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Running head: BALANCE SCORECARD IMPLEMENTATION

BALANCE SCORECARD IMPLEMENTATION

Balance Score Card Implementation

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Business Studies

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In any organization, four factors are a must for the organization to live, leave alone to thrive. These factors are land, labor, entrepreneurship and finance; these are the basic units of production, without which no meaningful outcome would ever be realized by any kind of Organization. The Balanced Score Card inculcates these basic units in its ideology that it is based on, that is, financial focus, learning and growth focus, internal focus and customer focus.

This aspect of the BSC touching on these basic units of production makes the BSC applicable in any organization as it touches on the core fabric of any organization, the DNA of any ‘living’ organization. The Balanced Scorecard concept seeks to provide managers with a set of performance metrics balanced between outcome measures and measures of the drivers of future outcomes. It provides a framework for organizing strategic objectives into the four perspectives, financial, learning and growth, internal processes and customer focus perspective. In each of the four perspectives quantitative measures are developed in order to operationalize the model.

The British Airports Authority, henceforth referred to as BAA took a gigantic leap of faith in employing the BSC paradigm in managing a multi-billion Euros worth of project contract. The BSC has traditionally been used in managing organizations and not projects but it is now being used in the strategic management of projects, thanks to the good case practices of such projects like the Terminal 5 project. Strategic Management has been defined as "the identification of the purpose of the organization and the plans and actions to achieve the purpose. It is that set of managerial decisions and actions that determine the long term performance of a business enterprise. It involves formulating and implementing strategies that will help in aligning the organization and its environment to achieve organizational goals.

The BSC is a tool used in enabling the strategic management of an organization or project. And just like the role of strategic management in comparison to other styles is that it is most effective when an organization faces too much external influence, the BSC is most effective when external factors are at play, and this ranges from external suppliers to customers and stake holders. Strategic management is an integration of management theories which stem mainly from the systems perspective, contingency approach and information technology approach. The contingency theory draws the idea that there is no one or single best way or approach to manage organizations, Organizations should then develop managerial strategy based on the situation and condition they are experiencing. In short, during the process of strategy formulation, implementation and evaluation, these main strategic management theories will be applicable to management of organization as tools to assist them in making strategic and guided managerial decision. This is the same ideology that the balanced scorecard considers and which makes it very dynamic in handling the management of any kind of organization or project. The common strategic management theories noted and applicable in strategic management of projects and organizations are the profit-maximizing and competition-based theory, the resource-based theory, the survival-based theory, the human resource-based theory, the agency theory and the contingency theory.

The Balanced Score Card has however proven to be a most effective strategic planning tool of all. This system proposes a balance between concepts that could be contradictory to managers. For example; it aims to balance between short-term and longer-term objectives, financial measures versus operational measures, internal performance versus external performance, enabling indicators versus results indicators and between leading and lagging indicators. This has made it extra ordinarily successful because it has managed to achieve more effective management results than any other tools used by managers before. This is why the T5 project, despite its titanic nature is successfully completed, timely and efficiently.

The adaptable nature of the Balanced score card is seen in the BAA’s T5 project and still one is able to identify traces of the traditional BSC paradigm from the hybrid version that the T5 project has created and applied, it is more like an evolution of the Balance Score Card ‘species’ and still the genetic code remains the same as the original version. These similarities with the traditional BSC are such as; the focus of this hybrid Balanced Score Card approaches on the internal systems of the project. This is seen in its emphasis on ensuring that all the consultants and suppliers work together. People from all stakeholders were encouraged to raise issues at the earliest opportunity and this helped the reporting and discussions on performance and non-conformance issues and this ensured that the internal systems run smoothly.

The other similarity is the financial focus. The project has gone out of its way to ensure that costs arising from resource wastage and avoidable screw ups are completely eliminated. Analysis of the data shows that 70 per cent of the total cost of non-conformance had resulted from just 150 reports. A no-blame culture that the project had adopted resulted in speedy and effective resolution of all issues. This greatly reduced the costs arising from avoidable eras and mistakes which is very common in public projects.

Another similarity with the traditional BSC is that in the traditional Kaplan and Norton’s Balanced Scorecard the enabling or leading indicators are provided by learning and growth. In the T5 Balanced Scorecard, the enabling indicators are ‘‘Benchmarks Agreed’’ (which also include some financial benchmarks) and ‘‘Verifications Planned & Work Supervised’ the hybrid BSC therefore has considered the traditional value of learning and growth.

The Handing over of Agreed work and making sure that the Work being handed over is Complete in the T5 relates to the customer aspect of Kaplan and Norton’s traditional BSC. In this case, the customer to the project include the members of public and BAA.

The T5 project Key Performance Indicators also relates to the internal aspect of the traditional BSC. The project greatly emphasizes on compliance assurance as a way of maintaining quality internal process is so much like the traditional BSC approach.

However, on the other hand, there are some key differences that stand out in the T5’s BSC implementation from the traditional BSC. One of the greatest contrasts with the traditional BSC is the fact these BSC paradigm has been applied in the managing of a project while the traditional one were only used to run organizations.

Another difference one might notice is that not all the key measures as a group in each of T5 KPIs conform to specific aspect of the traditional Kaplan and Norton Balanced Scorecard, for example, T5s Total Estimated Cost of NCRs’’, which is a key measure of the KPI ‘‘Compliance Assured’’, also relates to the financial aspect.

Another difference is that T5’s learning and Growth aspect is focused on that specific project and not on the people or the specific organization while the Traditional BSC’s Learning and Growth aspect focused on the learning and growth of the individuals/ people involved in the organization and also the growth of the organization as a whole.

References

1. Basu, R., Little, C., Millard, C., (2009). Case Study: A fresh approach of the Balanced Scorecard in the Heathrow Terminal 5 project. Measuring Business Excellence. 13(4). 22-33. Retrieved from: http://www.perf-ex.co.uk/wp-content/

2. uploads/2012/04/T5-case-study-MBE-papaer.pdf

3. Gordon Walker (2009), Modern Competitive Strategy, McGraw-Hill International Edition.

4. Lamb, Robert, Boyden, Competitive strategic management, Englewood Cliffs, NJ: Prentice-Hall, 1984

5. Martello, M., Watson, J., Fischer, M., (2008). Implementing a balanced scorecard in a not-for-profit organization. Journal of Business & Economics Research. 6(9), 67-80. Retrieved from: http://journals.cluteonline.com/index.php/JBER/ article/view/2471/2517