Analysis On Blackmores: Implementing Balanced Scorecard As A Performance Management Tool

About Blackmores ltd

Discuss about the Energy And Performance Management Of Green Data.

The main purpose of this assignment is to conduct an analysis on Blackmores ltd so as to establishes how the business internal process and performance will be improving if the management incorporate Balanced Scorecard as a performance management tool. The analysis will be identifying the business process of the company and also the internal strengths and weaknesses of the business (Hoque 2014).

The company which is selected for this assignment is Blackmores ltd which is engaged in manufacture of medical supplements. The company is one of the leading brands which produces Natural health solution. The company was established by Maurice Blackmore in the year 1932. The company is one of the few companies which uses naturopathic expertise and combines the same with the scientific formulas to manufacture the bests products related to health and hygiene. In addition to this, the company is committed towards following innovative practices so that the business can bring about positive change in the natural health sector and provide the customers of the business products which are distinguished to have highest quality (Blackmores.com.au. 2018). The company has wide market reach and the company is able to reach the customers from 17 different markets.

The extensive range of vitamins, herbal products and mineral supplements makes up for the medicines which are to be manufactured by the business. Moreover, the business has the practice of sustainable development and is committed to be sustainable in the operations of day to day business of the company. The focus of the management is to ensure that the business is able to generate growth and continuous improvements so that the business can maintain theirs positions as market leaders.

Balanced Scorecard is a management tool which is used by an organization to evaluate performance of an organization. The balanced scorecard of the company measures multiple features of an organization. In other words, Balanced Scorecard is a performance metric which is used by businesses in strategic management which is used by businesses to improve the internal functions and also their related external outcomes (Tjader et al. 2014). With the help of balanced scorecard, a company can measure different features of a business and establish a standard performance of the business. A balanced Scorecard can be prepared on the basis of needs of the organization and thereby more features can be added to a balance scorecard easily (Bhattacharya et al. 2014). An effective balanced scorecard should be having the following features:

• Balanced Scorecard must be prepared in such a manner that the same highlights the strengths of the company and also the corporate strategy of the business. Suppose a business aims to have lower costs but at the same time have accelerated growth. The balance scorecard should effectively identify the specific objectives of the business (Sainaghi, Phillips and Corti 2013). In addition to this, the learning and growth perspective of the management prepared in such a way that its improves the internal business process of the company.
• Balanced Scorecard should help the business in communicating the strategy which is formulated by the business to different departments in an understandable manner (Reefke and Trocchi 2013). The employees and the departmental head take necessary steps which are required for their performance and also to achieve the goal of the business which should be based on the balanced scorecard (Nikolaou and Tsalis 2013). In many businesses in order to facilitate fast and quick decision, balanced scorecards are prepared by the businesses at departmental level.
• In a business which follows the policy of profit maximization, the balanced scorecard plays a vital role and focuses more on the financial objectives and measures. A good balance scorecard should always consider the non-financial aspects of the business and improve the same so that the business can achieve the financial aspect which is profit maximization (Ghamkhari and Mohsenian-Rad 2013). In many cases businesses are able to achieve a decent balance between financial and non-financial aspects of a balanced scorecard and many of such non-financial scorecards can be identified as indicators of the financial performance of the business (Gibbons and Kaplan 2015).
• The balanced Scorecard limits the number of measures used for identification of the critical issues which the businesses faces. Balanced Scorecard brings the attention of the management to the most critical problem which the business faces and also helps in implementing an appropriate strategy to tackle the problem (Cooper, Ezzamel and Qu 2017).
• The scorecard highlights suboptimal tradeoffs that the management may make when they fail to consider the operational and financial measures together. For example a business may be tempted to increase the financial performance of the business in the short run by reducing the funds which were allowed for research and development (Perkins, Grey and Remmers 2014). In such a case an appropriate balanced scorecard would be able to advise the management that they are increasing the financial performance in short run by hurting the chances of the business to make a decent financial performance in the long run.

Balanced Scorecard as a Performance Management Tool

The balanced scorecard is a very useful tool which the management has which can measure the performance of the business as well as help in planning process of the business. There are four components in a balanced scorecard which are Financial perspective which defines the financial goal of the business, Customer Perspective which defines the products which the business is providing to the customers of the business, Internal business process which defines the internal processes which are followed by the management for adding value to the product of the business and learning and growth perspective which defines what activities are there which the business undertakes for future development of the business (Tjader et al. 2014).

In order to understand the difference between traditional performance measurement system and Balanced Scorecard, it is important to get an understanding of Traditional Performance Measurement System. Traditional Performance measurement system is solely focused in measuring the financial performance of the business which the business generates by selling the products of the company. Such a practice measures on the basis of internal accounting reports such as profitability, revenue, cash, earning per shares and similar other financial indicators of the business. Such type of data is also known as lag data as they are known to only reflect the past data and historical performance of the business (Van Dooren and Van de Walle 2016). The data which is provided in such type of measurement are mostly quantitative data and such can be used for improving the financial performance of the business but such data will be of no help when the management wants to take a decision which is regarding long run business conditions. Such data if taken for long term decision making will results in incorrect decision-making process.

As per Porter, if the business solely relies on the financial metrics than the business will be sacrificing long term benefits which the business can achieve. For example, cost reduction will only help the business to gain profits in the short run but permanent transformation of the cost structure of the business will help the business in achieving the long term profitability for the business. A research show that the traditional performance measurement system was introduced during the industrial age which is almost 50 years or so ago for measuring the profitability of the business. The world has changes ever since and has become more competitive in nature. The business is ever changing and the market is becoming more and more dynamic in nature. With the level of technological changes and innovations which are taking place even in present market, business have to formulate strategies so as to competitive and survive in such a market (Melnyk et al. 2014). Therefore, it is clear that in such a market, only by focusing on the financial aspect of the business, the company will not be successful. The company needs to focus on all important aspects which may be financial or non-financial in nature. The modern business has moved from mass production and therefore cannot rely on just the financial data of the business and has put more emphasis on the intangible assets which are either made by the business or purchased such as goodwill, customer relationship, human and intellectual capital. In todays world it is unadvisable to completely rely on the financial data of the business there are other factors which a business must consider before taking appropriate decisions.

Traditional Performance Measurement System vs Balanced Scorecard

In addition to this, traditional performance measurement system is not in any way liked to the core strategies of the business. The strategies of the business focus on the long term business development policies of the company and also related to the resource availability and the opportunities which the business has in the long run. Hence it is clear that traditional performance measurement system measures the short term performance of the business (Yadav and Sagar 2013). This is another fault in the system as an ideal management tool would measure the performance of the business in terms of past performance but also anticipate the performance of the business for future.

Balanced Scorecard on the other hand is a performance measurement tool which addresses the weakness in the traditional performance measurement system. Balance scorecard has added the non-financial metrics to the traditional performance measurement system thus providing an balanced view of the performance of the business (Giannopoulos et al. 2013). Thus, it is clear that BSC incorporates both financial and non-financial aspects which can affect the business. In addition to this, BSC reflects the changes which takes place in the modern environment which is highly competitive in nature. The management tool takes into consideration the intangible assets of the business which have become an important source for competitive advantage in the present world.

BSC is an integrated management tool which also helps in strategic management of the business. The management tool links the strategic objectives of the business with the performance measurement of the business. The management tool provides a framework which can translate the strategic objectives of the business in terms of quantifiable performance objectives which the business can measure effectively. There are four perspectives which are discussed below:

1. Financial Perspective: The financial perspective of the business is concerned with thr financial objectives and goals of the business. The financial perspectives analyze the financial performance of the business for the current year as well as the past years. The purpose is to measure the financial success of the business and also track how the business look to the needs of the shareholders of the company (Bento, Bento and White 2013). The mostly used financial measures which can be commonly seen in a balanced scorecard are profitability of the business, revenue which is earned by the business, return on investments of the company, return on capital employed of the business, cash flow and sales growth of the business (De Visscher 2016). The financial indicators which are related to the overall success of the business are represented in the Balanced scorecard which is prepared by the business. The financial perspective is also quite useful in defining the financial goals of the business.
2. Customer Perspective: The customers perspective which is included in the balanced scorecard reflects the view point of the customers of the business as to how they see the company. The perspective is mainly concerned with customer satisfaction and retenion of customers as well. This is because the customers are the life blood of a business and without their continuous support businesses will not be able to survive. The retention of potential customer is essential for long term business growth and survival. This perspective forms a part of the long term planning process of the business. This perspective makes it clear that the goal of the business should be fulfilling the demands of the customers and ensuring that the product which is provided to the customers have value (Martello, Watson and Fischer 2016). The measures which are included in such a perspective are customer satisfaction rate, customer retention ratio, quality performance, percentage of sales which is achieved and the feedbacks which are received from the customers. The feedbacks which are received from the customers are important source of identifying whether the customer is satisfied with the services which is provided by the business.
3. Learning and Growth Perspective: As per this perspective, the focus of the business is mainly on the intangible components of the business which are human capital and operational capital. This perspective identifies whether there is a possibility for the business to grow any further, improve the business structure and create value for the customers. The learning and growth perspective of the business is also related to the innovations which are conducted in a business for the purpose of improving the internal structure of the business and also identifying a way in which the business can add more value to the products which are supplied to the customers. The measures which are selected for such a perspective are job satisfaction, employee turnover, training of employees and the rate in which the business is conducting research and development for innovation purposes. The main focus in this perspective is innovation and the perspective are related to the long term business growth and survival in the competitive environment.
4. Internal Process Perspective: This refers to the internal process area of the business which the business needs to achieve in order to survive in the everchanging business environment. The perspective gives a clear idea as to how well the business is operating and what are the activities of the business which create value for the customers. If a business has an effective internal process structure than the costs which is associated with product manufactured will be less and the sales revenue which the business generates will be more. The management of the company needs to develop proper strategies so as to improve the internal process of the business and focus on creating value for the customers of the business. These measures include processes such as efficiency level, value analysis of unit costs and process alignment.

Thus, from the above discussion it is clear that the BSC is made up of the four perspective which have been discussed above and it can also be seen that BSC covers a vast area in performance measurement of a company which traditional performance measurement system clearly lacks. In addition to this, BSC is linked to the organizational strategy which means it cover both short run and long run perspective of the business which is not the case with traditional performance management system which only measures short term perspective of the business. Thus, from the above analysis, it can be said that BSC is superior to Traditional system of performance measurement.

Implementation of Balanced Scorecard in Blackmores ltd

Blackmores ltd is engaged in manufacturing business of medical supplements and for the purpose of performance management of the business and also strategic planning, the management of Blackmores ltd should implement BSC in the business. The business can effectively implement the management tool which will be surely beneficial to the business. The business of Blackmores ltd will be following the BSC on the basis of the four perspectives of the BSC which are discussed below:

• Financial perspective: From the viewpoint of Blackmores limited, the company is doing excellent in terms of financial performance of the business and is regarded to be one of the leading medical accessories companies in Australia. However, with the introduction of BSC in the business, the management will be able to better monitor the performance of the business in terms of finance metrics which are included in this perspective which are all financial indicators demonstrating the financial performance of the business. The profit which is made by the business, the dividends which are offered by the company, the cash inflows of the business all forms under the category of financial perspective of the business.
• Customer Perspective: As per the financial performance of the business and the reputation which the business enjoys in the market comes under the customer perspective of the business. The company is regarded to be one of the leading brands in Australia which provides medical accessories to the business. If the management of the business implements BSC then the management will be able to measure the customer satisfaction and customer retention rate of the business.
• Learning and Growth Perspective: This principle focuses on the innovative approach which is taken by a management in the business process of the company. Blackmores limited is committed towards following innovative practices so that the business can bring about positive change in the natural health sector and provide the customers of the business products which are distinguished to have highest quality. The company produces medical supplements and therefore is naturally involved in innovative practices to come up with new drugs. This shows that the business can effectively implement BSC as a performance management tool which can further improve the business.
• Internal Process Perspective: The management of the company can improve the internal process of the business which can be operations, management of finances and costs and other similar factors effectively. If the management of Blackmores ltd can improve the internal business factors then the performance standard of the company will further enhance which will lead to further growth and development of the business.

Conclusion

Thus, from the above, explanation, it is clear that the management of Blackmores ltd should implement BSC as a performance management tool in the business. The above discussions also make it clear that BSC as a performance management tools is much better than the Traditional performance measurement tool and it also covers the strategic objectives of the business. The four perspectives of the BSC are also discussed in brief in the above paragraph. Thus, it can be said that BSC is one of the best management tools which the business can implement in today’s changing and dynamic market.

Reference

Bento, A., Bento, R. and White, L.F., 2013. Validating cause-and-effect relationships in the balanced scorecard. Academy of Accounting and Financial Studies Journal, 17(3), p.45.

Bhattacharya, A., Mohapatra, P., Kumar, V., Dey, P.K., Brady, M., Tiwari, M.K. and Nudurupati, S.S., 2014. Green supply chain performance measurement using fuzzy ANP-based balanced scorecard: a collaborative decision-making approach. Production Planning & Control, 25(8), pp.698-714.

 Blackmores.com.au. (2018). Company information. [online] Available at: https://www.blackmores.com.au/about-us/company-information [Accessed 22 May 2018].

Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.

De Visscher, F.M., 2016. Financing transitions: Managing capital and liquidity in the family business. Springer.

Ghamkhari, M. and Mohsenian-Rad, H., 2013. Energy and performance management of green data centers: A profit maximization approach. IEEE Transactions on Smart Grid, 4(2), pp.1017-1025.

Giannopoulos, G., Holt, A., Khansalar, E. and Cleanthous, S., 2013. The use of the Balanced Scorecard in small companies. International Journal of Business and Management, 8(14), p.1.

Gibbons, R. and Kaplan, R.S., 2015. Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture?. American Economic Review, 105(5), pp.447-51.

Hoque, Z., 2014. 20 years of studies on the balanced scorecard: trends, accomplishments, gaps and opportunities for future research. The British accounting review, 46(1), pp.33-59.

Martello, M., Watson, J.G. and Fischer, M.J., 2016. Implementing a balanced scorecard in a not-for-profit organization. Journal of Business & Economics Research (Online), 14(3), p.61.

Melnyk, S.A., Bititci, U., Platts, K., Tobias, J. and Andersen, B., 2014. Is performance measurement and management fit for the future?. Management Accounting Research, 25(2), pp.173-186.

Nikolaou, I.E. and Tsalis, T.A., 2013. Development of a sustainable balanced scorecard framework. Ecological Indicators, 34, pp.76-86.

Perkins, M., Grey, A. and Remmers, H., 2014. What do we really mean by “Balanced Scorecard”?. International Journal of Productivity and Performance Management, 63(2), pp.148-169.

Reefke, H. and Trocchi, M., 2013. Balanced scorecard for sustainable supply chains: design and development guidelines. International Journal of Productivity and Performance Management, 62(8), pp.805-826.

Sainaghi, R., Phillips, P. and Corti, V., 2013. Measuring hotel performance: Using a balanced scorecard perspectives’ approach. International Journal of Hospitality Management, 34, pp.150-159.

Tjader, Y., May, J.H., Shang, J., Vargas, L.G. and Gao, N., 2014. Firm-level outsourcing decision making: A balanced scorecard-based analytic network process model. International Journal of Production Economics, 147, pp.614-623.

Tjader, Y., May, J.H., Shang, J., Vargas, L.G. and Gao, N., 2014. Firm-level outsourcing decision making: A balanced scorecard-based analytic network process model. International Journal of Production Economics, 147, pp.614-623.

Van Dooren, W. and Van de Walle, S. eds., 2016. Performance information in the public sector: How it is used. Springer.

Yadav, N. and Sagar, M., 2013. Performance measurement and management frameworks: Research trends of the last two decades. Business Process Management Journal, 19(6), pp.947-971.