Balanced Scorecard and Strategic Map for a Global Company - Case Study Example

Balanced Scorecard and Strategic Map for a global company (WPP) Executive Summary This report purpose is to develop balanced scorecard for WPP. In the balanced scorecard of WPP, the company has financial, customer, internal business and innovation perspectives. In each perspective, the company has developed certain objectives along with actions. For example, in the financial perspective, the objective of increasing capital expenditure is to be achieved through obtaining funds either from the shareholders or from the financial institutions. However, despite developing these goals and actions, still there are certain external factors which cannot be controlled by WPP. As a result, it is highly recommended that the company should only strive for those objectives and actions which have higher chances of success. Contents Table Content Page # Introduction 4 Mission and Vision 4 Balanced Scorecard 5 Strategy Map 11 Critical Evaluation 13 Recommendations 14 References 15 Introduction WPP is a communications services company based in the United Kingdom (Annual Report, 2013). Currently, the company employs more than 175,000 employees throughout the world encompassing associates who are working in more than 3,000 offices established in operational countries with more than 155 companies and firms (Annual Report, 2013). At the same time, the company has diverse range of business activities in which dynamic range of services and products are provided to the clients and the core business activities include: Advertising, public relations and public affairs, media investment management, branding & identity, data investment management, specialist communications, healthcare communications, and direct, digital, promotion & relationship marketing (Annual Report, 2013). Based on this information, it can be deduced that the company has not limited to one specific aspect of communication but has covered almost all aspects of communications and have ensured that the related clients are to receive all types of communications services expected by them. Mission and Vision WPP has developed a comprehensive mission statement. The mission statement is “ to develop and manage talent, to apply that talent, through the world, for the benefit of clients; to do so in partnership; to do so with profit” (Annual Report, 2013, p. 2). This statement is comprised of six steps in which each step is designed and developed in a way to satisfy the expectations of the previous step in a sequential manner. In other words, the company primarily attempts to use talent and related skills of human endeavour for achieving its objectives in a way to facilitate communications services to the current and future clients as well in a professional manner. At the same time, the company has developed a range of objectives which include: substantial penetration of global markets, revenue increase from new media, increase in data investment management along with the application of technology improving services (Annual Report, 2013). Balanced Scorecard of WPP WPP plc Financial perspective GOAL KPI Target Initiative or ACTION 1 Cash Flow Increase in capital expenditure Capital Expenditure 20% increase WPP should increase capital expenditure on virtual marketing and communications services. And this can be availed through raising funds from the shareholders or obtaining loan from the financial institutions. 2 Shareholders Increase in earnings per share Earnings per share 15 per cent rise WPP should put more focus on reducing the business cost and simultaneously it should increase revenue from all companies working under its ambit 3 Profitability Add more to gross profit Gross profit 10 per cent rise For this purpose, the company should reduce direct expenses from which revenues are deducted and it should use those methods through which business cost is diminished or controlled. 4 Return on Assets improve return on assets Return on assets 18 per cent increase For this purpose, the company should increase the productivity of assets in which better and effective use of assets are two aspects through which return on assets can be enhanced and improved as well. WPP plc Customer perspective GOAL KPI Target Initiatives or ACTIONS 1 customer trust Increase the number of customer visits Customer visits Top 50 clients For this purpose, the company should offer competitive prices and services to the current and potential customers. 2 customer expectations Improve the frequency of returning customers Return customers Top 20 clients The company should have a diverse range of services from which the clients are allowed to choose the one best fitting to their expectations and requirements. 3 Latest communications services Improving communications services Quality communications services to clients Enhance both online and offline communications services The company should provide more cost effective and regular communications services to the clients 4 Reliable communications services Faster and easier access to the required services Type and level of support for communications services 10 per cent increase in positive feedback The company should enable the clients to receive reliable communications services through virtual means and without wasting any time. WPP plc Internal Business perspective GOAL KPI Target Initiatives or ACTIONS 1 coordination Improving coordination among at all levels of inter and intra communications within and among departments Better decision making 20 per cent increase in better decision making For this purpose, the company should conduct regular seminars and other gatherings, so that cooperation between and among employees is improved. 2 cooperation Increasing cooperation between and among department and colleagues working in these departments Results based on the coordinated efforts 25 per cent improvement in results based on cooperation In order to improve cooperation, the company should arrange regular meetings of the key employees for improving cooperation among them. 3 sharing of information Enabling and providing information for improving performance of organization as whole Reduced repetition of information sharing 30 per cent rise in useful information sharing and its benefits to the information sharing process For this purpose, immediate and faster internal communications systems should be put in place so that all employees have better opportunity to provide and to avail the benefits of information sharing. 4 accuracy of information Improving sharing of quality and accurate information to the relevant decision makers Key and accurate information 15 per cent increase in the productivity and quality of accurate information sharing For this objective, the company should put in place a mechanism through which information accuracy is confirmed and the related employees take necessary measure before sharing any piece of information. WPP plc innovation and learning perspective GOAL KPI Target Initiatives or ACTIONS 1 cost minimization Cost control Variable and fixed cost 12 per cent decrease in variable and fixed costs The company should induct more freelance and consultants and other staff that do not directly affect the cost structure. And alternatives methods should be pursued for reducing these costs. 2 talent management Quality hiring Best achievers and performers 5 per cent increase in best achievers and performers For this purpose, the company should put in place the strong selection and recruitment process through which high and best performers are hired 3 improved productivity Informed decision making Number of quality and informed decisions 8 per cent increase in productivity For this purpose, the company should offer them attractive incentives and packages so that they receive motivation and encouragement for making effective and informed decisions. 4 Improving data usability Data usability Number of data shared 10 per cent increase in data sharing For this objective, the company should provide them regular training relating to the current, potential and future usability of the relevant data. Strategy Map Capital expenditure refers to that kind of expenditure through which productive capacity of assets is improved (OECD, 2014). It is also referred as spending on long term assets (Yong and Hong, 2007; Dawson, 1996). For WPP, the goal of capital expenditure and target of 20 per cent increase in the capital expenditure can be achieved through selling more shares to the shareholders or the financial institutions can be accessed for this purpose. Through this goal, the company will be in a better position to increase the services quality which is highly essential for retaining competitive position in the market. Also, the objective of improving earnings per share can be satisfied through improving the financial and operational performance of the company and this can only be done through the reducing direct cost and improving the revenues from companies as well. Gross profit is profit earned after deducting sales revenue from cost of sales (Meckan, 2007; Novak, 2012; PAkroo, 2014). For profitability, gross profit is the important goal and target will be a 10 per cent increase in gross profit margin ratio annually. Direct cost takes away a substantial amount of money from the revenues. Thereby, it is highly essential that this cost should be controlled so that the revenues are improved which will be subsequently improve the profitability of the company. Return on assets refers to improving the productivity of assets which are used for generating revenues. And this can only be achieved through either investing in the assets. Customer satisfaction (trust) is defined as feelings formed after positively experiencing something (Hill et al., 2007). Increasing and improving the customer trust can be attained through providing competitive prices and quality services to the customers. In these days, the clients more rely on qualitative and competitive aspects for developing and retaining business relationship with the clients. Furthermore, for improving the frequency of returning customers, the company should provide them a wide range of options and services and only through this diversity; there will be chances that the frequency of returning clients will be improved. For improving communications services, only cost effective services are only way to attain this objective and for reliable communications services including faster and easier access to the communications services, the company should provide them reliable services. Seminars and other gatherings will enable employees to attain the objective of improving coordination. Through this improved coordination, they will be in a position to experience the benefits of this approach at all levels. For this objective, a target of 20 per cent increase in better decision making will be a key process for enabling all employees to coordinate. At the same time, the objective of cooperation is also important and that can be availed through arranging regular meetings of key employees who are always required to cooperate with employees working in other departments. And the objective of information sharing can be availed through providing faster and easier internal communications systems to the employees as this will increase the overall performance of the organisation. At the same time, accuracy of information is also vital for improving productivity and this goal can be achieved through establishing effective mechanism through which information accuracy is ascertained. Cost minimization refers to restricting costs within the boundary of budget (Lal and Srivastava, 2009). The objective cost control can be achieved through reducing the variable and fixed cost. Both variable and fixed costs take a considerable amount of money. Thereby, it is highly essential to look for alternative ways and methods for reducing these costs. And for quality hiring, it is highly essential that the company should establish effective selection and recruitment process through which only best candidates are selected for employment. Also, for improving information decision making, the company should provide better and attractive incentives for encouraging employees for improving their performance. Similarly, for data usability, regular relevant training should be provided to the employees. Critical Evaluation The balance scorecard of WPP has certain limitations. Tyagi and Gupta (2008) contend that the balanced scorecard is not suitable for service organizations and at the same time, it is not appropriately constructed to predict certain trends. For example, the scorecard has provided certain actions that should be taken for achieving goals and objectives. However, still it will not be easy for the company to ensure 100 per cent achievement of each objective. For example, there are certain factors that are beyond the control of the company and the company may not be able to reduce or control their impact on the business cost. for instance, if more legislation is carried out and the use of technology comes under heavy scrutiny, then there are chances that the company will incur additional cost which will increase the business cost. As a result, which will render the purpose of balanced scorecard useless? Recommendations The balanced scorecard takes into account financial, customer, internal business and innovation perspective. In each perspective, WPP has a range of options to improve its financial and operational performance and at the same time it can attain goals and objectives mentioned in the balanced scorecard. However, WPP will not have absolute control over the external factors. As a result, it is highly recommended that the company should pursue only those goals which are probable and are capable enough to attain the related goals and objectives. References Annual Report, (2013). WPP Annual Report & Accounts 2013. Available: http://www.wpp.com/annualreports/2013/downloads--financials/ , Accessed: 21 September, 2014 Dawson, J.C. (Ed.). (1996). Flow-of-Funds Analysis: A Handbook for Practitioners. New York: M.E. Sharpe. Hill., N., Roche., G., and Allen., R. (2007)., Customer Satisfaction: The customer experience through the customer’s eyes. London: Cogent Publishing. Lal., J. and Srivastava., S. (2009). Cost Accounting. 4th edn. New Delhi: McGraw Hill. Meckin, D. (2007). Naked Finance: Business finance pure and simple. London: Jupiter images. Novak, C. (2012). Making the Financial Case for Learning. California: ASTD. OECD, (2014). Education at a glance 2014: OECD Indicators. Paris: OECD Press. Pakroo, P. (2014). Small Business Start-Up Kit for California. 10th edn. California: Nolo. Tyagi., R.K., and Gupta., P. (2008). A Complete and Balanced Service Scorecard: Creating Value Through Sustained Performance Improvement. New Jersey: Pearson Education. Yong, L.Y., &, Hong, W.P. (2007). Principles of Accounts. Singapore: Pearson. Read More