Strategic Performance Measurement (SPM), Essay Example

Introduction

This report develops a strategic performance measurement focus on the Balance Scorecard strategy. It will evaluate the performance of the University of Hertfordshire (UH) in 2015-16 and will evaluate the university’s 2020 vision. Different perspectives are evaluated, including the financial perspective, customer perspective, internal business process perspective, and learning and growth perspective. Finally, this report will include recommendations for the future strategic plan for the university to deal with the 2020 vision.

The financial perspective is concerned with the improvement of the operation efficiency of the UH. The Customer Perspective is evaluating the services that are provided by the university and whether they satisfy the customers. The Internal Business Process Perspective is concerned with the developments made by the university, including “prototype of a robotic system”. The Learning and Growth Perspective is concerned with implementing cross-training, providing access to transaction information, and aligning personal goals with those of the university. Finally, the recommendations will be focused on achieving the vision 2020.

Literature Review

Strategy Performance Measurement (SPM) 

Strategic Performance Measurement is a functional and dysfunctional measure for companies’ performance. It is a process guides the management of a company through achieving its strategic objectives, and aligning employees’ attitude and behavior. Ultimately, it influences the performance of a company and also has a positive impact, because it can take corrective and preventive actions to guide the company to greater performance (De Waal, 2013; Micheli & Manzoni, 2010).

SPM performs health checks in companies, links the strategic objectives and business measures to achieve the company’s goals, and clarifies the vision of company’s operational strategy. Also, it enhances strategic feedback and learning. The strategic performance measures provide an early warning system by monitoring and changing key indicators that impact on staff behavior, in order to promote desired changes. SPM is performed in 70% companies, medium and large firms, in the USA and Europe, as well as in many governmental departments (Kourtit & Waal, 2008).

Balance Scorecard (BSC)

Balance Scorecard is defined as a strategic planning and management tool that aims to achieve the strategic objectives of a company. It is widely used in different industries, businesses, government, and in non-financial organizations. It was developed by Norton and Kaplan in 1990s, and they designed it as a performance management framework that adds non-financial measures to traditional financial metrics. It aligns business’s activities with the business strategy, and it improves the internal and external communication in the company, and monitors business performance against business’s strategic goals (Rao & Sreelakshmi, 2017).

BSC improves the internal and external communication in the company, monitors business performance against business’s strategic goals, and helps managers to have a ‘balanced’ view of the performance of a company (Rao & Sreelakshmi, 2017). Also, the four perspectives under BSC can help companies to focus on the critical areas, and translate their strategy into actions (Seraphim, 2006).

The phrase Balance Scorecard was formulated in the 1990s with deep roots in the pioneering on the performance measurement reporting by General Electric and other work by French process engineers in the early part of the 20th century (Rao & Sreelakshmi, 2017).  BSC proposes that the company must be viewed from the four perspectives and metrics, by collecting information and gauging it against all the four perspectives. Kaplan and Norton state that “these perspectives are interlinked and layered: so that financial results are determined by customer satisfaction, which is in turn determined by internal processes and, underneath these three layers, is the foundation of the learning and growth perspective.” (2001:18).

Marr and Adam (2004) have found that the major weakness in Balance Scorecard method in strategy planning is the learning and growth perspective. They state that the last attempt to improve BSC by Kaplan and Norton had an adverse effect. Moreover, Marr and Adam have outlined how Kaplan and Norton have failed to acknowledge the large body of writing on intangible assets. However, from my point of view, BSC will not always guarantee success for companies because it still has other weakness. Many companies have failed to put the required measurement to success. There are two reasons for the difficulty experienced by companies in utilizing the BSC: the time and fees. The Balance Scorecard needs some time to be implemented in a company. Many firms might not have enough time or resources to invest accurately in this performance measurement. The fees, implying the cost of implementing this method, may not be readily available for all organizations. BSC might be expensive because all the employees of the company must be sufficient and well trained. If employees are not well-trained, this will increase the cost as the company has to provide them the requisite training. Moreover, they might need to improve their production processes, like have high technology and high-quality machines.

The Balance Scorecard: University of Hertfordshire

The table below is a summary of the BSC for the University of Hertfordshire

Financial Perspective

Financial Perspective examines the strategic objectives of a company in order to improve the bottom-line and to achieve the financial objectives. Also, it helps managers to track the financial objectives of a company in order to improve the company’s profit and to increase the value of the shareholders. Financial perspective focuses on the long-term strategic objective (Advance Performance Institute {API}, 2017), despite the need to have balanced approach to performance measurement. Companies incorporate the intangible results from a traditional financial term such as profit before tax, cost reduction, gross revenue (Chia et al., 2009). The financial perspective presents the long-term strategic objectives of a company. Despite the need to have balanced approach to performance measurement, the financial perspective is the major indicator of the profit growth of the company and shareholder’s value. The financial perspective focuses on traditional return-based efficiency and effectiveness metrics (Punniyamoorthy & Murali, 2008). The financial perspective focuses on the revenue of a company, improvement of efficiency and enterprise financial health.

In 2016, the University of Hertfordshire completed its ambitious three years’ accommodation development plan at College Lane. There are 2,500 new student’s bedrooms built and a further 500 were refurbished. BREEAM, the industrial body that evaluates procurement, design, construction and operation of important construction projects around the world, considered this outstanding work. Moreover, the University has built a new science building and a new modern campus that bring everything together from labs, technology, research facilities, modern classrooms, and a good environment that fits the needs of students. Also, they have achieved their main vision which it is the estate project; it included £50 million investment in the teaching facilities all over the university, £18 million to improve the College Lane Campus, £5 million to improve the social site in the De Havilland campus. Since 2009, the university has decreased its external borrowing, paid £15 million to their lenders, and reduced gearing and its interest burden. The proportion of external borrowing to income dropped to below 30% (University of Hertfordshire, 2015).

Customer Perspective

The customer perspective focuses on the target performance that is related to customer and market. In this perspective, managers identify customers, the market sectors and which business unit will compete and the performance measures of the business unit in these specific sectors (Kaplan & Nortan, 1996). Kaplan and Norton (1996) stated that if the customer perspective is implemented in the right way, it guarantees the achievement of a company’s objectives such as improving customer satisfaction, profitability, relationships with other stakeholders, and new customer acquisition and increased market share in targeted sections. Also, this will enable the company to measure the value of propositions such as prices, a unique mix of products, service, and relationships. This will deliver the company to it is targeted customers and market segments. Businesses must identify the segments in which they are going to compete (Kaplan & Norton, 1996). However, it is difficult to implement the customer perspective in many companies. However, it is easier for the University of Hertfordshire as its 2020 vision cares about the value of the students, which enables them to identify what their customers want.

According to the University of Hertfordshire’s strategy plan 2015-2020, the university is looking to gain students satisfaction. To achieve this, the university focuses on providing professional and qualified teachers, providing the highest quality of lecture rooms and facilities, and developing students’ social and global awareness. Moreover, the strategy has focused on the international students by strengthening the university’s position as a university of choice for international students, improving international perspectives, improving global partnerships, and strengthening the curriculum on a global perspective (University of Hertfordshire, 2015).

Internal Business Process Perspective

This perspective helps managers to identify the best actions to achieve the goals of a company by analysing its internal business processes (Drury, 2004). Metric based analysis is important for managers in aligning a company’s services with the need of it is clients (Papenhausen & Einstein, 2006). This perspective focuses on the internal process of the company, which the company will need to improve to achieve the financial and customer perspective (Drury, 2004). According to Chavan (2009) a “well-oiled machinery” of internal processes is important in any work and may not always be associated with external concepts. Internal business processes are identified by three major processes; innovation processes, operation processes, and post-service process (Drury, 2004).

The University of Hertfordshire has developed new services to improve its business. The prototype of a robotic system is a system developed by scientists at the University, which helps invalids and can nurse old people, functioning as carers, to live independently.  In March 2016, the University of Hertfordshire developed the Digital Hack Lab with the latest technology in 3D printing and additive manufacturing innovation which can help to improve the performance of companies in different areas, including designing products, medicine, fashion and media, and architecture. Moreover, the university understands the customer’s sectors by seeking to deliver their services in the best way to the public. As the university is primary to Hertfordshire’s economic growth, it seeks to increase the value of its business by providing expertise teachers and professional services to achieve the desired objectives based on strong partnerships such as those the university has developed with the leading European defense companies. It creates a dedicated and devoted workforce with the skills needed by employers. Moreover, the university understands the customer’s sectors by seeking to deliver their services in the best way to the public.

Learning & Growth Perspective

The learning and growth perspective is important in satisfying customer needs and improving the efficiency of the business processes to achieve the strategic objectives of a company. This perspective focuses on the challenges of a company to improve such as training company’s employees. Thus, the company can keep satisfying its customers in the future (Drury 2004). Learning and growth metrics can guides directors in centering training funds that can help the company to achieve it is future strategic objectives (BSC, 2010). Kettunen (2005) states that the learning and growth perspective includes three principles; the capability for R&D, environmental scanning and customer knowledge, and quality and assessment capabilities, and in-house training.

The university has improved and implemented cross-training in risk awareness, and risk indicators. Also, the university has achieved the 2016 goals and met the needs of their business long into future by aligning their courses, research, knowledge exchange, and commercial activities. Therefore, they form modular units to provide industry-related skills as well as create more jobs, exchanges, volunteerism, and industry projects.

Conclusion and Recommendations

The University of Hertfordshire has set an appropriate strategy plan to achieve its goals for the future, according to the previous analyses of BSC on its strategic plan. It shows that the university has done well by taking care of its vision, which is to be friendly, ambitious, collegiate, enterprising and student- focused.

In the future, there must be more courses and initiatives to the students and to the staff in the university to increase awareness of the risk of climate change. From my point of view, as a student at the University of Hertfordshire, there is high consumption of electricity and water. The university must also improve its plan to reduce its carbon footprint by reducing the amount of gas emitted by various processes. Moreover, there must be more initiatives in the company to identify future risks earlier, just to help the university to transfer the risk, and to be adapted with any new financial mechanisms in the future. As Edward  states, “pro-action is invariably cheaper than reaction” (2015:21).

References

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