In Module 1, we begin our application of the Balanced Scorecard with a close look at the financial perspective. Actually, we need to start a bit further back, with the fundamental ideas of corporate vision and mission that underlie all effective business strategy. Here is a good brief introduction to this topic:
Robin, D. (ND) Vision, Mission and Values: Management Tools for Building a Better Workplace. Daniel Robin & Associates. Retrieved July 20, 2010, from http://www.abetterworkplace.com/027.html
So the balanced scorecard rests ultimately on corporate vision and mission – and ultimately, all organizations, whether they are designed to make a formal “profit” or not, hope to accrue more resources than they expend. So the financial (or “effectiveness”) perspective is the logical place to start our consideration. But as we observed in the Course Overview and the Introduction to this module, all the perspectives or components are integrally related. So let’s take a good look at the relationship of financial perspectives to the rest of the balanced scorecard before we dive into it specifically:
MyStrategicPlan (N.D.) Balanced Scorecard: Performance Measurements for Success. Retrieved July 20, 2010, from http://www.mystrategicplan.com/strategic-planning-topics/balanced-scorecard.shtml
As we noted, the financial perspective of the balanced scorecard defines the “bottom line” of the system. So here is a useful brief summary of the approach:
Niven, P. (N.D.) Financial perspective. EPM Review. Retrieved July 20, 2010, from http://www.epmreview.com/Resources/Articles/Delivering-shareholder-value-growing-revenue-and-enhancing-productivity.html
There are any number of possible cases where we could begin. But let’s start in this case with an assessment of the use of the balanced scorecard in Saatchi & Saatchi, one of the premier advertising and “creative service” organizations (although they have certainly had their ups and downs over the last ten years or so. Here’s how this process has been described:
“Faced with a set of brutally tough choices in the Nineties, Saatchi & Saatchi’s leadership team defined a new vision and global strategy and set stretching three-year financial goals. In this case study, Paul Melter, Worldwide Director, CompaSS, explains how the balanced scorecard was used to turn ambitious strategic aspirations into operational reality.”
The article from which this summary is taken can be found here:
Greenhalgh, C. (2004) Building a Strategic Balanced Scorecard: Saatchi & Saatchi Complementary Case Study. Business Intelligence Company. Retrieved July 20, 2010, from http://www.business-intelligence.co.uk/PDFdownloads/strat_bsc/Saatchisr.pdf
As your case assignment for this module, you are to carefully review this article, and then (in 3-4 pages) prepare your analysis of how Saatchi & Saatchi implemented the balanced scorecard and its apparent effects.
Assignment Expectations:
Your analysis should be structured in terms of the following four issues (you will be using essentially this same comparative evaluation framework for the first four modules of this course):
Introduction: What was the situation for Saatchi & Saatchi in the mid 1990s? The management team adopted an approach that was primarily two-pronged: the financial perspective and the customer perspective. In terms of the financial perspective, what goals did the new leadership set for the company?
Analysis: How did the company categorize its different business units (agencies)? What strategies were chosen for each unit? Saatch & Saatchi also adopted several strategies that related best to a customer perspective. What were they?
Conclusion: Did the financial strategies make sense for each given unit? Why or why not? Did the acquisition by Publicis Groupe SA change the results of the BSC? Now that you have analyzed both “prongs”, did the two approaches worked in synthesis or in conflict?
Evaluation: Assuming that it would be best if the customer perspective strategies meshed with the financial strategies, do you think the customer perspective reinforces or conflicts with their financial strategies? In your opinion (supported, of course, by your readings), was the implementation done well or poorly?
Course Overview
Welcome to BUS 499! In this capstone course, you will begin to integrate all the diverse knowledge you have gained in your BSBA core courses, just as you’ll need to do when you start to use your degree in the Real World. It’s called a “capstone” because this should be the last course that you complete before you graduate (be sure you’ve taken everything else before you go any further with this course!).
Here, you will see how marketing, management, information systems, finance, accounting, and operations management all act to shape the goals and objectives of a firm and the activities it undertakes to achieve those goals. You’ve covered each of these topics in separate courses, but perhaps have not had an opportunity yet to see how they play off each other. That’s what this course is all about. It is going to seem strange to you to have to reach all the way back perhaps a couple of years to recall specific pieces of learning — but that’s basically how you’ll have to approach applying your degree throughout your career, so think of this as some useful practice for the rest of your professional life.
To focus our attention, we will use an analytical and planning model called the “balanced scorecard”. In recent years, this has become a very popular tool used by businesses, nonprofit agencies, government units, and other kinds of organizations to ensure the coordination of their various activities and goals. There are four main components to the model: customers, finance, internal business processes, and learning and growth. As the graphic shows, each of these components is organized around a key question, a target audience, and a set of organizational problems. As the arrows emphasize, the answers to any of these questions of necessity affect the other areas and how their questions are answered in turn. The whole model features a series of iterations in which answers are increasingly attuned to each other; no problem can be solved effectively without reference to the others. And since each of these components is subject to outside influences, the entire model is always dynamic, always subject to readjustment. Like the Real World itself, nothing is forever, and continual change is always the name of the game.
The balanced scorecard was originally designed to measure the contribution of non-financial assets such as Human Resource Management. When organizations treat all departments as profit centers, departments such as sales have a distinct advantage because the revenue and costs for that department are easily defined. But what revenue does Human Resources generate? Like IT, advertising, and accounting, it can appear to be only a source of costs rather than benefits, and it’s often asserted that it’s better for the financial performance of the firm if it’s outsourced or if it “charges” (through an elaborate system of ‘funny money’) for the services it performs. But within the framework of the balanced scorecard, it’s easy to see how HR, IT, finance, marketing, and many other maintenance functions need to be considered interactively in the process of allocating resources. Today, it is one of the most popular tools for organizational analysis and planning, because of its forward-looking and comprehensive orientation. According to the Balanced Scorecard Institute, by 2004, 57% of the companies with global operations used the balanced scorecard.
A good place to begin would be to review this introductory presentation on the philosophy, basics, fundamentals, and functions of the balanced scorecard. In particular, look at slides 11 through 18 for an excellent overview of how the balanced scorecard is used as a tool to integrate the various function-based activities of organizations.
Each of the first four modules of this course will introduce one of these perspectives and see how it focuses on the key elements of objectives, measures, targets, and initiatives. In Module 5, we’ll bring them all together and see how they collectively can lead to the development of effective visions and strategies for the organization.
In your Cases, you will see how others have used the balanced scorecard. In your SLP assignments, you will have an opportunity to try to use the balanced scorecard in an organization of your choice. As has been true in all of your other courses, it’s important to choose the right organization; please look through the SLPs and make sure that you have access to the information that the balanced scorecard requires before you commit to its use.
Since you are already familiar with most of the vocabulary and ideas of business through your previous work, the reading load for this course is relatively light, although the thinking and synthesizing load will definitely stretch you. If you’ve kept your CD’s from previous business courses, you may find them to be helpful in reviewing basic concepts. If you’ve taken courses within the past three terms or so, your course materials should still be available to you online through CDAD. If you haven’t got access to previous course materials, you’re not out of luck; you’ll find a wealth of optional and supplementary resources available here to help fill in the gaps. And as always, your instructors are here to help when you have questions or concerns. So, good luck, have fun, and try as much as possible to keep to the schedule!
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