is necessary for companies to trace back to internal measures after gaining enough customer-based measures. It can create appropriate budgeting, tracking, communication, and reward systems. (Bain, 2015) Also from my process modeling course, I knew that those internal process measures like cycle time and inventory are the ones the process managers can really control with the help of information system. It is challenging to decide what internal measures to connect because sometimes a conflicting measure will make cross-functional cooperation very difficult; however, the balanced scorecard can play a good role in deciding which one is the first priority in this kind of scenario. Moreover, the information system empowers the managers in many ways. With an evolving information system technology, it is possible for the managers to have a better data-visualization to summary performance, more capacity to forcast performance and more applied business rules to predict risks.

In summary, the balance scorecard is nice combination of what the companies should achieve and how they have progressed. I would love to read more and find out how the balanced scorecard can be integrated into information system, and technologies like machine learning may possibly keep interacting with it.

Reference:

Management Tools - Balanced Scorecard. (2015, June 10). Retrieved March 28, 2017, from http://www.bain.com/publications/articles/management-tools-balanced-scorecard.aspx

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