Financial Counseling and Planning - Article Example

II.GENERAL INFORMATION Learner’s yousuf saeed ali obaid kaabi ID Number: 101110011 111PMF103 Performance Management Fundamentals ) Article Title: The future of the Balanced Scorecard: an interview with Professor Dr. Robert S. Kaplan Date of Submission: SUMMARY (300 words minimum) This article by de Wall is a summary of a lengthier interview with Robert Kaplan, the co-creator of the Balanced Scorecard concept with David Norton, as well as excerpts from the speech he gave at the 2002 PMA conference, in July in the US in Boston, Massachusetts, where he was the key-note speaker. The author states that Mr. Kaplan is clearly most prominent scholars in the area of business performance management and that the Balanced Scorecard concept is one of the most important techniques developed in the last century. The primary focus of the first part of the interview is a re-evaluation by Kaplan of the Balanced Scorecard approach and what he feels is its most important and relevant points. The author asks Kaplan why he believes that the Balanced Scorecard had become so entrenched in the business world and its internal process and matrix. To which Kaplan sites what he feels is the tremendous communication gap between those creating the strategy and vision of the company at the top, and those that are attempting to implement that strategy on the front lines and in the real world at the bottom, so to speak. Kaplan states that the Balanced Scorecard helps to bridge the gap between the vision of upper management and the implementation of that vision into strategy by the staff. When asked if this system is still useful today and not “passé” as others have said, Kaplan responds by stating that book sales are still high and the attendance at Balanced Scorecard conferences are growing. He also sites that many countries Asia are implementing the technique in their larger organizations and he has also seen a rise of its use in many non-profit companies both here and abroad. Kaplan also believes that many companies are still struggling with getting their strategies out into practical business practice and that these companies have failed to utilize most of the non-financial metrics in their business evaluations, leaving them in the dust as far as any progress is concerned. He is currently working on another concept called a Strategy Map, which will hopefully guide companies along the process of strategy implementation. Kaplan believes that the Balanced Scorecard will be a valuable business tool for many years to come and he would like to see much more research done in the area of creating excitement and greater participation by employees to help them with the task of strategy implementation. By giving employees proper motivation he believes that any strategy can succeed, and will certainly fail without it. CRITICAL ANALYSIS (400 minimum) While this interview is certainly interesting in that it involves such an influential person as Robert Kaplan, it is a little short on real insight or real information regarding the use of the Balanced Scorecard in the present. Obviously, one of its greatest strength is the ability to bridge the communication gap between management and staff as well as implanting strategy in a very methodical and open ended way. Again, it is the difference between solely suing financial measures and incorporating other non-financial measure of performance such as customer satisfaction, internal processes, learning and staff growth all combing to create measures seen through as cause and effect chain. Furthermore, the Balance Scorecard itself acts as a form of main line management; almost more than a value measuring tool, by assisting management to understand better how these different metrics are inter-related and how they will contribute to better financial results in the long run. However, none of this was presented in this interview. Perhaps the non-annotated version would have it. Also when asked about how the Balanced Scorecard is performing in this century, Kaplan merely alludes to book sales and conference attendances as his most important metric. This is a bit anathema to the Balanced Scorecard concept itself, relying solely on financial data to form a conclusion about the technique. However, Kaplan’s current research endeavors are certainly of interest as in the concept of strategy maps and strategy map templates. The implementation of which, Kaplan states, will help to provide the necessary communication for business strategies. They will help everyone in the company to discuss and implement the strategy based on the elements contained within the map. Further information will be available in his latest book of the time. IN a sense much of the interview is a teaser for new books, and old, both by Kaplan and the De Wall who happened to have received an endorsement from Kaplan for his book, Quest for Balance. So in this sense the article itself seemed a bit more like an advertisement than an informative, in-depth interview. Nonetheless, the article certainly brought out some cogent points by Kaplan and his view of the business world today, and for tomorrow. While he is a bit mono-focused on his Balanced Scorecard, he also realizes that business must base its performance evaluation on more then just mere financial data, but there must be a balance between that and the non-financial data as previously mentioned. HOW WOULD YOU APPLY WHAT YOU HAVE READ (400 words minimum) While the particular metrics a company places within its balanced scorecard certainly depend upon its vision, strategic plan as well as the nature of its undertakings, there are certain general concepts that must all fit. If anything, this interview still stresses this fact. For instance, typical financial assessments may include long-term revenue growth as well as cost developments, now certain client metrics such as customer satisfaction or market share demographics have to be considered. The perspective of internal business processes while also including the standard measures of operational efficiency such as specific item / process costs and cycle times now must also include such performance measure such as employee satisfaction and the improvement of skills and on-going education. I can no longer have the luxury to view the competitive advantage or the sustainability of a company based solely on finical information. I see now that it is what its internal cohesiveness includes as well as the ability to create a sustainable and engage-able vision and strategy. Also that there must now be a level of transparency from the top down, so all employees feel part of the large process of growth and sustainability. This is the aspect of the Balanced Scorecard that I would apply to business overall. I would use the Balanced Scorecard to create transparency between departments by creating inputs from all departments and related outputs of decisions to the entire company. IN this way, not only is there greater interagency communication, but a greater chance for seamless implementation of strategy and development. I have also come to realize that there is no one size fits all solution to the problems companies can face. For instance, while on the surface downsizing may be a viable alternative to cut costs; it can also cut out key employees that may make the company more sustainable in the future. These values must be taken into consideration in a holistic way in order to keep the company growing and changing for the future. While this often results in short term losses, it will certainly result in long term gains overall. This interview has brought to mind the concept of systems theory and that while there may be many independent entities within a company, they must all work as a unified system in order for the company to move forward and progress. The main components of systems theory are inputs, throughputs, and outputs. Demands and resources enter the managerial subsystem as inputs. When families clarify their demands and assess their resources to attain their goals, these activities are known as throughputs. Next, actions are sequenced, and a plan is implemented. This is known as an output. Feedback provides information to various parts of the system that use it. The managerial process outlined by Deacon and Firebaugh is similar to the financial planning process recommend by the Certified Financial Planner® Board of Standards: establish goals, gather data, analyze information, develop a plan, implement the plan, and monitor progress toward the goal. (Schuchardt, Bagwell, Bailey, and Devaney 68) I can only think of the example of a centipede whose legs all work in unison. Even though separate single units on their own; there is a chain of thought, a system by which the one hundred legs all move the entity forward. In fact Rovira and Keeefe have researched that very idea, “Systems’ Theory is at the foundation of BSC [Balanced Scorecard]. The complex reality of an organization should be reduced to a set of indicators that represent levels of performance and the progress towards achieving a set of strategic objectives.” (Rovira and Keefe 42) Figure 1 below further elaborates on this. Figure 1: The Balanced Scorecard Systems Approach (Rovira and Keefe 19) I would seek to apply the Balanced Scorecard using Systems Theory so that it may be viewed as a chain of events that helps a company coordinate its activities and implement strategy from their vision. However, I do agree with Kaplan that keeping employees motivated and positive throughout the process is of primary concern and better ways to do this need to be researched and developed in the future. FACULTY COMMENTS AND FEEDBACK Marks: Works Cited Rovira, M Mercè and Terry Keefe. Deliverable: iSAC6+ D2.1 Base line analysis of administrative burdens and improvement locally. iSAC6+ project partially funded by the European Commission under the CIP-ICT-PSP program and Grant Agreement number +238887. 2010. Web 22 November 2010 Schuchardt, Jane, Dorothy C. Bagwell, William C. Bailey, and Sharon A. Devaney. "Personal Finance: an Interdisciplinary Profession." Financial Counseling and Planning 18.1 (2007): 61-68 Read More