Use the Internet and/or Strayer Learning Resource Center to research a company t
ID: 2421001 • Letter: U
Question
- Use the Internet and/or Strayer Learning Resource Center to research a company that has implemented a balanced scorecard system for evaluating performance. Suggest at least two (2) variance measures the identified company can employ in a balanced scorecard performance evaluation system, and examine how the company can use these variances to improve performance.
- Examine the main reasons service companies are more sensitive to labor and price variances, as compared to material price variances, and determine the importance of companies managing these variances in relation to sustaining profitability.
- Use the Internet and/or Strayer Learning Resource Center to research a company that has implemented a balanced scorecard system for evaluating performance. Suggest at least two (2) variance measures the identified company can employ in a balanced scorecard performance evaluation system, and examine how the company can use these variances to improve performance.
- Examine the main reasons service companies are more sensitive to labor and price variances, as compared to material price variances, and determine the importance of companies managing these variances in relation to sustaining profitability.
Explanation / Answer
The Balanced Scorecard - Who's Doing It?
Increasingly, as balanced scorecard (BSC) concepts become more refined, we have had more inquiries asking for examples of organizations that have implemented the BSC, how the BSC applies to a particular business sector, metrics are appropriate for that sector, etc. This section provides a database of working balanced scorecard examples that our research has located.
By 2004 about 57% of global companies were working with the balanced scorecard (according to Bain). Much of the information in the commercial sector is proprietary, because it relates to the strategies of specific companies. Public-sector (government) organizations are usually not concerned with proprietary information, but also they may not have a mandate (or much funding) to post their management information on web sites.
Increasingly, as balanced scorecard (BSC) concepts become more refined, we have had more inquiries asking for examples of organizations that have implemented the BSC, how the BSC applies to a particular business sector, metrics are appropriate for that sector, etc. This section provides a database of working balanced scorecard examples that our research has located.
By 2004 about 57% of global companies were working with the balanced scorecard (according to Bain). Much of the information in the commercial sector is proprietary, because it relates to the strategies of specific companies. Public-sector (government) organizations are usually not concerned with proprietary information, but also they may not have a mandate (or much funding) to post their management information on web sites.
Recent Success Stories:
Mecklenburg County, NC
Mecklenburg County lacked a stable and sustainable approach to achieving the vision and it had no consistent model for making funding decisions based on priorities and assessing the bigger impact of those decisions. The County needed to develop a model and structure for decision making that could be sustained regardless of economic conditions or political ideology. At the time, they had no way of predicting the long-term impact of this decision but the system he implemented led to break-through performance toward achieving the County’s vision and the framework is, to this day, in use at Mecklenburg County. It an integral part of how the County is managed and has become a model for other municipal governments around the country.
Building a Balanced Scorecard
Each organization is unique and so follows its own path for building a balanced scorecard. At Apple and AMD, for instance, a senior finance or business development executive, intimately familiar with the strategic thinking of the top management group, constructed the initial scorecard without extensive deliberations. At Rockwater, however, senior management had yet to define sharply the organization’s strategy, much less the key performance levers that drive and measure the strategy’s success.
Companies like Rockwater can follow a systematic development plan to create the balanced scorecard and encourage commitment to the scorecard among senior and mid-level managers. What follows is a typical project profile:
1. Preparation
The organization must first define the business unit for which a top-level scorecard is appropriate. In general, a scorecard is appropriate for a business unit that has its own customers, distribution channels, production facilities, and financial performance measures.
2. Interviews: First Round
Each senior manager in the business unit—typically between 6 and 12 executives—receives background material on the balanced scorecard as well as internal documents that describe the company’s vision, mission, and strategy.
The balanced scorecard facilitator (either an outside consultant or the company executive who organizes the effort) conducts interviews of approximately 90 minutes each with the senior managers to obtain their input on the company’s strategic objectives and tentative proposals for balanced scorecard measures. The facilitator may also interview some principal shareholders to learn about their expectations for the business unit’s financial performance, as well as some key customers to learn about their performance expectations for top-ranked suppliers.
3. Executive Workshop: First Round
The top management team is brought together with the facilitator to undergo the process of developing the scorecard (see the chart “Begin by Linking Measurements to Strategy”). During the workshop, the group debates the proposed mission and strategy statements until a consensus is reached. The group then moves from the mission and strategy statement to answer the question, “If I succeed with my vision and strategy, how will my performance differ for shareholders; for customers; for internal business processes; for my ability to innovate, grow, and improve?”
Mecklenburg County lacked a stable and sustainable approach to achieving the vision and it had no consistent model for making funding decisions based on priorities and assessing the bigger impact of those decisions. The County needed to develop a model and structure for decision making that could be sustained regardless of economic conditions or political ideology. At the time, they had no way of predicting the long-term impact of this decision but the system he implemented led to break-through performance toward achieving the County’s vision and the framework is, to this day, in use at Mecklenburg County. It an integral part of how the County is managed and has become a model for other municipal governments around the country.
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