Balanced Score Card Analysis

Balanced Score Card Analysis

Introduction

Organisational performance effectiveness is the accomplishment of missions or the achievement of objectives. Whatever its mission, the effectiveness of an organization requires that it efficiently identify, assess, solve, and cope with events or problems that arise within the operational environments. These are the classical functions of all organizations, and performance of them has always been critical for organizational success. It is clear now that functional proficiency and the integration of management and control systems play important roles in the performance of all organizations.

To be effective in turbulent and complex conditions, every organization must possess capabilities to: Search out, identify, and interpret the properties of operational situations as they develop, solve problems as they occur within the context of rapidly changing situational demands, generate flexible decisions relevant to changing situations and cope with shifting situational demands with precise appropriateness ( 2000).

It is apparent that the above capabilities require a highly responsive and adaptive system of decision and action. In such a system, the complex interplay between individuals, positions, and organization levels is a critical element in flexibility and responsiveness and, therefore, in organizational effectiveness. Control and guidance and management of each of these performances are an essential function to ensure improved organisational performance.

In order achieve an effective organisational performance, it is important to consider the management of all performances within a certain industry. It is noted that, performance has become a business buzz word. Organisations use many different approaches in the quest for a high- performance workplace. Organizational management entails practices used to guarantee that internal functions achieve their respective goals. In the management context, there emerge to important managements systems that include performance management. Part of it is the measurement of performance of organisation using tools and instrument such as the balance scorecard systems. Primarily, the main goal of this paper is to analyse the balance scorecard approach of an organisation and the application of a new system to improve their performance measurement approach.

Overview of the Company/Issues

The case that will be considered in this report is the retailer industry in Hong Kong, specifically the ZARA. The company is noted to be the flagship chain store which is owned by Spanish tycoon Amancio Ortega, who also owns some brands like Pull and Bear, Bersha, Massimo Dutti and Stradivarius. The company is regarded as one of the mode retailer industry which has enabled to expand and compete with quality brands as well as affordable process. Zara has resisted the business-wide trend of transferring production to low-cost nations. The company has established a policy which is the zero advertising and they preferred to invest percentage revenues in opening new retail outlets instead. The company has been regarded by others as the most creative, innovative and devastating retailer industry in the world. The company is a vertically-integrated enterprise; they design, produce and distribute their products which make them unique from other retail stores. In addition, the company also has control most of the channels of the supply chain.

To be able to sustain its competitive position, the management the retailer industry has been able to measure their productivity or performance. One of the reasons why ZARA measures its performance is to identify whether their employees and the industry has been able to meet their organisational objective of providing quality service to their target market.

Evaluating the performance of an organisation is essential as this may serve as a tool for implementing organizational approaches ( 1996). Measuring performance which has been applied in the retailer enables the industry to translate their strategy into concrete objectives. Through performance measurement, such organisational purpose has been communicated well to their retailer staffs and employees (1998;2000).

One of the implications of the performance measurement used by Zara is in terms of the reliability and credibility of the result or findings of the conducted performance measurement or evaluation. This can be attributed to the inability of the management to use efficient indicators and metrics that would effectively and credibly measure the performance of employees or staff of the organisation.

Other issue that concerns the performance evaluation or measurement of this retailer industry is in terms of the inability of the management to integrate balance scorecard or performance measurement approach integrated with their strategic management approach. Accordingly, at the very core of this performance measurement concept is the strategy of the industry to guide the actions, decision as well as the assurance of aligning the top to bottom employees. A performance measurement through scorecard can be developed without the guidance of strategy. However, the implemented scorecard system of the retailer industry becomes a key performance indicator which lacks the attributes given by a true balanced scorecard. In this regard, the problem occurs on having a performance measure system that are not linked or connected with the organisational strategy which may lead to further conflict and issues.

In the study by (2000), the researcher conducted a research on the use of balance scorecards using 15 firms. Based from the findings, the application of balance scorecards should consider four main factors. First, the company must constantly communicate with its stakeholders (managers, employees, customers, and senior leaders). By means of communication, the company should clearly relay the purpose of using the scorecards, how it will be used, what it will measure as well as the outcome of the gathered measurements. Several respondent of the study stated that two-way communication should be practiced so as to engage, inform and empower every stakeholder.

Another factor to consider in applying scorecards is simplicity and flexibility. Based from the replies of the respondent, it appears that the efficacy of BSC is enhanced when the set of activities involved are more homogenous. The quantity of the measures involved is not the important thing in BSC. Thus, measures should be selected in accordance to the objectives of the company. In order to increase