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- BALANCED SCORECARD : A STRATEGIC MANAGEMENT TOOL
- Putting the Balanced Scorecard to Work
- 7 Benefits of a Balanced Scorecard
- Putting the Balanced Scorecard to Work
The journal aims to provide a forum for publication and dissemination of scientific research conducted in the fields of management, as well as promote the interconnection of academic research with practical reality. It is intended to disseminate the scientific results obtained by academics and professionals, both nationally or internationally. The journal is based on a process of double blind review. In the last twenty years the relationship between Management Control Systems MCS and strategy has become a relevant issue to management control investigation.
BALANCED SCORECARD : A STRATEGIC MANAGEMENT TOOL
The journal aims to provide a forum for publication and dissemination of scientific research conducted in the fields of management, as well as promote the interconnection of academic research with practical reality. It is intended to disseminate the scientific results obtained by academics and professionals, both nationally or internationally. The journal is based on a process of double blind review.
In the last twenty years the relationship between Management Control Systems MCS and strategy has become a relevant issue to management control investigation. This study aims to understand how managers use the Balanced Scorecard BSC to support the processes of implementation and formulation of strategy. The research adopts an exploratory case study approach and was conducted on a business unit of a large industrial Portuguese company.
The research provides insights into the relationship between MCS and strategy, as it identifies the characteristics of using the BSC in the several levers of control..
The variable strategy is only openly used in Management Control MC investigation papers in the last three decades Langfield-Smith, Until then, MC was viewed as a set of mechanisms created for the purpose of producing information to support planning and control, favoring financial control and accounting related information.
During the decade of 80, investigation starts to relate MC and strategy based on the contingency theory. Starting in the mid-decade of 90, research highlighted the active role assumed by MC on the process of strategy formulation and strategy change. Conducted research assumes that strategy influences MCS and these can influence strategy. The studies of Simons , Simons, , , , , , have provided important contribution for this new vision of MC. The conceptual framework of Simons highlights the way managers can use MCS to define and implement strategy and also promote strategic change Langfield-Smith, The era of performance management introduces, in academic research and corporate practice, a set of management techniques focused on value creation, where the BSC is included.
Therefore, the research questions considered in this investigation are: how do managers within the Business Unit BU use the BSC, and how is the BSC implicated in the process of strategy implementation and strategic change? Our research focuses on the use of the BSC, on its diagnosis and interactive mode, and its relationship with strategy implementation and change, rather than on the BSCs technical details. A qualitative methodology and a case study method were adopted to better understand the processes and context in which the practices of management control take place.
This paper provides some contributions. This research explains, with detail, how managers, from a practical standpoint, use the BSC to implement strategy and promote new strategic initiatives, generating practical contributions to corporations.
The research on the BSC is considered insufficient and some of the premises do not foster consensus across the research community. This paper aims to secure further knowledge on the form that managers use the BSC and leverage other management processes with it.
The structure of the paper is as follows. Section 2 presents the literature review and propositions which are used to guide fieldwork and subsequent analysis. Section 3 draws the research methodology and design. Results from this investigation are described in Section 4 and Section 5 contains conclusions. Finally, in Section 6 limitations and issues for future research are displayed. The interactive control systems motivate managers to seek opportunities that might result in strategic changes and, later, in implemented strategies;.
The belief systems inspire employees to implement planned strategies but also to look for opportunities for change, as long as they are aligned with the organizational mission;. The frontier systems assure that implemented actions are coherent with defined product and market strategies. Control and business strategies implementation imply the integration and balance of the four control levers.
And the effectiveness level which is achieved in the implementation of the planned strategies and in the identification, formulation, and implementation of emerging strategies depends on the way that the four control levers are used by managers and how they complement each other.
The belief and interactive control systems foster creativity and the search for new opportunities, creating an organizational environment that stimulates information sharing and the organizational learning process.
The frontier system and the use of control systems for diagnosis are used to guide behaviors, imposing managers some action frontiers and focusing them on the defined objective set and reward criteria. Literature review focused on the framework of Simons , and on the studies that used the four control levers to study the relationship between management control tools and strategy.
The studies of Simons determined the course of research on the relationship between the MCS and strategy. Nevertheless, the results are not consensual. Abernethy and Brownell analyzed the way the budget was used within a context of strategic change and collected evidence that the use of the budget in interactive mode responds better to the learning and adaptation needs in a context of strategic change.
Marginson sought, through a case study, to understand the relationship between management control and strategy, exploring how and why the model and the use of MCS may affect the autonomy of managers in the development of new ideas and initiatives. Based on the model of Simons , , he concluded that: the system of beliefs and values may be used as a strategic change mechanism; the tools of administrative control may be used at the various levels of the organization to assure the strategy implementation; and, the key performance indicators may be used to secure performance in the critical strategic areas.
The obtained results validate the conceptual framework of Simons , The results of the study of Bisbe and Otley show that there is no positive relation between the use of management control in the interactive mode and product innovation, countering the assumptions of Simons Research suggests that the interactive management control seem only to hold any positive influence in companies with reduced innovation levels; in highly innovative companies, the interactive use of management control reduces the initiatives of product innovation.
The work developed by Kober et al. Moving away from the classical view that management control adapts to the strategy of the organization, Kober et al.
They concluded that management control systems influence and are influenced by strategy: the mechanisms of management control used by interactive mode facilitate strategic change and, on its turn, the management control mechanisms adapt to the strategic changes that take place.
Bisbe and Malagueno , analyzing a sample of medium-sized Spanish companies, conclude that the specific choice of an individual MCS for interactive use is related to the type of innovation mode that the company is dedicated to.
In this sense, the authors found evidence that companies dedicated to simple and isolated forms of innovation and companies looking to create a rich portfolio of innovation usually tend to select PMS for interactive use.
Bisbe and Malagueno studied how management accounting and control systems influence product innovation, and concluded that interactive control systems have a significant effect on the creativity, coordination and knowledge integration. Chenhall, Kallunki, and Silvola contribute to the debate in the literature by examining, through a survey research in Russian companies, how the MCS are involved in the relationship between strategies of product differentiation and innovation.
By doing it, the authors can find evidence that formal controls have some influence in helping companies developing innovations. Chenhall and Moers report that to be effective in management of both innovation and efficiency, the levers of control framework must have the four levers working together.
The authors stated that BSC has had a significant impact in the way we think about relating MCS and strategy innovation. Ramos and Hidalgo concluded that the use of performance measurement systems might evolve from the diagnosis mode to the interactive mode. Tuomela developed a long longitudinal case study and the results show that the performance measurement system in the specific case the scorecard may be used as diagnostic on interactive control systems.
The use of performance measurement systems through interactive mode presents benefits when compared with the use through the diagnosis mode. Henri found support on the resource-based theory and studied the relationship between the use of performance measurement systems and organizational capabilities inductive of strategic choices. Results are consistent with the model of Simons : the management control tools not only contribute for the implementation of planned strategies but also stimulate the emergence of new strategies.
The study of Widener shows that strategic risk and strategic uncertainties determine the importance and the way management control is used. The belief systems and the use of management control for diagnosis promote organizational learning. Jazayeri and Scapens have concluded that, in this case, the performance measurement system was used to allow that strategies emerged within the organization and not as an implementation tool of planned and top-down decentralized strategies.
Several researchers have focused on the way that performance measurement systems like the BSC and the performance measures are used in organizations. In sum, a significant set of published research, since the decade of 90, focuses on the relation of performance measurement systems, highlighting non-financial metrics, and the process of strategy implementation and change. Some researchers studied if the performance measurement systems, like for example the BSC, can be used of an interactive form.
This paper investigates how managers use the BSC to support the strategy implementation and change processes. The empirical study has been realized based on the theoretical framework of the diagnostic and interactive management control of Simons whose main propositions are presented in Table 1.
The literature review will help in the interpretation and discussion of the empirical study. The use of BSC in the diagnostic and interactive mode. Source: Researchers from compiled evidence.
This investigation adopts an exploratory qualitative case study method to understand how managers, within an organization, use the BSC to support strategy implementation and change processes. Research was conducted on two separate moments: a pilot study realized from January to June ; and the main study, from July to June The study was conducted in a BU of one of the largest Portuguese manufacturing groups that controls industrial and sales operations in different countries.
The BU wishes to remain anonymous and will be referred to as Alpha. Alpha was selected based on its theoretical importance Yin, First, the group uses the BSC methodology since , which provided an adequate time frame to study the form of use and impact of the BSC. The adoption of the BSC aimed to assure the alignment of the objectives of management structures and the implementation and monitoring of strategy within each BU. Since then, Alpha managers use the BSC on a rather permanent and dynamic fashion.
Second, Alpha has proved significant willingness and interest on the adoption of new management techniques and, particularly, of MC. Third, Alpha is included in one of the largest Portuguese manufacturing groups standing for the business units that operate within context and conditions equivalent to the object of our study Yin, Finally, the research reports a successful case in the use of the BSC methodology.
The tool was peacefully accepted and integrated into daily routines of the organization by all of the organizational players. The methodology is in use, and general organizational perception is of overall satisfaction. Alpha also proved to offer adequate context to the study of the form in which the BSC is used by managers and by the relationship between the BSC and strategy Keating, For data collection, researchers used semi-structured interviews, direct observation, and document collection.
Data collection was made during an month period, which allowed obtaining deep knowledge on the culture and management methodologies used in Alpha.
Questions were designed in accordance to key theoretical constructs Patton, ; Silverman, ; Yin, Interview scripts were used flexibly in the sense that they were being adjusted as the researchers were proceeding with the interviews Yin, The research study included a total of 28 semi-structured interviews during 30 h, representing the major part realized with senior executives.
The researcher has not faced significant resistance to recording as managers are used to routine meetings being video and audio recorded. Apart from the interviews, the researcher also interacted with an additional 80 BU employees, of different hierarchical levels, by both mail and directly.
Table 2 presents the schedule of interviews that were conducted. Besides the audio record, the researchers wrote down some notes during the interview that allowed, on the one hand, conducting the interview and, on the other, to help to elaborate the contact forms and in the indexation of interview transcriptions.
In the situations in which the researcher has not been authorized to audio record, exhaustive annotations were taken. The analysis of data, resulting from the interviews, was made through the method of content analysis. In the phase of evidence collection, the researchers adopted the following procedures: first, they conducted the maximum number of interviews involving employees of the BU and corporate headquarters; second, the researchers resorted to data and method triangulation; third, they considered the importance of data and sources; fourth, the researchers then resorted to key informers to validate collected evidence and the interpretation that were formulated.
Still in the analysis phase, the researchers replicated some of the results gathered, through the collection of additional data, and discussed the results obtained with the key informers.
The results were registered in a report, in narrative format, following logic of theory construction Yin, The economic group, to which Alpha belongs, adopted the BSC in Taking into account the published studies on the adoption of the BSC, the group will have been an early adopter of the BSC in Portugal.
Putting the Balanced Scorecard to Work
Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads.
7 Benefits of a Balanced Scorecard
E-mail: jordaoconsultor yahoo. E-mail: jlnovas uevora. The research described in this paper has analyzed the use of the balanced scorecard BSC as part of a management control system for implementing strategies in a large mixed economy company.
It is a disciplined effort that produces fundamental decisions and actions that shape and guide what an organization is, who it serves, what it does, and why it does it, with a focus on the future. Effective strategic planning articulates not only where an organization is going and the actions needed to make progress, but also how it will know if it is successful. What is a Strategic Plan?
In the early s, the Balanced Scorecard approach to strategic planning was developed to enable business owners to better organize and visualize their objectives. Giving this methodology a try may prove beneficial. Also identify the types of customers you want and, more important, can best serve.
Putting the Balanced Scorecard to Work
Research has shown that organisations that use a Balanced Scorecard approach tend to outperform organisations without a formal approach to strategic performance management. The key benefits of using a BSC include:. The Balanced Scorecard provides a powerful framework for building and communicating strategy. The business model is visualised in a Strategy Map which helps managers to think about cause-and-effect relationships between the different strategic objectives.
Quality Glossary Definition: Balanced scorecard. A balanced scorecard BSC is defined as a management system that provides feedback on both internal business processes and external outcomes to continuously improve strategic performance and results. By bringing together measures around internal processes and external outcomes, a balanced scorecard supports continuous improvement at the level of strategic performance and results. The balanced scorecard is a strategic management tool that views the organization from different perspectives, usually the following:.
Strategic Planning and Balanced Scorecard. (BSC) model are also among the approaches and models that deals with planning and performance assessment of.
2. Interviews: First Round
By contrast, the measures most companies track are bottom-up: deriving from local activities or ad hoc processes, they are often irrelevant to the overall strategy. It is forward-looking. It addresses current and future success. Traditional financial measures describe how the company performed during the last reporting period—without indicating how managers can improve performance during the next. It integrates external and internal measures. This helps managers see where they have made trade-offs between performance measures in the past, and helps ensure that future success on one measure does not come at the expense of another. It helps you focus.
The journal, published since , is the official publication of the Spanish Society of Cardiology and founder of the REC Publications journal family. Articles are published in both English an Spanish in its electronic edition.
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