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Integration: Causal Chains and Strategy, Capstone Project Example

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Capstone Project

As a supermarket, Wal-Mart has recorded impressive performance over the last couple of years. On the same note, Wal-Mart has been on the move to explore various ways in which it can further improve its performance in business. The management of Wal-Mart is well determined to apply Balanced Scorecard to boost and improve the financial performance of the company. Balanced Scorecard is a performance improvement tool which helps an organization to align its activities and practices to organizations strategies and vision and at the same time help to enhance the internal and external communication of the company. In addition, Balanced Scorecard is vital in evaluation of the company’s performance in consideration with the achievement of the strategic goals and targets (Niven, 2006).

One of the major benefits associated with Balanced Scorecard in Wal-Mart relates to causal chains and mappings across both performance measures which are nonfinancial to key performance measures that are financial. In this case, the three nonfinancial perspectives that will be under consideration include learning and growth, customer focus and internal business process perspectives (Kaplan & Norton, 1992).

Measures categorized into Balanced Scorecard

Learning/Growth

 

Internal Business

Processes

Customer service/focus

 

Financial
Hours of training employees

 

Satisfaction of employees

 

Turnover rate of employees

 

 

Potential customers conducted via sales calls

 

Referrals

 

Introduction of new products

 

Cross-sells

Satisfaction of customers

 

Retention of customers

 

Appreciation calls/ new and existing customers given cards

 

Product number for every customer

 

New customer accounts

 

The number of new customers

Loan Balances that are outstanding

 

Noninterest-Income

 

Balances of Deposit

 

The created new loans

 

 

 

Considering the categorization Hours of training employees, Satisfaction of employees and Turnover rate of employees under learning and growth objective; my main basis was on how Wal-Mart should continuously engage in creation and improvement of value. In order for the company to attain high standards set in the three other perspectives, it should highly invest its resources in infrastructure and people. The company should therefore engage in identification of various areas that require resources and embark on development of a plan which will empower employees to fulfill the objectives and targets of other perspectives.

Considering the internal business process, I specifically decided to categorize the above measures (refer to the table) mainly on the basis of consideration of the areas where the company need to excel. In order to realize financial and customer perspectives, Wal-Mart must engage in identification of internal business processes that must be created and subsequently improved. With this in mind, I decided to place Potential customers conducted via sales calls, Referrals, Introduction of new products and Cross-sells measures under this perspective.

Performance, cost, quality of service delivery and time are the main categories under which the concerns of most customers fall. I categorized Satisfaction of customers, Retention of customers, Appreciation calls/new and existing customers given cards, Product number for every customer, new customer accounts and the number of new customers based on the way the customers view the company (Wal-Mart). Therefore, Wal-Mart must focus on how value addition can be attained in the products for customers and at the same time tailor the products and services that are relevant and capable of meeting the specific customer needs.

Considering the categorization of Loan Balances that are outstanding, Noninterest Income, Balances of Deposit and The created new loans under financial perspective is on the basis of how Wal-Mart, as a company, appears in the eyes of the stakeholders. In this aspect, the financial objectives of the company must be the focus of every activity or practice underway. Every measure selected by Wal-Mart for the Balanced Scorecard must be part of the integral part or segment of the causal chain that gives rise to performance improvement in financial objectives (Kaplan & Norton, 1992).

Considering the cause-effect chains, in the Balanced Scorecard, the following will happen:

Enhancing growth and learning in the company will lead to improved internal business processes which will then improve the customer value. Once the customer value is improved, the financial performance will subsequently improve. Since the effectiveness of a company’s strategy is determined by its financial performance, the improved financial performance will lead to declaration of the company’s success in terms of its strategy. Incase the strategy of this company is successful, the nonfinancial perspectives will then act as primary value addition indicators demonstrated through improved financial measures (Niven, 2006).

Incase the employees of the company are trained in customer service delivery, product profitability, sales and knowledge on supermarket operation; they will be in the best position to provide services of high quality to customers. At Wal-Mart, employee training programs are measured for effectiveness by means of in-house tests on various training topics. Increasing the knowledge and skills of employees will lead to high quality referrals, proposals of cross-sells, greater customer satisfaction and improved customer retention. Maintenance of the customer base will lay a foundation for an increase in deposit and loan balances; at the same time, increased successful referral count and cross-sells leads to increased noninterest income (Niven, 2006).

The relative performance for the branches that used Balanced Scorecard approach was relatively higher that that recorded by branches that did not apply the approach. They attained 90% customer satisfaction, 80% customer retention, 85% employee satisfaction, 5% turnover rate, 50% new product introduction, increased cross sells, successful referrals and successful financial strategy. For branches that did not apply BSC approach, they attained relatively lower performance of 50% customer satisfaction, 40% customer retention, 55% employee satisfaction, 50% turnover rate, 20% new product introduction, reduced cross sells, less successful referrals and reduced success in financial strategy (Stan, 2001).

The managers of the five branches applied own individual styles to the implementation of Balanced Scorecard thus creating quality differences and variation in performance between the branches A-E. In this case, branch A must have made a lot of effort to enhance awareness of the importance of implementation of Balanced Scorecard amongst its employees. Branches A and B informed their employees on how Balanced Scorecard will be implemented, evenly distributed the implementation work load and made sure that the measures of Balanced Scorecard were challenging yet realistic. Both branch A and B decided to give cash incentive for employees that managed to go above/beyond the expectations of the scorecard. Branch C insisted on team work by encouraging employees to collectively realize their roles in implementation of Balanced Scorecard. Branch C also concentrated on its employees by motivating them through considering their feedbacks, offering quarterly parties as well as earned time-offs. However, branch C seems to have set some few unrealistic scorecard measures for employees. On greater perspective, branch C, just like A and B, also set most of scorecard measures realistic, evenly distributed the expectations and offered cash incentives to motivate employees. Branch D mostly engaged in promotion of growth of employees and made them focus on their ideas. Branch D and E were similar in a way that they both allowed performance comparison between employees for improvement. However, Branch E failed to involve its employees in developing the scorecard, offer incentives for motivation and provide targets clearly (Stan, 2001).

In conclusion, I believe that the pilot study is a success in consideration with the fact that al the branches, A-E, exhibited improvement in almost financial indicators (deposit balance, loan balance and noninterest income) as compared to previous year. It is only branch E that failed to show improvement in noninterest income. To the Wal-Mart board of directors, I would advice them to integrate the four perspective of Balanced Scorecard, inform all employees on the importance and how to implement Balanced Scorecard. They should also create challenging but realistic goals and involve all employees in Balanced Scorecard development process. They should also provide clear goals, consider feedbacks from employees, motivation strategies (incentives), enhance collectiveness/teamwork, even distribution of workload and make performance comparisons (assessments) for appropriate corrective actions (Stan, 2001).

Balanced Scorecard therefore integrates Wal-Mart’s strategy into Financial, Internal Business, Customer, Learning and Growth perspectives and at the same time balances internal, external, subjective/objective and future performance measures.

References

Kaplan, R. S., & Norton, D. P. (1992). The Balanced Scorecard: Measures That Drive

Performance. Retrieved June 19, 2008, from http://library.tmu.edu.tw/news/%5BHarvard%20Business%20Review%20-%20January-February%201992%5D%20-%20Kaplan%20&%20Norton%20-%20The%20Balanced%20Scorecard%20-%20Measures%20That%20Drive%20Pe.pdf

Niven, Paul R. (2006). Balanced Scorecard: Step-by-step Maximizing Performance and Maintaining Results. Chicago: Johns Hopkins.

Stan, D. (2001). Tri-Cities Community Bank A BALANCED SCORECARD CASE. Retrieved June 19, 2008, from http://www.allbusiness.com/human-resources/employee-development/814343-1.html

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