Balanced Scorecard Strategy, Essay Example

Abstract

The four perspectives of the balanced scorecard strategy are learning/growth, internal processes, customer service, and financial. The purpose of the balanced scorecard strategy (BSC) is to use the non-financial perspectives to improve the financial perspective (Albright et al 2001). Part of implementing BSC involves creating causal chains. In a business sense, causal chains refer to a series of actions or events that eventually lead to a final goal. The six main steps of developing an effective strategy are: “develop the strategy, plan the strategy, align the organization, plan operations, monitor and learn, and test and adapt” (Silverthorne 2008).

Integration Causal Chains: Balanced Scorecard Strategy

Case A

Case A consists of two parts which have been named Case A-1 and Case A-2. The purpose of Case A is to identify various measures and place them within their correct categories. Case A also involves creating causal chains and demonstrating how achieving one objective can essentially have a positive domino effect.

Case A-1

Objectives and measures can be sorted into four distinct categories when using BSC. These categories are: learning and growth, internal business processes, customer, service and financial. The following table illustrates examples of measures that fit into the four categories.

Case A-2

Case A-2 will demonstrate two causal chains. The purpose of this Case is to explain how one positive action can lead to subsequent positive effects; such as greater financial returns. Causal chains are an important part of BSC.

Causal Chain 1

Create new products that cater to an increasingly diverse customer base, based upon customer comments and requests. à Monitor the effectiveness of the new products. à Use newsletters to send the word out to existing customers. à Gain increased revenue.

Explanation: If the business is growing, then the customer base will become increasingly diverse. This means that eventually new products or services will need to be added in order to suit the needs of new and existing customers. The first thing the business should do is ask for the customers’ opinion. A customer satisfaction survey is a very effective way to do this. Because creating new products can be risky, a team of marketing experts should review the success of the new products during their initial phase. The marketing team should also send newsletters to existing customers to let them know about the new products that will meet their needs. As a result of meeting a need and listening to customer suggestions, the firm increases their overall revenue.

Causal Chain 2

Create an incentive program where employees create challenging, yet attainable goals and are rewarded for reaching them. à Increased employee productivity à Employee satisfaction creates better customer service. à Higher customer retention rate due to satisfied and helpful employees

Explanation: The creation of an incentive program centered on employee goal-setting would eventually lead to increased employee productivity. Of course, the goals would have to be work-related and they would have to be something that benefits the company. Employees who reached their goals would not only be personally satisfied, but they would receive a reward for their hard work. Those who did not meet their goals would be encouraged to set smaller goals and try again. All goals would be reviewed by the supervisor in charge. Satisfied employees provide greater customer service. Greater customer service would prove to create a higher customer retention rate.

Case B

Case B will view the effects of the implementation of BSC as well as note any consequences. It will view the before and after performance of bank branches A-E and mention any significant changes. This case will also review the interviews with bank personnel.

Case B-1

This part of the case study will determine the effectiveness of implementing BSC. The program was used only at bank branches A-E. The data from Table 3 will be used to rate the effectiveness of the program (Albright et al 2001).

According to Table 3, there is sufficient evidence to support BSC. All branches experienced some growth the following year (Albright et al 2001). Branches A-E experienced 21.5 more loans, 31 more deposits, and 163 more in income (Albright et al 2001). Branches F-J experienced 5 more loans, 7.7 more deposits, and 59 more in income (Albright et al 2001). Branches A-E experienced 16.5 more loans than branches F-J after the implementation of BSC (Albright et al 2001). Branches A-E also had 23.3 more deposits than branches F-J (Albright et al 2001). Branches A-E had 104 more income than branches F-J (Albright et al 2001).

Case B-2

The customer service representative at Branch A mentions that BSC defines a strategy for helping them reach their goals; loans, deposits, and growth. The loan representative at Branch B notes that BSC is a tool to measure progress. The customer representative at Branch C believes that BSC will help create more teamwork throughout the branch between workers of varying ranks and statuses. The loan representative at Branch D believes that BSC is for charting growth. The loan representative at Branch E believes that BSC is to track employee performance.

It appears that each branch was effective in their implementation of BSC despite the variations in executing it. Each branch experienced a significant amount of growth, as noted in Case B-1. If anything, the differing strategies for using BSC proved highly beneficial.

Case B-3: Statement of Advice

The BSC approach worked well for the bank branches in this study. BSC can be implemented in a variety of ways but it is important to maintain the following consistencies. Offering employee incentives to those who reach their goals is a useful strategy for implementing BSC because satisfied employees are productive employees. Encouraging customers to fill out brief satisfaction surveys is another way to improve customer satisfaction and retention. Finally, it is important to hold regular meetings with all of the staff to be sure that everyone is on the same page as well as to conduct employee performance reviews.

References

Silverthorne, S. (2008). Executing Strategy with the Balanced Scorecard. Retrieved August 20, 2009, from http://blogs.bnet.com/harvard/?p=397&tag=nl.e713

Albright, T.; Davis, S.; & Hibbets, A. (2001, October). Tri-Cities Community Bank: A Balanced Scorecard Case. Strategic Finance, 83(4), 54-60. Retrieved August 20, 2009, from http://proquest.umi.com/pqdweb?sid=1&vinst=PROD&fmt=6&star tpage=-1&clientid=29440&vname=PQD&RQT=309&did=83040028&scaling=FULL&vty pe=PQD&rqt=309&TS=1226794941&clientId=29440