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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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Implementation of BSC based performance management system in larger organization unlike smaller counterparts is a greater challenge that stems from wider employee base who are resistance to change.British Aerospace is example of large organization that have successfully implemented the BSC with more than 100,000 employees in nine ‘home’ markets (UK, USA, Sweden, Saudi Arabia, France, Italy, Germany, Australia and Canada) and had customers in more than 80 countries. In this discussion, illustration of success and barrier of implementation of BSC in large organization is done and comparing BAA’s approach to the Balanced Scorecard and more traditional approaches

British Aerospace(BAE) Systems used SAP to facilitate it in reporting their monthly outcomes of the scorecard in a visually appealing approachonline. As a result, the information was shared effectively among all company employees, and this was observed as key to management control. When the scorecard was introduced to BAE in 1997, it included merely eight performance measures. The number of performance measureswas deliberately limited, to allow the measurement system to evolve over time. However, the organization scorecard now includes over 70 measures, which are structured into the five ‘values’ to enable goal settingacross different departments and company levels.

When compared before BAE Systems developed and implemented the balanced scorecard, devotion was concentrated on measuring and managing according to classic accounting performance metrics that were the traditions of the company.Rather than identifying and examining non-financial value drivers, the company tended to measure what could be measured, rather than what should be measured. Even with most important changes to its control systems (including implementation of activity-based costing,investment inmodern facilities and machinery,the adoption of modern manufacturing methods and systems and analysis programmes), competitive performance did not increase as widely expected, and it open up need for serious analysis of the company’s strengths. Faced with changing markets and increased competition, the BAE Company fought to re-establish its dominance and regain market share.

At the centre of the culture change in wider organization with many employees programme was BAE’s balanced scorecard. The change progression was supported by the fact that the information,on which successful operation of the scorecard relied, was extractable from BAE’s existing SAP R/3 (ERP) system. As a result the scorecard was the heart of the organization’s control system. (BAE used ‘traffic light’ reporting to highlight deviations from expected performance).

During implementation of the BSC the reports contained layers of hierarchically linked data, whichpermitted employees to view data from a top-down or bottom-up perspective. This illustrates that employees can both drill down to detect the factors contributing to performance results, or drill up, to affirm how their own work pays to the performance of their organization as a whole.

The organization followed seven steps to implement the changes to accommodate the BSC which begins with review of competitive position and involvement of senior employees to ensure cohesion in implementation of change where the five company directors joined the chief executive to undertake a comprehensive SWOTanalysis of the company. In the third step Creation of a shared vision was carried out where 130 groups developed a shared vision to clarify. Communication of the company vision was step four, step five include plan for and create short-term goals. Step six was embedding cultural change and lastly articulates the linkages between the cultural change project and organizational competitive success.

In Overcoming resistance to change the company established and defined the role of the 130Group in crafting and clarifying thesuggested value statements were crucial inovercoming resistance to change. To preserve commitment to its change programme, BAE Systems used the objective measures resulting from the values of balanced scorecard, and linked each to its impact on financial performance, and ultimately to the increase in company stock price. The company to ensure wider acceptance and reduce resistance among employees of the BSC system re-alignment of strategic focus, and an engaged, motivated and empowered workforce was done.

The change programme at BAE systems include high-ranking management decided to implement a comprehensive change programme, which involved: Disassembling the conglomerate that was in existence since 1979, trading off this with interlocking businesses that would supplement one another and create competitive benefit for the entire enterprise; and Reducing reliance on managerial authority, recognized rules and procedures and narrow divisions of work.

In conclusion one of the most importantand outstanding strengths of the Balanced Scorecard is its adaptability even with the increased organization base. The real command of a properly developed Balanced Scorecard is that it links the performance measures to the organization’s strategy. Organizations implementing a Scorecard process such as BAE are forced to ponder clearly about their prime purpose or mission; their strategy and who the stakeholders in their organization are and what their necessities are. They also have to evaluate quite clearly the time scales in which they hope to achieve their strategic objectives.

References

Braam, G.J.M. (2012). Balanced Scorecard's interpretative variability and organizational change.In C.-H.Quah&O.L. Dar (Eds.), Business Dynamics in the 21st Century (pp. 99-112).

Murby, L., Gould, S., (2005). Effective Performance Management with the Balanced Scorecard: Technical Report. Chartered Institute of Management Accountants