Integration - Causal Chains and Strategy - Essay Example

?Integration – Causal Chain and Strategy Introduction There are various kinds of evaluation techniques used by the strategists in order to assess theperformance of the organization. Among such techniques, balanced scorecard technique has been the one which provides the most comprehensive results regarding the performance of the organization. There are four quadrants of a balanced scorecard namely as Organizational Capacity, Internal Processes, Customers, and Financial Perspectives (McKay, 2004). This article is aimed at providing the causal chain integrated among all these quadrants with respect to a technology firm named as Sonic Technologies. Under the following section, each quadrant is briefly discussed, followed by their causal linkages and last part of this article provides a nine-step framework to develop such balanced scorecard system in technology-based organization. Analysis As mentioned-above balanced scorecard, system works based on four perspective such as organization capacity, internal processes, customers and financial perspective. Organizational capacity relates to the concept of increasing the capacity of the business such as production capacity, material capacity, project capacity, etc. In order to meet the demands from the customers, it is essential that the organization must have sufficient capacity to fulfill that order. Internal processes relates to the concept of how effectively the organization can perform a certain job or fulfill customer’s demand for instance. How departments are managed and integrated, how internal controls work together, etc. are the core issues highlighted through internal processes. Third perspective solely relates to customers. Customers are most important stakeholders of any business such that their preferences, tastes, dispositions, likes and dislikes, etc. paly a profound role in developing the most adequate business strategies. From this perspective, the organization needs to assess the current demands of the customer, how to satisfy them, how to retain their loyalty, how to provide after-sales services to them, etc. are focused through this perspective. Last, but probably the most important perspective of a balanced scorecard is the financial perspective such that every organization needs to improve its financial performance and position. For this purpose, the organizations use financial ratio analysis as a technique of evaluating their performances. Some important financial ratios under this perspective include return on investment, return on assets, return on equity, net profit margin, etc. Challenges faced by Technology Organizations Before establishing the causal linkage between the balanced scorecard perspectives within the technology organizations, it is of crucial importance that the characteristics of technology organization are studies first. Technology organizations are the ones which can be differentiated from other organizations especially in terms of challenges that they face (Rohm and Moinoski, n.d.). Following are some of the typical challenges faced by the technology-based organizations: Their product cycles constantly and rapidly contract. They constantly have to recruit, retain and reward the best technology talent. These organizations have to make and communicate the timely and critical decisions relating to product development. They have to track the customer’s perspectives such that they have to track the customer’s featured demands and their corresponding models. They have to deal with disruptive technologies which can, not only wrap up the product but the entire business. Integration of Causal Chain Keeping in mind the above challenges that technology-based organizations face, the balanced scorecard system is developed through a strategy. The strategy can be referred as integration of causal chain between these four perspectives of balanced scorecard (BSI, 2007). This strategy aims at developing the organizational capacity first. The investment in organizational capacity leads to an increase in technology capacity, improvement in project management skills, cross-disciplinary teams. These improvements cause an improved internal process of the business. The improvements in internal processes can be viewed through improved market assessment, improved product lifecycle and improved concept development. These improvements in internal processes cause improvements in customer perspective such that customer satisfaction strengthens and loyalties retain. Once, the technology organization achieves improvements in customer perspective, it leads to an improved financial performance and position which can be demonstrated through increasing revenues, increasing profits, enhanced return on investment, etc. In this way, these four balanced scorecard perspectives are integrated in a causal chain such that an improvement in perspective causes an improvement in the other one. Nine-Step to Success Framework to establish Balanced Scorecard The development of strategy-based balanced scorecard in technology-based organization can be established through a nine-step to success framework highlighted as under: A Nine-Step to Success framework for balanced scorecard has been developed in order to develop and execute the strategy based scorecard system (Murby, 2005). The basic criterion for the development steps are same however, separate versions of this framework have been developed for non-profit sector, public sector, business or industry. Step 1 comprises of Organization Assessment. In this step, organization enablers, values and pains are developed. Mission and vision are authenticated and scorecard development plans and change management plans are organized. Step 2 consists of strategy. In this step, stakeholder value propositions and customer base are defined. These elements are then used to create the strategy of organization. In step 3, strategic objectives are determined. This step is followed by step 4, which comprises of strategy maps. These maps reveal a causal relationship among those objectives, which lead towards creating customer value. Step 5 comprises of targets and performance measures. This step is used to create critical measures that provide pertinent evidence for tracking strategic execution. Sixth step consists of determination of new projects and strategic initiatives, which form the basis for successful execution of strategies. In step seven, the phase of implementation and deployment starts. This step is called as automation where data of performance is collected, reviewed, reported and transformed into meaningful information, which helps in the process of decision making and communicating the improvement throughout organization. In step eight of Cascading, the scorecard is transferred to different business units (e.g. divisions or departments) and support unit (HR or IT), to translate corporate strategy and vision into operational terms. After that, scorecards can be cascaded to individuals and teams to align their day-to-day work along with corporate vision and strategy. The process is then completed with step nine, where assessment and review of the management system is performed to understand the results of strategy against desired results and to make necessary amendments in the strategy of organization. References BSI (2007) Balance Scorecard Example for the Regional Airline. Balanced Scorecard Institute. Retrieved from http://www.balancedscorecard.org/Portals/0/PDF/Regional_Airline.pdf MacKay, A., (2004) A practitioners guide to the balanced scorecard: A practitioners’ report based on: Shareholder and stakeholder approaches to strategic performance measurement using the balanced scorecard. Chartered Institute of Management Accountants. Retrieved from: http://www.cimaglobal.com/Documents/Thought_leadership_docs/tech_resrep_a_practitioners_guide_to_the_balanced_scorecard_2005.pdf Murby, L., Gould, S., (2005). Effective Performance Management with the Balanced Scorecard: Technical Report. Chartered Institute of Management Accountants. Retrieved from: http://www.cimaglobal.com/Documents/ImportedDocuments/Tech_rept_Effective_Performance_Mgt_with_Balanced_Scd_July_2005.pdf Rohm, H. & Malinoski, M. (n.d). Strategy based balanced scorecards for technology. Balanced Scorecard Institute. Retrieved from: http://www.balancedscorecard.org/Portals/0/PDF/Technology%20Company%20Balanced%20Scorecard%20Systems_06222010_Final.pdf Read More