1. Kaplan and Norton (1996) created the Balanced Scorecard to provide managers with a better performance measurement system, one that was linked to the organisation’s strategy.
Prepare a business report for the benefit of a hospital’s Trust Board on the concept of a Balanced Scorecard that also analyses its usefulness for the hospital.
2. Write a short review that critically compares and contrasts two articles on the implementation of the Balanced Scorecard.
This report is intended to examine what benefits can be achieved by implementing Balanced Scorecard in NewcroftHospital Trust and what problems it can encounter to. The report will outline what complimentary processes would need to be implemented in order to support Balanced Scorecard model in Trust. It would also address to manifest some limitations or disadvantages balance scorecard model.
Developed by Kaplan and Norton (1996) the BalancedScorecard model was proposed as a performance management tool and was intended to assist organizations to look beyond financially weighted Performance Management System. The under premise of Balanced Scorecard model was ‘what is measured is what is gotten’ (Fenton-O’Creevy and Knight).
The Balanced Scorecard model intended to include some other indicators that can contribute toward success in performance and management system of organization. Kaplan and Norton saw the excessive dependence on financial indicators so as to simplistic a view of organization’s performance.The organizations can manage the interrelationships between the activities more efficiently by including financial and non-financial indicators. Kaplan highlighted that the performance indicator included in Balanced Scorecard model need to be linked with strategic goals (Fenton-O’Creevy and Knight). This ensures that organizational activities are aligned with its strategic goals and helps employees to realise how they fit to the bigger picture.
It was advised by Norton and Kaplan that four different perspectives should be associated in Balanced Scorecard model. These four perspectivesinclude innovation and learning perspective, internal progress perspective, customer perspective and financial perspective. Norton and Kaplan further advised that these perspectives can be modified according to organizational needs and objectives (Kaplan and Norton).
As this report intended to examineshow Balanced Scorecard model can be implemented NewcroftTrust Hospital. Firstly, it is going to focus Trust’s strategies because this will form the basis of Balanced Scorecard Model. Then it will be consider, what performance indicator the Trust is bound to report on because these may be needed to be indicated in Balanced Scorecard. Once, the Trust strategy and arbitrary indicators are established the report will turn to focus on needs of stakeholders who should be taken in account, while designing the Balanced Scorecard.
The strategy of Trustis outlined under its vision “Our Patients are at the Heart of Everything we do”. The Trust has broken this strategy into five high level objectives and some high level metrics to assess progress of these objectives.
The NewcroftTrust’s purposes:
To be the healthcare provider for and a national specialist centre
In partnership with Newcastle University Faculty of Medical Sciences and others to be nationally and internationally respected for our successful clinical research and development programme which leads to benefits in healthcare and for patients
To maintain financial viability and stability
To promote healthy living and lifestyles
To sustain the delivery of our vision for integrated care across Newcastle and its environs in partnership with Newcastle City Council
The vision “Our Patients are at the Heart of Everything we do” is accompaniedin one highlevel objective:
To put patients at the centre of all we do, providing the safest and highest quality health care.
For this objective, the associated metric is the number of customers who advised they receive a satisfactory service from Trust. The metric appear to be inadequate as there are 13,500 employees in the Trust and the chosen training inline would not achieve the objective. The Balanced Scorecard design should contribute to strengthen these metric by critically measuring activities, which have greater chance of delivering the objective of Trust (but cannot be easy to measure).The Balanced Scorecard design needs to be aligned with purposes of Trust.To apply, it is needed to include element of the existing performance management system. That is because Trust unabled to report on certain indicators. The important indicators which Trust needs to measure are (BVPI’s) Best value performance indicator, (HIS) Trust information system, (AER) Annual efficiency reviewer (QOL)Quality of life indicator and some other indicators that management may deem necessary.
The patients must report on best value indicator of Trust, while local indicators namely (HIS) Trust information system, (AER) Annual efficiency reviewer (QOL) Quality of life indicator all contribute to Trusts comprehensive performance assessment.The comprehensive performance is indicated by audit commission which is one of the ultimate drivers of local authority. An excellent performance review means to have greater reputation from government, local and national recognition from peer, on other side poor performance review results opposite.
An important to be considered, should the Balanced Scorecard design incorporate existing arbitrary indicator or should it be a completely separate performance framework,working along with existing framework.If the indicators are included then managers and employees may develop indicator overload.If the existing indicators or should the Balanced Scorecard. If existing indicators are not included then corporate performance system seems to become little confusing.In accordance of local authority settings, managers would probably tend to concentrate on existing arbitrary indicator to the detriment of any other indicator.
In both cases, the Balanced Scorecard design marked risk of become unbalanced, noticing that, it is believed that arbitrary indicator should be incorporated.Then the design will need tocomprise and distribute indicators to appropriate level of management to minimize the risk of indicator overload.
The stakeholders are defined by Freeman as ‘any group or individual who can affect or is affected by the achievement of organizational objectives’. The nature, complexity and variety of services provided by local authority indicate that there are different stake holders (Parmar et al.). This report includes some of them who are classified into providers and payers.
The Trust’spatients can be considered as payers. Anecdotal evidences suggest that service users want quality services,which are easy to accessand rendered at timely manner. The patients cost Trust, but it is of the primary reason for existence of Trust.The Balanced Scorecard design would be needed to include indicators which meet patients’ needs. The requirements are expected to be satisfied under process.
Except this, the employer or management can be considered as provider is also a stakeholder. The employer generates revenue which in order finance services. To some extent, the employer and management are accountable to service users (patients) because they are payers. It concludes that employer and management have vested interest in developing quality service. The employer has set its own performance indicators to a achieve this. Some indicators are set by local authorities that can vary, but may form basis for Balanced Scorecards in them.The range for smart indicators must be based on customer or patients perspectives, process and financial perspectives, innovation perspectives and development perspectives.
It is believed to strengthen Newcroft Hospital Trust’s performance efficiently in line with its vision. A recent report regarding Northumbria Healthcare NHS Foundation Trust in England relates, to ensure continued to be a high performing healthcare provider, the CEO stated, “excellent past performance has no guarantee of future success. High performing organizations remain so by looking ahead, understanding challenges and always determining the right strategy”. A component of this was introduction of Balanced Scorecard as their strategic management tool “We were looking for a new and powerful tool for sharpening strategic formulation”.
The above testimonies highlight the positive outcome of Balanced Scorecard implementation by health care providers from improved performance measurement. Banchieri (2011) suggested that across all industries, not just health, implementation of the Balanced Scorecard is most often associated with a strategic change in the organisation (Lucía-Clara Banchieri).
There are many example of success for implementation of balance scorecard model. This paper is intended to review the impact of the balanced scorecardin different level and sectors of organizations.Therefore part of essay is based on data to compare and identify the limitationsof balanced scorecard.
The SAQ Company Limited was established in 2002. It is a retail trading company in the electrical appliance sector. The main product of company is air purifiers, which contributes to its third largest market share in country. The company has annual sales of over 10 million and has twelve full-time staff and a number of part-time staff depending on the season and marketing campaigns. The drive for implementing the Balanced Scorecard came from the manager-owner. The main reason for his decision was that he saw a future for this business and expected rapid growth in the near future. He then looked for an appropriate performance measurement framework that could help him translate the organisation’s mission and strategy into action and believed that the Balanced Scorecard model would be of use in his organisation (Rompho, 2011).
The researcher was invited to be a consultant to help set up the Balanced Scorecard for the company. The design stage lasted about four weeks, and thenthe first completed Balanced Scorecard design was implemented. Since then, meetings were held approximately once a month to discuss the measures in the Balanced Scorecard and the company’s current strategies. Due to the changing environment and constant change in product characteristics, i.e. introduction to new product or innovations, strategies were subject to constant changes and many of the initial measures became obsolete. In some cases, data was not even collected for that specific measure before being discarded (Rompho, 2011). After two years implementing the Balance Scorecard design, the manager-owner decided to stop using it until the company’s strategy was more stable.
The findings of this study imply that, perhaps the Balanced Scorecard concept is found to be useful in many large organisations, but due consideration should be given when it is implemented in smaller enterprises, where the nature of business is totally different. The findings expand the boundary of knowledge, revealing that factors leading to successful use of the Balanced Scorecard in both large and small organisations. Although frequent strategy changes that require revision of the Balanced Scorecard is another important factor to determine the success or failure of implementation (Norreklit, 2000).
From the conduction of the report on the use of balance score card it has been evident that this tool has been proved to be one of the effective means of strategic business management for both, that is for the profit earning as well as for the non- profit organizations. Many health sector organizations,are being referred here which are using balancedscorecard model as framework to track organizational performance, are benefiting from it. It has been highlighted that Balanced Scorecard model has its own advantages and disadvantages or benefits and limitations depending on the nature its use.
An article known as, Using Balance Scorecard as a Strategic Management System, by Robert S. Kaplan and David P. Norton, published during 2007, July, has mainly shed light on the organizational management aspects by the use of the balance scorecard. This Article mainly deals with reflecting on the aspect that how balance score card can be used as an effective tool by the management of business organizations so as set the strategies for the business which would be beneficial from the angle of managing the operations and performance of the business. The concept that has been developed by Robert S. Kaplan and David P. Norton has been proved to be a revolutionary measure toward the performance evaluation of the business from the different angles. This article has also shed light on some of the important features of using balance scorecard by the different organizations, such as from the use of balance scorecard the organizational managers would be able to evaluate on the financial performance of the business from the use of non-financial means of any business organization (Harvard Business Review, 2007). At the same time the performance of the organization is also judged from the other angles like the operational and effective management of the business activities and operations. This article has emphasized on the fact that by the following of balanced scorecard would enable the organizations to achieve its strategic goals (Norreklit, 2000).
On the other hand there is another article which has also been reviewed is the Balanced Scorecard: A Strategic Tool in Implementing Homeland Security Strategies by the Naval Postgraduate School Center for Homeland Defense and Security, published during the year of 2008. This article has provided a further extended use of balance scorecard not only in the management of the strategic functioning of the organizations but also throws light on the use of this tool that can be applied from the context of safeguarding the homeland (Hsaj.org, 2015). This article has dealt with the use of this strategic management tool from the view of single organization and also emphasized on the fact that this also be used as the measuring tool for the purpose to determine the interdependency of the organization with other partner organizations. The balance scorecard can be used to focus on the relationship, the strategic partnership performance and also used for the determination or catering of the gaps resulting in the performance betterment of the organization and also of the industries, on the whole (Meyer, 2002). Mainly analysis the financial outcome of the sector by the way of measuring the financial features of the organization and also of the entire economy by the way of gauging on the rate of return generated and other prospects affecting the financial achievements and also the internal and efficiency of the external and internal aspects of the organizations are gauged with the help of using this management tool.
The main comparison of the two articles is that the first article has emphasized on the use of this tool as the management device which is used by the business organizations so as to improve the performance of the overall business organization, the results in most of cases have been tangible but they are narrow at times. While on the other hand, the second article has provided a discussion on the approach of the balance scorecard; the use of extended balance scorecard used by the single organizations to improve the strategic partnership with other organizations in the industry and has also dealt with the explanation homeland security scorecard and the security strategy.
References
Aravamudhan, S. and Kamalanabhan, T. (2007).Identifying balance in a Balanced Scorecard system.International Journal of Learning and Change, 2(4), p.386.
Chavan, Meena. ‘The Balanced Scorecard: A New Challenge’. Journal of Mgmt Development 28.5 (2009): 393-406. Web.
Denton, G. A., and B. White. ‘Implementing A Balanced-Scorecard Approach To Managing Hotel Operations: The Case Of White Lodging Services’. Cornell Hotel and Restaurant Administration Quarterly 41.1 (2000): 94-107. Web.
Denton, G. A., and B. White. ‘Implementing A Balanced-Scorecard Approach To Managing Hotel Operations: The Case Of White Lodging Services’. Cornell Hotel and Restaurant Administration Quarterly 41.1 (2000): 94-107. Web.
Fenton-O’Creevy, M, and Peter Knight. ‘A Practice-Centered Approach To Management Education’.New visions of graduate management education (2003): n. pag. Print.
Harvard Business Review, (2007). Using the Balanced Scorecard as a Strategic Management System. [online] Available at: https://hbr.org/2007/07/using-the-balanced-scorecard-as-a-strategic-management-system [Accessed 23 Mar. 2015].
Hsaj.org, (2015).The Balanced Scorecard: A Strategic Tool in Implementing Homeland Security Strategies | HOMELAND SECURITY AFFAIRS. [online] Available at: https://www.hsaj.org/articles/115 [Accessed 23 Mar. 2015].
Inamdar, N., R. S. Kaplan, and K. Reynolds. ‘Applying The Balanced Scorecard In Healthcare Provider Organizations / Practitioner’SResponse.’. Journal of Healthcare Management (2002): n. pag. Print.
Kaplan, Robert S, and David P Norton. The Balanced Scorecard. Boston, Mass.: Harvard Business Review Press, 2010. Print.
Kaplan, Robert S, and David P Norton. The Balanced Scorecard. Print.
Lucía-Clara Banchieri,. ‘Qualitative Analysis Of Supply And Demand Of The Balanced Scorecard: Consultants Versus Information Users’. AFRICAN JOURNAL OF BUSINESS MANAGEMENT6.14 (2012): n. pag. Web.
Meyer, M. (2002).Rethinking performance measurement. Cambridge, UK: Cambridge University Press.
Norreklit, H. (2000). The balance on the balanced scorecard a critical analysis of some of its assumptions. Management Accounting Research, 11(1), pp.65-88.
Norreklit, H. (2000). The balance on the balanced scorecard a critical analysis of some of its assumptions.Management Accounting Research, 11(1), pp.65-88.
Nørreklit, H. and Mitchell, F. (2014).Contemporary issues on the balance scorecard.J Acc& Organizational Change, 10(4).
Parmar, Bidhan L. et al. ‘Stakeholder Theory: The State Of The Art’. The Academy of Management Annals 4.1 (2010): 403-445. Web.
Radnor, Zoe, and Bill Lovell. ‘Defining, Justifying And Implementing The Balanced Scorecard In The National Health Service’. J Med Market 3.3 (2003): 174-188. Web.
Rompho, N. (2011). Why the Balanced Scorecard Fails in SMEs: A Case Study. IJBM, 6(11).
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