Balance Scorecard for projects by Stewart (2001) - Essay Example

?Table of contents 0 Introduction 2 1 overview of the topic 3 2 Main findings from the topic 6 3 Critical appraisal of the topic 6 2.0 Critical analysis of BBCL/EI Dorado case scenario 6 2.1 Principles of project management 8 2.1.1 Phase 1 Identification of needs 8 2.1.2 Phase 2 Formation of objectives and definition of the project 9 2.1.3 Phase 3 Planning and scheduling 9 2.1.4 Phase 4 Project management 9 2.1.5 Closure and feedback 10 2.2 Methods that can be used in this project 10 2.3 Performance Measurement 11 2.4 Conclusion 12 Bibliography 13 Fig 1 Work breakdown structure 10 Fig 2 Organisational structure for BBCL/ EI Dorado 11 1.0 Introduction During the contemporary period, it can be noted that organizations operate in a dynamic and complex environment which is characterised by stiff competition. In order to ensure the viability of an organization, it is imperative to implement measures that are meant to improve the overall performance of the organisation as a whole. On the other hand, it can also be observed that the success of any particular project heavily draws on the performance of the people involved in that particular project. A project is often regarded as a mini organization as a result of the fact that it is more structured and controlled. It can also be noted that different projects have failed to achieve their goals as a result of poor management. “With a proper performance measurement tool such as the balanced scorecard (BSC), organisations can clarify their vision through measurable goals and outcomes,” (Shepko & Douglas, 1998 as cited in Stewart, 2000, p. 38). Against this background, this essay will discuss the BSC as a more contemporary means of implementing the strategies of an organisation in order to operate viably with the aim of achieving its stated goals. The discussion will heavily draw on the work of Stewart, Kaplan and Norton, Ahn and Prastacos. Particular attention will be given to the work of Stewart (2001) entitled Balanced scorecard for projects. The essay will critique journal the articles by these authors with the aim of discussing their views about this topic which is related to BSC. The paper is structure in different parts and the first part deals with giving an overview of the topic in view of the ideas raised by different authors. In the main, the essay will discuss the findings of different authors about the topic in question. The last part of the essay is based on a critical analysis of a case scenario of BBCL/El Nino/El Dorado. The discussion of this case study will heavily draw on the ideas raised by different authors mentioned above. A conclusion to give the main points discussed in the essay will be given at the end where a personal reflection about the writer’s own perception about the topic will be given. 1.1 Overview of the topic Organisations are currently encountering a revolutionary transformation where industrial age competition is replaced by the information age competition. During the contemporary period, it can be noted that sophisticated financial control systems were developed to monitor efficient allocations of financial and physical capital. Thus, the need for a new approach to the evaluation of value creation of the organisations has led to the development of the balanced scorecard. According to Kaplan and Norton (1996), a balanced scorecard is a strategy that is used to supplement the traditional financial measures with other criteria that measure performance from three additional dimensions which include the following: customers, internal business processes, learning and growth. The BSC can be used to transform the vision of the organisation towards the attainment of its strategic goals. According to these authors, building a scorecard enables the organisation to link its financial budgets with its strategic goals given that it will be easier to monitor the performance of the organisation as a whole through an outlined step by step process. Stewart (2000) suggests that the goal of every organisation is to do more, better, faster with less and this can only be achieved if an organisation is able to measure what it is doing and how well they are achieving their set goals against the initial benchmark. The author of this article suggests that measurable goals have to be implemented by an organisation and certain strategies have to be taken in order to achieve the set goals. Stewart argues that the success of the BSC is mainly based on four pillars which include the following: communication, compliance, continuous improvement and cooperation among the members involved in that particular project or organisation. Essentially, the objectives and measures of the balanced scorecard are derived from the organisation’s vision and strategy and it attempts to reflect a balance between various processes of an organisation. The objectives of the BSC include the following: to ensure that measures support the core values of the organisation, establish meaningful performance measures throughout the project life cycle, align the measures against the project charter and to establish measures that are efficient as well as effective in implementing the project. A balanced scorecard is a very effective strategy in implementing a project given that projects usually go through different stages from the beginning to the end. Each phase has to be carefully implemented such that the objectives are attainable. According to this article, the success of any given project mainly depends on performance measurement strategies implemented. On the other hand, Ahn (2001) posits to the effect that a balanced scorecard is mainly concerned with establishing performance measurement of a particular organisation with the aim of ensuring that the set objectives are achieved. Planning plays a pivotal role with regards to setting the objectives of an organisation. This author also suggests that a BSC has to incorporate the following aspects: customers, internal business processes, learning and growth. These play a pivotal role in ensuring that the responsible authorities are better positioned to measure the performance of the organisation as a whole. In order to achieve the set goals, it is imperative to ensure that there is a fine balance between all the activities of an organisation. It is also important to ensure that all the operations are carried according to the laid down objectives. Papalexandrix et al (2004) also concur with the view raised by the other three authors discussed above. These authors also suggest that a meaningful balanced scorecard is designed on the basis of the following aspects: customers, internal business processes, learning and growth. These form the basis of short to long term objectives of a particular organisation. Essentially, each organisation is primarily concerned with achieving set goals and objectives and these have to be properly planned. Planning is very important since it gives the direction that can be followed towards the attainment of the set goals. Without setting the objectives of the organisation, its operations may be doomed since the performance cannot be measured. It can also be noted that organisations operate in a dynamic environment hence an effective strategy has to be put in place in order to ensure compliance of the stated objectives. Given such a scenario, it can also be observed that communication plays a pivotal role in as far as the operations of the organisation are concerned. The vision of the firm is clearly outlined such that there is common understanding among all the members and they can perform according to the set guidelines. In order to gain the commitment of the people involved in a certain project, it is important to communicate the vision clearly such that they will put optimum effort in their performance. Besides the performance of the employees, it is also important to measure the level of organisational performance in terms of its financial statistics. It is also important to measure the level of customer satisfaction so as to be better positioned to improve the operations of the organisation in order to satisfy the needs of all the stakeholders involved. In order for any given organisation to operate profitably, it is very important to take into consideration the above mentioned aspects which affect the operations of almost all companies that are in business of generating revenue. Generally, all the authors of the above mentioned articles suggest that in order for the organisation to operate viably, it should put indicators that can be used to measure its performance against its set goals. Failure to measure the performance of the organisation may result in that particular company failing to achieve its stated goals. The authors also concur that these factors namely customers, internal business processes, learning and growth are very important in as far as project implementation is concerned. These help the company to be in a position to clearly measure its performance towards the attainment of the set organisational goals. All the authors suggest that the vision of the organisation has to be clearly defined in order for the organisation to have a clear direction in its operations. 1.3 Main findings from the articles Essentially, the objectives and measures of the BSC are derived from the organisation’s vision and strategy. The balanced scorecard allows the organisation to link its long term strategy with tangible goals and actions. The authors agree that the measures and of the BSC view organisational performance from the following four perspectives: customers, internal business processes, learning and growth. In summary, the following points reflect the main findings about this topic by the authors. No single measure can provide a clear performance target for a business Traditional measures can give misleading signals for organisational growth The balanced scorecard is a process which translates the vision and strategies of an organisation into action. The BSC can be used for performance appraisal 1.4 Critical appraisal of the topic Without a balanced scorecard, most organisations are unable to achieve consistency in their operations as they may change direction in their operations. The BSC also provides a framework for managing and implementing strategy which can respond to the changes obtaining in the market. However, this approach has been criticised given that it has no link with other management tools. The other risk of using this approach is that it increases the risk of not paying attention to the company’s competitive advantage. The other weakness of this approach is that it overlooks the contribution that can be made by the other stakeholders in the decision making process. It can be argued that the stakeholder approach is more ideal in as much as attainment of the goals of the organisation is concerned. It seems that the BSC is mainly determined by the senior managers and communication follows a top to bottom sequence. Besides some of the shortcomings of the BSC strategy, it can be safely said that this strategy is very effective in as much as the operations of the organisation are concerned. There is need to put measures in place in order to ensure that the objectives of the organisation are attainable. Failure to do that may negatively impact on the performance of the organisation as a whole. The BSC strategy is ideal especially for projects which are short term based since these need to be closely monitored such that they achieve the stated objectives. 2.0 Critical analysis of BBCL/El Nino/El Dorado case scenario In the given case scenario, it can be seen that the coalition government of the FF and the Greens has underscored to implement a project that is primarily meant to construct the M360 Motorway. This project is financed to the tune of €300M and has approximate programme duration of 36 months from inception to completion. The El Nino Conglomerate Group / El Dorado civil engineering Division is seen as the potential contender to undertake this particular project. Basically, the El Nino group, is a €10B conglomerate and they have a Civil Engineering subsidary called‘El Dorado.’ El Dorado was acquired as part of El Nino’s €2B purchase of a mining organisation ‘Deepdown’ and it has identified Ireland as a key area for infrastructural development projects in view of the Irish Government’s plans to keep the NDP programme going. As such, the government will make investments of about €3B in road development projects under NDP over a period of six years. Against this background, this report seeks to critically analyse the steps that can be taken by the above mentioned organisation in implementing this particular project. Basically, Burke (2007), defines a project as a set of linked activities aimed at achieving set goals as well as satisfying different needs of the stakeholders involved. It is characterised by a definite start and a definite end. In order to fully implement a project, it can be noted that there are various phases that have to be taken into account in order to ensure that the goals of the project are achieved. These phase include the following: identification of needs, formation of objectives, planning and scheduling, execution and handover. In order to achieve the goals of this project, performance measurement is a virtue and this can be done through implementing the balanced scorecard strategy. 2.1 Principles of project management 2.1.1 Phase 1Identification of needs The Irish government has realised the need to improve the road network through constructing the M60 Motorway. This will help ease the free movement of vehicles as well as improving the road network in this particular country. A holistic approach has to be taken in order to implement this project. 2.1.2 Phase 2 Formation of objectives and definition of the project The main objective of this project is to develop the road network in Ireland. This is very helpful in that traffic congestion is eased on the road and this minimises chances of accidents which ensures the safety of the motorists as well as other road users. 2.1.3 Phase 3 Planning and scheduling Planning in this particular scenario entails the laying down of all activities that are involved. It includes aspects such as laying down the resources that are required in carrying out this particular project. It also entails the outline of the period that can be taken in order to complete this project. The costs likely to be incurred in this particular case are clearly laid down. 2.1.4 Phase 4 Project management Having planned all the activities that are involved in this particular project, it is imperative to break down all the work into smaller tasks that can be easily managed in a bid to ensure that the set goals can be attained. It is important for this organisation undertaking this particular project to establish teams of people who will work on different tasks. The project manager in this particular case has a major role of ensuring that all work goes according to schedule as well as assigning different tasks to different people. In order to monitor the performance of the project, various measures have to be put in place such as the balanced scorecard as going to be explained in detail below. 2.1.5 Phase 5 Closure and feedback After all work has been completed, the contractors have to close the operations and hand over the project to the responsible authorities. There is also need to give feedback with regards to the operations of the project so as to establish if all the work has gone according to schedule. 2.2 Methods that can be used in this project The work breakdown structure is very ideal in undertaking this €300M road project. The work is broken down into smaller tasks as illustrated in the diagram below. This is to ensure that all the phases are carried out according to schedule as well as to ensure that no extra costs are incurred when the contractors fail to meet the set target for the project. Fig 1 Work breakdown structure It can also be seen that there is need to establish teams that can deal with different tasks of the project in order to achieve the set goals. As such, the structure of the organisation implanting this project can be illustrated on the diagram below. Organisational breakdown structure for BBCL/El Nino/El Dorado It can be seen that there are different people involved in the implementation of this particular project. All the people involved in this project report to their respective leaders who have the responsibility of ensuring that all work goes according to schedule. 2.3 Performance measurement Different methods can be implemented in order to monitor the performance of the project as a whole. The cost control method is very effective with regards to ensuring that the project is executed within the set budget. In this case, the €300M has to be carefully utilised in order to ensure that the set budget is not strained. It is also important to measure the level of satisfaction of the stakeholders involved in this particular project. It is also important to monitor the internal business processes of this particular project to ensure that it is in compliance with the set project goals. All these measures can be implemented through the use of the balanced scorecard which is primarily concerned with monitoring the performance of a particular project. Given that this project has a definite start and finish, it can be observed that this method is very effective in as far as the attainment of the stated objects is concerned. 2.4 Conclusion Over and above, it can be noted that the balanced scorecard is a strategy that is used to measure the performance of a project in particular. A critical analysis of the topic using the articles by different authors discussed above shows that organisations which fail to implement this strategy often fail to achieve their set goals. It has been suggested by many authors as discussed above that projects often fail if a BSC strategy is not implemented since it takes into consideration various factors. In the case of BBCL/El Nino/El Dorado, discussed above, it can be noted that this project is comprised of aspects such as scope, risk, cost, WBS as well as project schedule among others. The project is also comprised of various phases that have to be properly implemented in order for the project to be a success. Bibliography Ahn, H 2001, ‘Applying the Balanced Scorecard Concept: An Experience Report,’ Long Range Planning 34 (2001) 441-461. Burke, R 2007, Introduction to Project Management, Burke Publishing, UK. Kaplan, S & Norton, DP 1996, ‘Using the balanced scorecard as a strategic management system,’ Harvard Business review, January to February 1996. Papalexandris, A et al2004, ‘Implementing the balanced scorecard in Greece: Software Firm’s experience,’ Available online, 22 November 2004. Stewart, WE 2001, ‘Balanced scorecard for projects,’ Volume 32, Number 1, 38-53, March 2001. Read More