Essay on Balanced Scorecard

The Balanced Scorecard (BSC) is a critical strategy-evaluation tool that facilitates holistic evaluation from a financial performance, customer knowledge, internal business process and learning and growth perspective. This executive summary of the team’s Balanced Scorecard (BSC) research will present three key BSC formats, and briefly assess the advantages of each BSC format. The executive summary will then discuss how each of the three adopter organizations used the BSC to their advantage when engaged in strategic planning, before ending with three specific takeaways for BSC format and adoption.

Three key BSC formats which business organizations should leverage for strategic planning are the basic BSC format, the triple bottom line BSC format and the COVID-19 business continuity strategy BSC. Foremost, the basic BSC format allows organizations to evaluate objectives from a customer, business ethics, sustainability, financial and corporate social responsibility perspective, alongside quantitative metrics such as financial profitability, revenue and customer acquisition cost. The basic BSC is beneficial as it allows the firm to understand its strategic priorities and value creation from multiple perspectives, but is disadvantageous because it does not provide specific foci on key strategic areas for the firm to optimise (BSC Designer, 2020). Secondly, the triple bottom line balanced scorecard is a relatively novel format based on a correlation matrix between the triple bottom line and the learning and growth, process, market and financial perspectives of the BSC, intended to provide a comprehensive sustainability assessment in terms of the firm’s environmental impact, employee engagement and overall corporate social responsibility. While the triple bottom line BSC is advantageous in allowing for a more deliberate examination of the organization’s sustainability-based priorities, the triple bottom line BSC is also disadvantageous as early stage companies may not have sufficient information to populate such a detailed BSC (Balanced Scorecard Institute, 2020). Finally, the COVID-19 business continuity strategy BSC provides firms with a contemporary and relevant examination of their financial performance, customer knowledge, internal business process and learning and growth in reacting to the disruptions from COVID-19. However, the COVID-19 BSC may be disadvantageous in providing an overly dynamic and short-term examination at a specific disruption (BSC Designer, 2020).

Three adopter organizations which successfully used the BSC to their advantage while engaging in strategic planning are the SAIPA automotive company, the Malaysian telecommunications company Komtel and the Hilton hotel chain. Foremost, the SAIPA automotive company successfully used the Balanced Scorecard to design key business objectives and link them with strategic initiatives for the organization. A key point of learning from the implementation of the Balanced Scorecard for the SAIPA automotive company was in the identification of different tiers of defects, ranked A, B and C, which allowed the organization to effectively prioritise key automotive defects to address (Darvish et al, 2012). Furthermore, the balanced scorecard allowed the company to balance different financial, customer-driven, process driven and learning-driven objectives, to ensure consistent alignment between financial and non-financial performance. A key point of improvement raised, however, was that the BSC should have been more effectively applied to set a minimum number of indicator metrics to capture the proper achievements of the strategic objectives and optimise business strategy accordingly. Secondly, the BSC was successfully used for strategic planning in the Malaysian telecommunications company Komtel to ensure that strategic planning efforts were well planned, implemented and tracked in performance for Komtel’s performance management and human relations development programmes (Othman et al, 2006). The BSC study on Komtel also found that the BSC was able to successfully identify priorities for rectification linked to Malaysian cultural perceptions of such programmes, and guide management in their strategic planning to overcome such human resource and cultural challenges (Othman et al, 2006). Finally, the BSC was effectively applied to drive strategic planning for the Hilton hotel chain in allowing them to balance their profit and revenue projections with their strategic objectives in delivering a superior, world-class customer experience and an environmentally sustainable approach to hotel management (Fatima & Elbanna, 2020). The BSC thus helped Hilton to apply and rectify key gaps in their priorities for implementation as part of their strategic plan (Fatima & Elbanna, 2020).

In conclusion, firms should consider the following key takeaways for BSC adoption. Foremost, BSC adoption can come in a variety of formats, and companies should consider the most appropriate level of detail and focus area for BSC implementation that meets their objectives for strategic planning. Secondly, BSC adoption should be conducted in partnership with a wide range of stakeholders and objectives, and management will eventually need to decide on the strategic areas to optimise for. Finally, BSC adoption requires a shift in change management, and managers must be willing to think outside the box and consider the interests and objectives of a wide range of stakeholders for a successful BSC implementation.

References

Balanced Scorecard Institute. (2020). Balanced Scorecard Case Studies. Balanced Scorecard Institute. https://balancedscorecard.org/bsc-basics/examples-success-stories/

BSC Designer. (2020). 28 Balanced Scorecard Examples with KPIs. Balanced Scorecard Designer Institute. https://bscdesigner.com/real-bsc-examples.htm

Cardinaels, E., & van Veen-Dirks, P. M. (2010). Financial versus non-financial information: The impact of information organization and presentation in a Balanced Scorecard. Accounting, Organizations and Society, 35(6), 565-578. https://doi.org/10.1016/j.aos.2010.05.003

Cheng, M. M., Humphreys, K. A., & Zhang, Y. Y. (2018). The interplay between strategic risk profiles and presentation format on managers’ strategic judgments using the balanced scorecard. Accounting, Organizations and Society, 70, 92-105. https://doi.org/10.1016/j.aos.2018.05.009

Darvish, H., Mohammadi, M., & Afsharpour, P. (2012). Studying the Knowledge Management-Effect of Promoting the Four Balanced Scorecard Perspectives: a Case Study at SAIPA Automobile Manufacturing. Economic Insights-Trends & Challenges, 64(1).

Fatima, T., & Elbanna, S. (2020). Balanced scorecard in the hospitality and tourism industry: Past, present and future. International Journal of Hospitality Management, 91, 102656. https://doi.org/10.1016/j.ijhm.2020.102656

Junior, A. N., de Oliveira, M. C., & Helleno, A. L. (2018). Sustainability evaluation model for manufacturing systems based on the correlation between triple bottom line dimensions and balanced scorecard perspectives. Journal of Cleaner Production, 190, 84-93. https://doi.org/10.1016/j.jclepro.2018.04.136

Othman, R., Domil, A. K. A., Senik, Z. C., Abdullah, N. L., & Hamzah, N. (2006). A case study of balanced scorecard implementation in a Malaysian company. Journal of Asia-Pacific Business, 7(2), 55-72.