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The strategy is that learning and growth helps in development of better business process and
which helps in efficient use of finance in return. With this the cost of production will reduce
and lesser prices could be charged for the product. This will lead to customer satisfaction and
that will again lead to generating more finance. With this, a chain will begin and all things
being interrelated there will be overall growth of the business.
Therefore we can say that Balanced Scorecard is a strategic planning system which helps in
the following activities:
Apart from improving performance management in organization, balance scorecard can also
be used to implement strategies. This is done by performing following four functions:
1. Clarifying strategies: All the strategies are mentioned very clearly and precisely.
If the objectives of the employee are defined in a proper way, employees never face
problem with their duties and when the work is measured in the eyes of employees
and the bosses it gets done well and early.
2. Communication strategic objectives: The communication of strategic
objectives is another important function given in the balanced scorecard. Unless and
until the objectives are clearly communicated they will not be acted upon and the
action plan will not function.
3. Planning, setting targets, and aligning strategic initiatives: After the
objectives are communicated they have to be acted upon and an action plan has to be
made. This action plan have to be aligned in the direction of the goals that have to be
achieved and this is where balanced scorecard comes into picture in a big way and
helps to complete this function.
4. Strategic feedback and learning: When the work is going on, it is necessary to
check and control it regularly and feedback helps to do this. Feedback also helps in
knowing what are the problems faced by the employees and what can be done to
remove those impediments from their way so that they can perform better. Learning
helps in eliminating the problems and smoothening the functioning of the employees.
Strategic impact of implementing
Balanced Scorecard:
In the diagram above, the learning The chart below is made on a single paper so that it is
and growth is at the bottom of the easy to refer to and know the progress, to set the
strategic system which helps in priorities and to plan the work accordingly. This chart
increasing the morale of the acts as a monitor for employees as the dash board to the
employees and it also leads to car which tells the performance. The 4 functions of
increase in suggestions from balanced scorecard can be explained by using the
employees. following diagram which is an extension of the
previous diagram. In this diagram we add 4 dimensions
Work starts getting better to all the four processes namely:
automatically then and rework
reduces which increases the 1. Objectives
efficiency of the business 2. Measures
processes. 3. Targets
4. Initiatives
At the third level, the customers
get more satisfied because the cost Each function of the process is given objectives to be
of production reduces with achieved and the measure of it that has to be done.
attaining efficient use of resources There is a row include in which the target for a time
and ultimately it leads to increase period is mentioned and last one is for the initiative
in accounts receivables. This leads taken.
to a better finance in the company
and return on capital increases.
Corporate Example:
UNUM Corporation, a company which is disability and
special insurer uses balanced scorecard technique to
drive its company towards the strategic vision. Company is USA based and it’s headquarter is
in Portland.
Before presenting UNUM’s balanced scorecard it is worth pointing out that, as with all the
best practice companies profiled for this Report, UNUM’s strategic goals and measures are to
support a clearly defined and meaningful corporate vision. As shall be explained later, the
corporation has a specific vision statement for each of its four scorecard perspectives.
Now they have laid their vision to ‘We will achieve leadership in our businesses.’
The company has made three other elements beyond the main objective,
‘We will be a products-offered company’
‘Be known for’
‘We will be a well-managed company’
Quantifiable measure:
o A benchmark survey will integrate the company’s employee surveys into a
tool for gauging progress.
Goal:
Our goal is to improve annually on the score established by the benchmark survey. In
addition, we will monitor our progress towards the goal on an ongoing basis through
formal and informal gathering of employee opinions.
Operating effectiveness
Vision:
We will increase customer value by rethinking, improving and streamlining our
business processes.
Quantifiable measure:
Operating costs will grow at no more than one-half the rate of the top line.
Goal:
By 1998, our total operating costs ratio will be reduced by approximately one-third.
Customer satisfaction
Vision:
UNUM will provide the best value in offerings matched to customers’ needs in the
markets we choose to serve.
Quantifiable measure:
Each UNUM area with an external customer chain will develop a customer value
measurement tool. It will be aimed at determining our customers’ assessment of the
overall value of our products and services.
Goal:
We will continually improve our customers’ perception of the value of UNUM’s
offerings so that the number of customers who DO NOT rate UNUM as ‘very good’
will have declined by 40 per cent when we compile our final measurement in 1998.
Shareholder value
Vision:
We will deliver consistently superior long-term value to UNUM shareholders.
Quantifiable measure:
Shareholder value will be measured in terms of total return - ie dividends plus share
price appreciation.
Goal:
We will achieve a total return that consistently places UNUM among the top 125
companies listed on the Standard & Poor’s 500.
References:
1. Building and Implementing a Balanced Scorecard, case study on UNUM Corporation
published by Business Intelligence 1999
2. Operations Management by Chase, Jacobs, Aquilano and Agarwal, Eleventh edition,
2006
3. Using the Balanced Scorecard as a Strategic Management System by Robert S.
Kaplan and David P. Norton published by Harvard Business Reviews
4. www.balancedscorecard.org/BSCResources/aboutthebalancedscorecard
5. www.quickmba.com/accounting/mgmt/balanced-scorecard