Developing a Balanced Scorecard for the Bookshop - Term Paper Example

Develop a balanced scorecard for your bookshop Contents Introduction 3 Balanced Scorecard and Strategic Planning as a management tool 3 Financial Perspective 4 Customer Perspective 5 Internal Business Processes Perspective 5 Growth and Learning Potential 6 The perspective that is most difficult to control for the bookshop 7 Conclusion 7 References 9 Introduction In today’s competitive and ever changing environment, new businesses will always find it very difficult to cope with the environment. They are likely to face countless problems related to finance because the planning system of any new organization may not be that good. New organizations need to have a sound system of strategy planning in place to achieve their objectives and also at the same time avoid any problem related to finances. Balanced Score card has achieved an important place in today’s business scenario and it is generally used by business organizations to review and assess the performance of the organization. Balanced Scorecard and Strategic Planning as a management tool Like other organizations and businesses, an effort is made here to apply the benefits of Balanced Score card in an owned bookshop. Any assessment of the progress of any organization is done basically in two ways such as by the balanced Score card approach which is used as a performance metric to assess the performance of any organization and also by the strategic planning and management systems. In a measurement based Balanced Score card, all the existing measures are grouped according to category and the measures are then displayed graphically. When the balanced Score card approach is used as a basis for strategic planning, it can effectively align the strategic objectives within the resources that are available to an organization. The objectives and mission statements should be first developed and must be made clear to each and every employee working on the bookshop before the company proceeds to construct the Balanced Score card (Kaplan & Norton, 1966, pp.135-147). This will make sure that the employees adopt a similar approach and share the same vision to achieve the objectives of the bookshop. Strategy based systems should also be developed later and those must be aligned with the mission statement of the bookshop to ensure the sustainability and future progress of the organization. The success of a bookshop depends on its financial status, its growth and learning potential, internal processes, and expectations of customers towards the bookshop. Financial Perspective There are various Balanced Score card goals which comprise mainly financial, customer perspective, internal business processes, growth and learning among others. The financial measure includes market share, profitability, and costs and revenues. Customer perspective measure comprises customer turnover or retention, customer value, and customer satisfaction. Internal business processes measures comprise productivity improvement, operation metrics and measures for the assessment of performances of processes (Paul, 2006, pp. 6-10). The growth and learning measures comprise level of organizational capability, employee satisfaction, employee retention or turnover, and the nature of the organizational climate or culture. For a bookshop, the main objective should be to provide various quality books in all subjects at reasonable prices. It must also create a space for teachers and students so that they can refer some texts at a very nominal fee. The bookstore should also create its online version which would help it have a presence at the global level. By doing so, the bookstore will also increase its volume of sales and at the same time reduce the operational costs (Robert and David, 1992, pp. 75-85). It will also increase customer satisfaction because the company will ship books to the customers at their doorstep. The Balanced Score card system is a new framework which allows organizations to translate the strategies and visions effectively so that it clearly conveys the strategy of the organization through the measures chosen and also through the Strategy Map objectives to reflect those objectives on the organization’s Balanced Score card. Customer Perspective The objectives of the Strategy Map form the basis of the measures of the Balanced Score card. The Strategy Map is very important because without this the contextual value of performance measures is lost. It would be not wrong to say that measurement is the basis of the Balanced Score card system (Robert and David 1, 1996, pp. 45-63). The strategic destination is communicated by the Strategy Maps while the measure of the Balanced Score card monitor whether the organization is on track or not. Strategy Map basically conveys the organization’s strategy through use of the organization’s objectives. Once a precise Strategy Map is created, the next step is to develop measures for each and every objective given in the Strategy Map. The measures are provided by the Balanced Score card and it is the ultimate decider of success for an organization because it provides an organization with the numbers to analyze and tally. The Balanced Score card is created by translating the organization’s strategy into clearly defined objectives, targets and measures. Any successful implementation of a strategy requires it to be communicated to every level of an organization. The employees of the organization should also act upon it to make it a successful one (Robert and David 2, 1996, pp. 132-139). The creation of a Balanced Score card provides an organization with an opportunity to critically assess the ongoing activities in an organization. The four perspectives of the Balanced Score card such as financial, internal business processes, customer, and growth and learning answers a lot of pertinent questions. Financial identifies some relevant financial measures. How the customers look at the bookshop or rather what are the perceptions of the customer about the bookshop is answered by the measure customer. Internal Business Processes Perspective Internal business processes identify the measures which tell the organization about how to achieve excellence. Growth and learning identifies the measures which tells the company about how to continuously improve, innovate, and create value. Balanced Score card is not at all a very complex thing. But the processes such as distribution, collection, and reporting may be labour intensive and a tedious one (Keyes, 2005, pp. 164-173). So the bookstore should follow a simple mechanism in this regard and delegate all the activities in this regard to an individual only. If the bookshop employs all the people that are relevant in this regard, it may lead to a situation where multiple people return the same information by a specific date and it may lead to an undesirable situation. As the system suffers from procedural problems, it will be best if the bookshop follows a specific approach in this regard. The bookshop will require a framework which is much disciplined and then only it will be able to build a sound Balanced Score card system. Balanced Score card may mean various things to various people. It is sometimes used as only a performance metric tool for grouping measures which are already existing into categories and then displaying those graphically. These measures are operational and are not at all strategic and their basic use is to track program operations, service delivery, and production. Growth and Learning Potential It is also used as a strategic management tool which aligns the work of the people to the organization’s strategy and vision. It forms the basis for aligning resources with strategic objectives. Strategic intent is communicated throughout the company and also to external stakeholders through this system. In the Balanced Scorecard system which is based on strategy, operational and strategic performance measures are only one out of several important elements and it is used to facilitate taking informed decisions at all levels of management. In this system, the main focus is on results and accomplishments which have its basis on a good strategy which is executed well. In today’s dynamic and ever changing environment, it is not enough to only analyse the actual against the budgeted results as the basis for strategic decision making. The Balanced Score card has provided a new direction in this regard whereby we can move from variance analysis and move to results provided by the scorecard for the purpose of reviewing, learning, and questioning the strategy of the organization (Brown, 2007, pp. 246-253). The perspective that is most difficult to control for the bookshop The sharing of the results of the Score card within an organization provides the employees with an opportunity to share among themselves the assumptions of the strategy, learn from events which are unexpected and also can discuss the need for any modifications, if needed, in the near future. In this way the employees will be able to understand the organization’s strategy in a simple manner and this will lead them to understand where the company is heading and how they can contribute to the organization’s journey towards excellence. The growth and learning perspective will be the most difficult perspective to control because for a new bookshop the most challenging thing is to adapt to the environment and continuously learn new business skills to prosper in this ever changing environment. It has to continuously learn skills which will help the business to grow at a rapid pace. Conclusion The bookshop in question will definitely not be the only bookshop in the area. There will be many other bookshops in the area which are already established. So it will face a stiff competition from other competitors in the area. The bookshop in question may have visionary power but if it has to stay ahead than its other competitors it has to apply effectively the Michael Porter’s five forces model which states that there are five forces such as supplier power, rivalry, buyer power, threat of substitutes, and barriers to entry. The bookshop will be in a better position than other competitors if it understands the above mentioned forces effectively. Economies of scale and supplying proprietary products can act as tools which will take care of barriers to entry for the bookshop. To conclude, it can only be said that the Balanced Score card is a very effective tool to cope with the challenges that are posed by the dynamic and ever changing environment of the today’s world. References Brown, M. G. 2007. Beyond the Balanced Scorecard: Improving Business Intelligence with Analytics. New York: Productivity Press. Kaplan, R. & Norton, D. P. 1966. The Balanced Scorecard: Translating Strategy into Action. New York: Harvard Business Review Press. Keyes, J. 2005. Implementing the IT Balanced Scorecard: Aligning IT with Corporate Strategy. New York: CRC Press. Paul, R. N. 2006. Balanced Scorecard Step by Step: Maximizing Performance and Maintaining Results, 2 nd Edition. NJ: John Wiley & Sons. Robert S. K and David P. N. 2. 1996. Using the Balanced Scorecard as a Strategic Management System. Harvard Business Review, January – February, 1996, pp. 75– 85. Robert S. K. and David P. N. 1. 1996. The Balanced Scorecard. Boston: Harvard Business School Press. Robert S. K. and David P. N. 1992. The Balanced Scorecard – Measures That Drive Performance, Harvard Business Review, January – February: pp. 71 – 79. Read More