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The Balanced Scorecard - What are the advantages for ADMECO?

Seminar Paper 2003 11 Pages

Business economics - Offline Marketing and Online Marketing

Excerpt

Contents

i. Abstract

1.0 Introduction & Context

2.0 Literature Review
2.1 Theory: What is a Balance Scorecard (BSC)
2.1.1 The Generations of BSC’s
2.2 Performance Measurement Tools - What BSC Software Applications are available?

3.0 Case Studies
3.1 ADMECO AG
3.2 Swissray America, Inc

4.0 Discussion

5.0 Conclusion

6.0 References

i. Abstract

This paper discusses the potential benefits for a small business operation, in this case ADMECO AG, in adopting a strategic measurement tool such as the Balanced Scorecard (BSC). The possible direct impact of the BSC on business performance is assessed, using inputs drawn from a range of research in the available literature, combined with my own experience, critical evaluation and analysis. The principal questions to be answered are: Can the implementation of the Balanced Scorecard framework drive future performance? Will it confer a business advantage on a small company such as ADMECO? How useful is it really?

1.0 Introduction & Context

The Balanced Scorecard (BSC) was first described in the early 1990’s (Kaplan,Norton,1992i) and is a widely adopted management framework combining financial measures with non-financial ones in a single frame, transforming the company’s mission and strategy into tangible objectives and measurements. It is not directed at controlling but deliberately sets out to provide a system of communication, information and learning to equip small or large organisations with a strategic framework empowering them to link today’s action with tomorrow goals. The BSC focuses on key measurements, aligning the company with its business units and the overall corporate strategy.

A 2001 survey amongst European companies (Press Information Schweizii) confirms the Balanced Scorecard’s role as the leading performance management tool available. It further indicated that 50% of the European companies believe that applying the Balanced Scorecard and linking it with the overarching strategy will ultimately increase shareholder value.

If we turn to the concrete case of ADMECO, we find a clear acknowledgement that it needs more than just traditional financial measures to run its operation well. After all, managing the future means more than just knowing about the financial past and present, it means understanding operational factors better in order to drive future success. BSC provides an ideal framework for identifying these factors and unlocking hidden potential (McCunn,1998iii) since it recognises the impact a performance has in one area on another.

As Kaplan and Norton originally put it (Kaplan,Norton,1996,p.21iv), if you can measure it, you can manage it!

2.0 Literature Review

2.1 Theory: What is a Balance Scorecard (BSC)

For some companies the BSC has evolved into an irreplaceable asset in discussing business strategy, strengths, weaknesses and performances. The BSC provides a structure for managing the implementation of strategy while allowing the strategy to evolve in response to changes in an organisation’s competitive market and technological environment (Kaplan,Norton, 1996v). It translates the strategy and mission of a company into a coherent set of measures and objectives, which can be broken down as individual business units and people.

Abbildung in dieser Leseprobe nicht enthalten

Table 1: Kaplan,Norton, The Balanced Scorecard, 1996, (reprint) p. 9

The four general areas provide a framework to help understand the bigger picture:

- Financial measures: a company improving on its bottom line performances of actions previously taken is reflected in the figures.
- Customer measures: incorporates satisfaction, account shares, profitability on markets and targeted segments.
- Internal business process measures: encompasses after sales services, development & product designs.
- Learning & growth measures: this deals with people, systems and organisational culture.

Furthermore, the BSC aligns and supports key processes:

Abbildung in dieser Leseprobe nicht enthalten

Table 3: Kaplan,Norton, The Balanced Scorecard, 1996, (reprint) p. 291-292

2.1.1 The Generations of BSC’s

The 1st generation BSC was described as a 4-box approach of key performance measurements (finance, internal business, innovation & learning, customers) by Kaplan & Norton (1992vi). As I have indicated above, the 1st generation of BSC is a collection of simple performance drivers. In the 2nd generation BSC, there are changes that seem to derive empirically from practice leading to model building on objectives rather than measures and with a concept of progress toward achieving the objectives. The 3rd generation BSC further refines the 2nd generation BSC to provide more strategic relevance and better functionality of characteristics and mechanisms (Cobbold,Lawrie,2002vii). Across the generations, the BSC has evolved into a strategic management tool linking managers in the strategic process, providing boundaries of control and, most significantly, removing the separation previously existing between the formulation and implementation of strategy.

2.2 Performance Measurement Tools - What BSC Software Applications are available?

In a study by Neely & Marr (2001viii), 28 BSC decision framework software packages were analysed, weighted by 46 specific factors divided into scalability, flexibility, customisation, analytical capabilities, service, communication, company & product section. Carefully evaluating BSC software in terms of delivery capabilities, cost-benefits and technical compatibility is crucial to the success of the projects. In the case of ADMECO, in order to answer the question of whether it is improving, it initially plans to apply a simple Excel sheet using the parameters set by Gälweilerix and integrating directional use in an analytical view. Previously, Thamm of Daimler-Chryslerx AG

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i Kaplan, R.S., Norton, D.P., Putting the Balanced Scorecard to Work, Harvard Business Review, Sept-Oct, 1992

ii Staff Report, Survey confirms balanced scorecard as leading performance management method amongst European companies, Press Information Schweiz, Feb. 5, 2001, Available URL: www.pressi.com

iii McCunn,P., The Balanced Scorecard.......the Eleventh Commandment, Management Accounting,London, 1998, Vol 76, Issue 11

iv Kaplan, R.S., Norton, D.,P., The Balanced Scorecard - Translating Strategy into Action, Harvard Business School Press, 1996,p.21

v Kaplan, R.S., Norton, D.,P., The Balanced Scorecard - Translating Strategy into Action, Harvard Business School Press, 1996

vi Kaplan, R.S., Norton, D.P., The Balance Scorecard - Measures that drive Performance, Harvard Business Review, Jan-Feb., 1992, Vol.70

vii Cobbold,I.M., Lawrie, G.J.G, The Development of the Balanced Scorecard as a Strategic Tool., 2GC Active Management ltd, Berkshire, UK, May 2002,

viii Neely,A.,Marr,B., Balanced Scorecard Software Report, Gartner and Cranfield School of Management, 2001

ix Galweiler, A., Strategische Unternehmensfuhrung, 2. Edition, Campus-Verlag, Frankfurt/Main, 1990

x Thamm,P. (Daimler Chrysler AG), Conference: Balanced Scorecard in Praxis, ZFU Zentrum fur Unternehmungsfuhrung, 2/3 Dec., 1999, Zurich, Switzerland - conference documentation

Details

Pages
11
Year
2003
ISBN (eBook)
9783656004578
ISBN (Book)
9783656005124
File size
520 KB
Language
English
Catalog Number
v178449
Institution / College
University of Strathclyde
Grade
1.1
Tags
balanced scorecard what admeco

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Title: The Balanced Scorecard - What are the advantages for ADMECO?