Balanced Scorecard Approach for London South Bank University - Case Study Example

Balanced Scorecard Approach for London South Bank 0 Introduction: Any organisation to improve its functioning needs an assessment of itsperformance in various spheres of its activities. Well developed performance indicators both financial and non-financial enable the managers of any organisation to assess and monitor the performance of the organisation. Such performance indicators also help managers in the decision making process relating to various issues in the functioning of the organisation. Performance indicators are found to be very helpful in the case of educational institutions like Universities imparting higher education which is subjected to increased regulatory pressure from the funding organisations, the government and the public. Moreover the inflationary tendencies force the educational institutions to have a closer control over their finances so that the expenditure is contained within the income levels. Financial performance indicators help the institutions in this respect. The application of the balanced scorecard representing a system of performance measurement that controls and monitors the key strategic parameters by evolving a set of performance indicators provide the educational institutions with a perfect tool for ensuring that the functions of the various divisions work towards the achievement of the strategic objectives of the institution. The balanced score card approach also helps the institutions to satisfy the expectations towards accountability and to meet the legislative requirements. With this background this paper envisages presenting a balanced score card approach for the London South Bank University (LSBU) 2.0 Balanced Score Card – an Overview: During the 1990s Prof. Robert S. Kaplan and Dr. David P. Norton of the Harvard Business School developed the balanced score card approach as an aid to the strategic business management. The purpose of the approach is to provide alternatives to the financial performance measures for improving the overall performance of the organisations.1 The balanced score card approach encompasses an operational framework that is designed to measure the company’s mission and strategic goals in terms of four distinct organisational perspectives. They are: Customer satisfaction Enhancement of internal processes The creation of capabilities in employees and systems and Financial performance2 Performance measures are evolved in respect of each of the above areas which can be regarded as very crucial to the success of any organisation. By comparing its actual performance against the established standards in each of these areas the organisation can ensure the sustenance of its success. 2.1 Need for the Balanced Scorecard Approach for LSBU: The balanced scorecard approach attempts to translate the strategic goals into performance by evolving a comprehensive set of performance measures. The major advantage of the approach is that it takes into account the performance in the non-financial areas of an organisation and develops a ‘balanced’ set of performance indicators to ensure the organisational success. Thus the approach covers the missions and goals of an organisation in full and not limits itself to the financial performance. LSBU being a non-profit organisation where the financial performance indicators are of less relevance needs such performance appraisal system to ensure its performance. 3.0 Creating a Balanced Scorecard for LSBU: “If decision making is to be strategic, the strategy must be directed toward some overarching objective.3 It is usually the case with most of the educational institutions to have their mission statement in place which describes the goals of the institution in a broader perspective. It is within this broader perspective that the institution has to set its areas of performance as well as the standards there for – a process described by Kaplan and Norton (1996) as “translating the vision”. “For people to act on the words in vision and strategy statements, those statements must be expressed as an integrated set of objectives and measures, agreed upon by all senior executives, that describe the long-term drivers of success” (p. 76) LSBU has expressed its Mission Statement as “Our primary focus is on our students. Our mission is to provide them with a rich and diverse range of academic programmes, underpinned and informed by relevant research. We will do this within a supportive environment which celebrates the diversity of our community and which enables our students to develop both academically and personally during their university careers”.4 The above mission statement can be translated into the following specific organisational areas that can be identified crucial for the achievement of the vision of the LSBU. They are: Academic Excellence: This area deals with the contribution of the University to the imparting of education and creation of knowledge thereby. The performance in this area is to provide an actual insight into the capabilities of all academic staff in enhancing the academic values of the University. Features like research publications, recognition by the national and international organisations and the increased student strength determine the progress of the Institution in this respect. Learning experience of the Students: The performance under this area relates to the effectiveness of the University in transferring knowledge to the students. The customer satisfaction mentioned in the Kaplan and Norton approach of the Balanced Scorecard is represented by the satisfaction of the students of the University in getting the knowledge imparted from the Institution. Factors like retention and graduation, number of post graduate students getting enrolled out of those graduated from the University and placements for graduates contribute to the success in this performance area. Transfer of knowledge to the Community: Under this area the University’s activity in transferring knowledge to the local and national communities is assessed for possible improvements. It also covers the extent of the University’s commitment to the international community. The efforts of the University in providing education to the students should in some way or other bring some benefits to the society in common. Identification of the areas where the various courses of studies offered by the University are helpful to the community outlines the performance in this area of the University. Engaging suitable indicators to assess the performance in this area is the core function of the balanced score card approach. Diversity Approach: The performance of the University in the area of meeting the needs of diverse strata of the community in accordance with the Mission Statement can be measured here. For an educational institution like LSBU it is important that it follows a diversity approach both in respect of academic as well as non-academic areas. To achieve the goal expressed in the Mission Statement of the University indicators are evolved to assess and improve the performance of the University in this area. A well defined diversity approach is central to the achievement of the goals of the University. Organisational Development Perspective: The performance of the University in the area of internal organisational development can be measured by formulating suitable indicators. Any management measure should have the purpose of raising the standards of the internal operating performance. The development of internal organisational systems and controls is one of the main objectives of the balanced score card approach. Having this in mind the ‘organisational development perspective’ has been designed as one of the performance areas for developing suitable performance indicators. Financial performance: The performance of the University in augmenting the financial resources and managing the same to the advantage of the Institution is monitored under this area. Just as in the case of any business undertaking in an University also a financial discipline should be maintained which can be subjected to internal and external review at any point of time for its accuracy, Moreover though the University is a non-profit making entity still it has the objective of enhancing the sources of income and controlling the cost of running the institution. With this objective in view the financial performance indicators as a part of the total balanced score card approach have been evolved. Based on the vision of the LSBU, scorecards representing long range strategic objectives covering all the above functional areas can be developed. Each long term objective should be broken down in to operational performance measures which will assess the progress made in the defined areas of performance. Though it is not possible for the balanced score card approach to identify the correctness of the decision, the approach can provide a “common frame of reference to all parties to the decision and clarify the choices and performance challenges involved.”5 The comprehensive nature of analysis being facilitated by the balances score card approach enables the University to gain a holistic view of the possible performance progress or otherwise in each designated performance areas. By associating the decision making process with the gains or losses assessed in the respective performance areas the University would be able to monitor the growth and success of the University precisely. Similarly by establishing the institutional and administrative unit goals, it becomes possible for the University to evaluate the individual performance of the operating units and take corrective action where necessary. The suggested score cards for each of the above identified objectives is appended below. 3, 1 Balanced Score Card for LSBU: Area Objectives Indicators Academic Excellence Increase in Research Output Objective: To enhance the performance in terms of the productivity in various research areas 1. Increase in the Number of Publications, citations, grants and awards as compared to the previous period Increase in the number of undergraduate and post graduate students Objective: To ensure enhancement in the number of students using the University to gain academic knowledge 1. Percentage increase in the number of under graduate students as compared to the corresponding previous period 2. Number of Research/Post Graduate Students (This may include full time/part time/off-campus students ) Attainment of recognition in National and International level Objective: To ensure the standards of education and knowledge is equivalent to comparable national and international institutions 1. Number of departments/courses that are in the top ranks as adjudged by reputed National/International organisations Learning Experience of the Students Improvement in the educational progress of the students Objective: To asses the level of students’ performance 1. Rates of graduation and retention over the period Improvement in the Students satisfaction Objective: To assess the satisfaction level of the students 1. Number of students enrolling for post graduation/research programmes who completed under graduation with the University 2. Data gathered by survey on students Improvement in the Quality of Graduate Programmes Objective: To assess the quality levels of the graduate programmes over the period 1. Number of students getting placements on campus interviews Transfer of knowledge to the community Improvement in the activities relating to transfer of technology Objective: To assess the contribution to the community in the area of technology transfers 1. Number of license, prototypes registered, patents and inventions registered 2. Quantum of royalty income on innovations of designs etc Improvement in the outreach to the general public Objective: To assess the extent of benefits passed on to the society in general 1. Number of programmes and services being initiated by the University for the benefits of the local community 2. Number of people who derive the benefits both directly and indirectly Diversity Approach Improvement in the diversity within the University campus Objective: To ensure the diversity objective is effectively followed 1. Percentage of students, non-teaching staff members, professors and other teaching staff to be accounted by gender and ethnicity Improvement over the access for disabled Objective: To ensure the diversity approach also includes the concern for disabled strata of the society 1. Inventory of programmes designed to meet the needs of the disabled community members and improvement on the programmes over the period Organisational Development Perspective Improvement in the Curriculum Objective: To assess the extent to which the University has reached flexibility in prescribing the curriculum choices 1. Percentage of interdisciplinary teaching as compared to the total teaching load Improvement in the Research Grants area Objective: To ensure swiftness in processing the applications for research grants 1. Number of research grant applications per member of research academic staff Assessment of Staff Strength Objective: To improve upon the proportion of teaching and non-teaching staff 1. Proportion of non-teaching staff to the teaching staff 2. Number of staff on term contracts as a percentage of total staff Assessment of Income as a proportion of University Land Area Objective: To improve upon effective utilization of the University Land Area 1. Gross Revenue per square meter of gross internal area of the University. 2. Gross internal area will cover all the non-residential areas o the University including all common utility areas Assessment of property costs Objective: To improve upon the effective cost of maintaining the property 1. The cumulative property costs as a percentage of the total revenue of the University Financial Performance Increase in the Total Revenues Objective: To ensure the enhancement in revenues over the previous period 1. Percentage Increase in the total revenue as compared to the previous period Increase in revenue under different heads Objective: To diversify and increase the sources of funding 1. Percentage of total revenue broken down to different sources : For Example a. Tuition fees collected b. Research grants received c. Government funding d. Endowment and Investment Income Control of Expenditure Objective: To maintain stricter control over expenditure under different heads 1. Percentage of expenses under different heads 2. Comparison of actual expenses against budgeted amounts 3. Percentage of Administrative Expenses as compared to operating expenditure. 4. Comparison of surplus of income over expenditure with historical figures periodically Control on other financial areas Objective: To Examine the effectiveness in utilizing the funds received under diversified heads 1. Percentage of Expenditure over income on other financial areas. For Example: a. Research Cost Recovery b. Commercialization of research – number of licenses c. Donations and grants received and spent against specific purposes d. Percentage of utilities maintenance and other annual service contracts Control on the Liquidity of funds: Objective: To manage the funds efficiently 1. Comparison of historical Liquidity ratios using the figures of current assets and current liabilities 3.2 Linking of Strategic Goals to the Balanced Score Card Approach: The success in using the balanced scorecard approach can be ensured only when the larger goals of the institution is linked to specific issues and problems to be resolved and also there is an effective linking of the decision making process with the balanced scorecard approach. According to Alice and Julie 6“while the balanced scorecard cannot guarantee a recipe for correct decisions, it provides an integrated perspective on goals, targets, and measures of progress.” The approach however gathers and presents information from a variety of sources and perspectives to aid a proper decision making process with proper trade offs of factors affecting each performance areas. Immediately after the organisation’s vision is translated into long term strategic goals and then on to the specific performance areas under the balanced score card approach it is for the academic and non-academic departments to gather a full understanding of the long-term strategic goals of the University. This will enable all concerned to formulate the objectives and measures for their individual performance areas and get them linked to the overall organisational goals ‘Academic Planning’ in the LSBU must include the role of the administrators to enable the linking of the individual unit goals with the macro goals established in respect of the six performance areas outlined above. The role of the administrators should further extend in focusing on the required resources and also help the units in setting up their priorities. In the process the administrators have the responsibility to develop achievable targets by evolving proper strategies and also ensure that a proper allocation of resources is made to achieve the devised strategies. It will also fall under the responsibility of the administrators to design suitable performance measures to indicate the progress made in each area towards the achievement of the goals set. The final step in the whole process of the balanced scorecard approach is getting the feedback and to revise the strategies depending on the outcome in the progress. If necessary the various performance indicators may be suitably modified to take into account the changed circumstances and strategies. In order that the balanced score card approach takes effect the University should allow sufficient time for the individual units to adapt themselves to the changed needs of information and data to facilitate a clear assessment of the progress made in each of the performance areas. It is worth noting that just as in the case of business in an educational institution also “just getting managers to think systematically about the assumptions underlying their strategy is an improvement” (Kaplan and Norton 1996, p. 85). 4.0 Conclusion: Thus the University’s balanced score card comprises of a set of performance indicators linked to the Institution’s strategic goals. The performance areas and the indicators have been designed to suite the broad perspectives of goals and operational performance outlined by the Mission Statement of the University. The balanced scorecard approach, it is hoped, will provide the management of the University an efficient tool to monitor the performance in the various areas identified and will enable the University to achieve its strategic goals and mission. It is also the purpose of the balanced score card to ensue that the University meets the regulatory obligations of the government and also the wishes of other stakeholders. However it must be noted that applying the balance scorecard approach to the complexities of an educational institution is a real challenge. It has always remained doubtful as to whether it is possible to measure the performance of the University quantitatively. Moreover the performance of the Universities is usually judged on the basis of the published ranking systems where the criteria and methodology for assessment are subject to frequent changes. But the application of the balanced score card approach with its emphasis on all the performance areas of the University can make the performance management to be looked into from an effective organisational internal development perspective than an external image driven ranking concern. References: Alice C. Stewart and Julie Carpenter-Hubin ‘The Balanced Scorecard Beyond Reports and Rankings’ http://oaa.osu.edu/irp/balancedscorecard.pdf Kaplan and Norton, The Balanced Scorecard: Measures That Drive Performance, Harvard Business Review January-February 1992. Kaplan and Norton, The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press, 1996. http://www.lsbu.ac.uk/about/mission.shtml Read More