Balanced Scorecard in Travel Trade - Essay Example

Balance scorecard in travel trade Problem ment: The problem of quantifying the success of the closely integrated complex business operations of the Travel Industry can be solved by using Balanced Scorecard. Challenge/ Opportunity: Challenges: The operations related to the Travel Industry are considered to be very dynamic in nature. It has to deal with many interrelated operations and services at time to deliver the services. Moreover it is that type of a service industry which survives by selling something intangible like “customer experience”. (“Travel Agency Balanced Scorecard Metrics”, 2009). For these reasons the complexity involved in such trade becomes huge. Apart from the operational complexities the competition for market share is also intense. Again as the industry necessarily deals with so many interrelated operations maintaining financial soundness is also somewhat of a challenge for these agencies. (“Travel Agency Balanced Scorecard Metrics”, 2009). Most of them have to handle many cost elements at a time and side by side have to make sure that they generate adequate profit out of the business. As far as the factor of internal environment is concerned, the issue of proper employee management and team work between them comes to the picture. (“Travel Agency Balanced Scorecard Metrics”, 2009). Considering all these aspects the formation of a Balanced Scorecard becomes an utmost necessity for the companies operating in the industry. It has to be remembered that the main aim of any travel related firm is to ensure safe and pleasant trip for its customers. That is the reason why counting on this “intangible asset” gathered from the numerous clients is definitely a challenge. Rather it demands a very sophisticated approaches and focus thinking before the implementation of the performance measurement system. (Quintano, n.d.) Unlike financial parameters which mostly deal with statistics and numbers, measuring total customer experience, is a subject that requires clear understanding and knowledge. (“Extending the benefits of Balanced Scorecard for a Travel Agency”, 2009). The management of a travel firm should clear about their goals and objectives, because due to the level of complexities involved in the trade it is sometimes very misleading for any management. The group of experts who work rigorously to achieve these goals should be very certain to identify the major strength of their organization so that they can improve on that parameter. (“Extending the benefits of Balanced Scorecard for a Travel Agency”, 2009). But it becomes very difficult for any firm to continuously filter and measure the negative and the positive aspects of their business without the identification of some quantifiable elements based on which they can monitor their performances. Apart from all these there are other challenges which hinder the process of quantifying the performances of a travel agent. One of them is of course the presence of intense competition both in the national and local level of operation. The presence of competition in most cases cannot be properly identified due to the level of complexity in the industry. (“Extending the benefits of Balanced Scorecard for a Travel Agency”, 2009). It is a fact that in every sector of travel related trade and operation the level of competition is rising and the most profitable members of the industry are trying to increasing their customer base. But problem is that the rate of increase of client base of the industry is not adequate to satisfy the competition level. (“Extending the benefits of Balanced Scorecard for a Travel Agency”, 2009). For that reason a fierce snatching game is observed within the industry, and there are less space and time for the competitors. Thus it becomes all the more essential for the companies to monitor individual performances so that strategic moves can be adapted at appropriate time. Opportunity: Considering the segmentation prevailing in the industry (corporate travelers, leisure travelers etc), the company with more focused approach is likely to be the one which will be more successful in trapping down the potential customers. “Balanced Scorecard” for operation provides a feasible solution to such problems. (“Extending the benefits of Balanced Scorecard for a Travel Agency”, 2009). Utilizing the metrics (balance scorecard) in the right areas will help all the players of the industry to reduce the performance gaps. For example if a travel agency measures and monitors the total customer experience in a continuous basis, the company would be able to identify their monthly or quarterly performance as far as that parameter is concerned. It is not only the sales figure which matters in this case as if the customer satisfaction level falls it will definitely affect the future sales revenue in a negative way. Without monitoring each individual parameter separately it would be very difficult for the firms to ascertain their risk and to determine the strategy they need to adapt. (“Extending the benefits of Balanced Scorecard for a Travel Agency”, 2009). The balance scorecard metrics can be used for all the related services of the agency. This is a vital point as a travel related company always has to keep track of various things related to its core business. For that reason it is very important for the firm to keep track of the things that are earning reasonable returns for the firm and the things which are incurring more cost. As already mentioned earlier that the growth of customer base of the industry is not high, thus for this reason the firms need to concentrate on sustaining customers base. A solution in the form of Balanced Scorecard helps in the managing of the expanding operations and also incorporates other parameters like financial earning position, internal operation, business plan and growth parameters. The following diagram gives a generalized view of a balance scorecard applicable to traveling industry: Travel Agency Scorecard Performance Evaluation is a responsibility and job of every organization. One of the ways to establish this is by employing a Balanced Scorecard. This can be used for showcasing metrics in the important areas. To start with, these areas can be Financial, Perspective Performance Financial Perspective 43.15% Customer Services and Satisfaction Perspective 43.59% Internal Operations Perspective 39.29% Business Planning and Growth Perspective 57.46% Total Performance 45.37% (Source: Balanced Scorecard Designer, 2009). Management Solution: The previous section emphasized on the challenges faced by the travel agency. Implementation and designing of a Balanced Scorecard is definitely a management level solution for any travel related company operating in the industry. There had many research conducted on this particular area and in a recent presentation of Southern Alberta a concept called “A Healthy Scorecard” was being introduced. (Mukherjee, 2003) This is the direct extension of the concept of “The Balanced Scorecard” with more concentration given on the health related issue. For any company operating in the travel industry it is important to understand the relationship between all the parameters with the ultimate goal. (Mukherjee, 2003) For long term success of a travel company proper strategic positioning is what is necessary as they necessarily deal with more unorganized external elements than any other industry in the service sector. Based on a feedback of a survey it is revealed that the professionals are now realizing the requirement of a planned approach to survive in the travel or hospitality industry. (Mukherjee, 2003) To make it successful the organizers should produces portfolio evidences about the types of travel organizers and the marketing strategies. (Marvell, Smith, 2005, p.208). Also the organizer needs to demonstrate skills and understanding the application of a Balanced Scorecard and the technology related to it. (Marvell, Smith, 2005, p.208). After the identification is done the organization must focus on the different marketing strategies to increase the customer base. As increasing the customer base and delivering them a perfect “experience” is the target of all the travel agencies of the world. According to the theory of Balanced Scorecard the performance of the organization should include critical measures which will indicate performances in four broad areas. They are Financial, Customer, Internal Business Process and Learning & Growth. (Mukherjee, 2003; Kaplan and Norton, 1996, p.13). The last measure can be regarded as the most crucial among all. If the process of Learning and Growth of an organization is maintained the Internal Business Processes will definitely undergo improvement which will necessarily be reflected on the Customer perspective. (Mukherjee, 2003). Continues focus on delivering perfect customer satisfaction will definitely lead to the financial growth. Here the interesting thing is that the financial growth is actually dependent on the other three non-financial measures. The Balance Scorecard necessarily incorporates all these measures so that the travel agency can monitor the growth of their organization. It will help the organization to point out those specific factors which are generating the returns of the firm. The management team of a travel and hospitality related industry should first focus on the learning and the growth perspective. (Mukherjee, 2003) This human resource perspective actually enhances the employee skills and also contributes to the input of the employees by improving their morale. (Mukherjee, 2003) As already mentioned earlier travel industry is a very dynamic one, the employees of any organization should be more focused on updating themselves with the situation and should work with much efficiency. The management on the other hand should put some quantifiable measures so that they can monitor the increase or decrease of the employee moral parameter. (Mukherjee, 2003) Then after that the management should consider the internal business process. When the employees are better skilled the business process will take shorter cycle time. (Mukherjee, 2003) This is also very crucial element as one of the major factors of enhancing customer satisfaction is timely delivery of the services and products related to travel. The increase in the efficiency of internal business measure will enhance the customer satisfaction level. (Mukherjee, 2003). Timely and efficient delivery makes the customer experience richer and the level of retention and acquisition for the organization increases. Finally when the company gets hold of its main customer base, the financial measurement shows positive signs. (Mukherjee, 2003). Thus this linkage shows the importance of implementing a balanced scorecard in any travel organization. In this way the management will have the edge to monitor investigate all the related activities that the firm is currently indulged in. The following diagram shows the technology involved in maintaining and incorporating a balanced scorecard system in any travel related organization. The importance of technology lies in the fact that the management should get access to real time information so that they can make adequate strategies. Also the connection between the system and interface should be adapted so that the relevant data related to performance indicators are updated regularly. Manual entries do take a lot of unnecessary time, which hinders the process of decision making. (Source: Balanced Scorecard Designer, 2009). A renowned travel related company called the Carlson Wagonlit Travel has adapted the process of information delivery to the clients which act as their main competency. (“Performance Measurement”, 2009). Carlson Wagonlit Travel integrates data from various sources thorough the help of efficient technological advancements. The company provides factual and synthesized form of information which helps the other firms to strategize their business. (“Performance Measurement”, 2009). Though these are general information related to the industry, such information often gives indication about the trend and change in policy of the various governments. Such information along with the internal business data helps the firm to make the correct strategic moves. Lesson Learned: Analyzing the entire situation it can be said that travel trade is a highly sophisticated business and it contains many internal complexity in the business system. It has to collaborate and synchronize its operation with many external industries. For that particular reason it is very important that the firm management monitors all the activities related to its business. The management should be able to adapt concentrated strategies so that it can make further development in its area. As increasing the “total customer experience” is main aim for each travel agency and travel related companies, the management should focus on enhancing that particular factor which differentiates their firm from the competitors. This becomes all the more critical as the level of competition in the industry is very high. Balanced Scorecard is that tool by means of which the management can control and monitor all the elements related to its business. This system actually enables the management to determine those loop holes that are affecting the business in a negative way and also helps in ascertaining the strength of the organization. The ultimate goal is to earn better revenue and that actually links with many other internal business processes of a travel company. The tool actually makes it quantifiable or in other word easier for the management to observe the change in performance. Why I care: The use of balanced scorecard for performance measurement is not a new practice. However now a days the more complex business operation are trying to adapt this kind of scientific and technically sophisticated system to have a close look on the performance of the various departments of their organization. A multifunctional organization like a travel agency will be most benefited by the concept of Balanced Scorecard. References Extending the benefits of Balanced Scorecard for a Travel Agency. (2009). strategy2act.com, Balance Scorecard Designer, website : < http://www.strategy2act.com/solutions/extending-the-benefits-of-balanced-scorecard-for-a-travel-agency-.htm> (accessed on November 18, 2009) Kaplan, Robert S. and Norton, David P. The balanced scorecard: translating strategy into action, Harvard University press, 1996. Marvell A, Smith J. (2005). Travel & tourism: AS level for OCR : GCE AS level double award: Heinemann, USA Mukherjee D. (2003). Strategy and its Execution- a hospitality industry perspective. HCFS International, Canada. “Performance Measurement”. (2009). U.S. Department of Transportation. Website: < http://plan4operations.dot.gov/index.cfm> (accessed on November 18, 2009) “Performance Measurement”. (2009). carlsonwagonlit.com. website:< http://www.carlsonwagonlit.com/en/index.html>(accessed on November 18, 2009) Quintano, A. (n.d.) PERFORMANCE EVALUATION IN THE HOSPITALITY INDUSTRY: THE BALANCED SCORECARD AND BEYO, University of Malta, available at: http://www.icabr.com/fullpapers/Quintano%20Alfred.pdf (accessed on November 18, 2009) Travel Agency Balanced Scorecard Metrics. (2009). strategy2act.com, Balance Scorecard Designer, website : < http://www.strategy2act.com/solutions/travel_agency_excel.htm> (accessed on November 18, 2009) Read More