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University of Dhaka

International Business

Term Paper
On

Balanced Scorecard
Prepared by:
GM Sajjat Hossain
ID No- 80129058

9th Batch
Dept. of International Business
Universityof Dhaka

Supervisor:
Mohammad Rakib Udidn Bhuiyan
Assistant Professor
Dept. of International Business
Evening MBA Programme
University of Dhaka

Date of submission: 20-12-2015

Table of Contents

Serial
No
1.

Title
Introduction

Page
Numbers
1-2

2.

Balanced Scorecard

2-4

3.

SWOT Analysis

4-5

4.

Design of The Balanced Scorecard for


Villa Vittoria Guest House, Coxs Bazar,
Chittagong

5-7

5.

Balanced
Scorecard
to
improve
performance of Bangladeshi companies

6.

Recommendation

7.

Conclusion

8.

References And Bibliography

10

1. Introduction
1.1 Background of the study
The business organization must have to follow the rules & regulation and without the proper
connection of the business organization it is not possible to have the success. But the thing is

it is so much necessary to have the performance measurement of the business organization.


The Balanced Scorecard (BSC) helps in this perspective. Without the proper implementation
and without the perfect measurement of the business organization, the management cant be
able to take any sorts of decision about the organization. Besides, it is so much important to
know about what is going on and what is so much necessary for the business organization.
The Balanced Scorecard (BSC) helps in reducing all sorts of problems and it is so much
necessary for the business organization to reduce those. On the other side, the Balanced
Scorecard (BSC) is the proper solution for the measuring of the perfect performance. There
are some of the perspectives about the Balanced Scorecard (BSC) which may help in giving
the perfect service to the management of the business organization.

1.2 Objective of the study


The objective of preparing this report was to find out: To review the concept of Balanced
corecard. Sustainability of Balanced Scorecard. Why sometimes the Balanced Scorecard
fails? Proper implementation of Balanced Scorecard and its importance. Is Balanced
Scorecard is a niversal solution for measuring the performance? Is Balanced Scorecard can
be developed?

1.3 Scope of the study


This report was prepared by studying many articles, reports, journals, and thesis papers,
books on the Balanced Scorecard (BSC) to find out the proper concept and then find out the
objective. Some organizations dont find the Balanced Scorecard (BSC) useful but in actual
sense they are wrong. To solve these I have to go through many papers to find out the proper
concept of the Balanced Scorecard (BSC) and to find out the actual meaning of using it.

1.4 Methodology
My thesis paper is not on any specific company. It an overall view on the concept, using and
sustainability of the Balanced Scorecard. For making this report more presentable and
meaningful, I have gone through many articles on the Balanced Scorecard. I have analysed
the articles of Stan Davis named An investigation of the effect of Balanced Scorecard
implementation on financial performance, Ruzita Jusoh named The performance
consequence of multiple performance measures usage, Hoque & James named Linking
Balanced Scorecard measures to size and Market Factors: Impact on Organizational
Performance, Paul Hepworth named Literature review of the Balanced Scorecard, Bernard
Marr named The Balanced Scorecard and Intangible assets: similar ideas, unaligned
concepts. From these articles I have taken a brief review on the performance measurement
activities of the Balanced Scorecard as well as its usage in the business organization. Then
from the article of Robert S. Kaplan named Conceptual Foundation of the Balanced
Scorecard I got an overall concept on the Balanced Scorecard. Besides, this helped me in
finding out the future opportunities of the usage of the Balanced Scorecard.

1.5 Limitations of the Study

There were many limitations in this study. I have faced many problems in preparing this
thesis paper. Some of the limitations that I have faced in my study are:
In the main constraint of the Balanced Scorecard (BSC) there is insufficient information in
different journals and articles. There were a lot of arguments of different experts in different
reports and thats why it became hard to find out the actual and final solution. Besides, time
shortage is a big sorts of constrain because the thing is, it is very difficult to complete a thesis
paper within only a short period of time. In Bangladesh, there is much lacking in the
information about the Balanced Scorecard (BSC) as the experts of Bangladesh only have a
few journals on this. I didnt have so much deep knowledge about the Balanced Scorecard
(BSC) thats why I have to go through many articles, books, journals, reports & theories.

2. Balanced Scorecard
2.1 Overview of the Balanced Scorecard (BSC)
The balance score card or BSC is a semi-standard structured report that is used as a tool of
strategy performance management. This tool is supported by automation tools and design
methods. Managers can use these tools to keep track of employees activities and monitor the
consequences of their activities so that they can control employees performance. According
to the report of 2010 annual survey of management tools undertaken by Bain & Company it
is the most effective strategy performance management tool.
Some of the experts described about the Balanced Scorecard as:
The balanced scorecard retains traditional financial measures. But financial measures tell the
story of past events, an adequate story for industrial age companies for which investments in
long-term capabilities and customer relationships were not critical for success. These
financial measures are inadequate, however, for guiding and evaluating the journey that
information age companies must make to create future value through investment in
customers, suppliers, employees, processes, technology, and innovation (Kaplan, 2001).
Balanced Scorecard is a strategic model tool which helps in measuring the performance and
to achieve the balance which supports the progress against the pre determined objectives,
without the sub optimization. (Smith, 1993) The original model of balanced scorecard
proposed by Kaplan and Norton consists of four perspective to identify and choosing
effective measures. They are financial, customer, internal business processes, and learning
and growth.

Financial perspective
Financial perspective identifies limited pertinent high-level financial measures (Aaker, 2000).
In specific, designers were inspired to pick up measures that helped to answer the question
"How do we look to shareholders or investors?"
Customer perspective
This perspective helps in identifying and selecting measures that answer the question "How
do customers see us?"
Internal business perspective

This perspective inspires to choose measures that answer the question "What must we focus
on?"
Learning and growth perspective
This perspective encourages to identify and to select measures that answer the question "How
can we carry on improving, creating value and modernizing?"

2.2 Objective of Balanced Scorecard


For implementing the balance scorecard in the field, organization must identify the objective
of balance scorecard. The Balanced Scorecard, developed by Kaplan and Norton at Harvard
University, provides an excellent framework for defining goals and objectives and translating
them into specific measures (Kaplan, 2000). Objectives defined using this framework is
Balanced in that they are defined from four perspectives:
OBJECTIVE OF THE BALANCE SHEET (BSC)

The Customer Perspective emphasizes satisfying the needs and wants of customers.
The Financial Perspective focuses on the stakeholder concern about how efficient and
effective the unit is at using its resources and capitals.
The Internal Business Perspective highlights excellence at performing internal processes
and in employee competencies and skills.
The Innovation & Learning Perspective stresses on dynamic improvement and the creation
of value.

2.3 Design
The main objective of designing a balanced scorecard is to identify a few numbers of
financial and non-financial measures and to assign target to them so that organization can
monitor whether they are meeting expectations or not (Arthu, 1994). If there is any fall or
deviation, managers can take necessary actions to improve performance (Banker, 1998).
According to Kaplan & Norton's writing on the subject in the late 1990s, designing a balance
scorecard requires four steps. They are: Converting the vision into operational goal.
Collaborating the vision and connect it to distinct performance. Business planning and
guideline setting. Feedback, learning and fitting strategy consequently.
In particular, people state a "strategic linkage model" or "strategy map" as being a balanced
scorecard (Barth, 1994). This design of balanced scorecard helps a manager to recognize
various measures and to monitor and control individual performance.

2.4 Original design method


The original design of balance scorecard contained simple tables segmented into four sections
termed as "financial", "customer", "internal business processes", and "learning and growth"
(Beaver, 1999). It requires selecting five or six measures for each perception to design a
balanced scorecard Organizations face problems in selecting effective measures. They must
choose the best measures to design major model of balanced scorecard. Though early-style
balanced scorecards are difficult to design in a manner that builds confidence that they are
well designed, they are still designed and widely used.

2.5 Improved design methods


The improved design method was developed in the mid-1990s (Bowbrick, 1992). This
improved model selects measures based on a set of "strategic objectives" planned on a
"strategic linkage model" or "strategy map" (Box, 1994). The strategic objectives are
assigned to four measurement perspectives to link the dots for creating visual presentation of
strategy and measures (Bushman, 1996). This sort of approach delivers greater contextual
justification for the measures chosen so that managers can work together harmoniously and
since 1996, this type of approach is widely used (Deloitte, 1994).

3. SWOT Analysis
3.1 Strengths
Top management commitment and support
Determining the critical success factors (CSFs)
Translating CSFs into measurable objectives (metrics)
Linking performance measures to rewards
Linking strategic planning, balanced scorecard, and budgeting process for better allocation
of resources.
translating strategy and strategy objectives into actionable goals and initiatives
communicating strategy and strategic objectives throughout the organization
setting achievable targets and initiating processes to achieve those targets

3.2 Opportunities

Obtaining executive sponsorship and commitment


Involving a broad base of leaders, managers and employees in scorecard development
Choose the right Scorecard Champion
Beginning interactive (two-way) communication first
Viewing the scorecard as a long-term journey rather than a short-term project
Getting outside help if needed
Increase in customer focus
Focus on creating intangible and intellectual capital
Business excellence and growth
Align strategy to operations at all levels of the organization

3.3 Weaknesses
Some of the organization has no rigorous linkage between the performance measures and the
strategies. Then it may happen that the organization cant be able to measure the proper
formance by the Balanced Scorecard (BSC). On the other side, it may happen that the proper
management cant be maintained perfectly because of the shortage in the linkage.
Sometimes organization cant be able to develop a formal casual model or cant develop a
perfect value-driven map. Then the Balanced Scorecard (BSC) cant be able to measure the
perfect management. Some of the organization doesnt use the non financial measures to
financial performance. Then in that case, the Balanced Scorecard (BSC) cant be able to
measure the perfect performance.

There are some of the organization which doesnt have attempted to validate the linkage
between their non financial measures and the future financial measures results. In that case,
the Balanced Scorecard (BSC) fails. When the organization have major implementation
problem, then the organization cant use the Balanced Scorecard (BSC) because, in that case
that tool cant work properly.

3.4 Threats
Lack of a well Defined Strategy
The balanced scorecard relies on a well defined strategy and understanding of
linkages between strategic objections and metrics. Without this foundation the
implementation could fail.
Too much focus on the lagging measures
Focusing on only the lagging measures may cause a lack of priority or opportunity
for the leading measures.
Use of Generic Metrics
Dont just copy metrics from another firm. Identify the measures that apply to
your strategy and competitive position.
Self-serving managers

Managers whose goal is to achieve a desired result in order to obtain a bonus or


other self reward.

4. DESIGN OF THE BALANCED SCORECARD FOR VILLA VITTORIA


GUEST HOUSE, COXS BAZAR, CHITTAGONG.
Imagine Villa Vittoria Guest House is a 20 room 3 star guest house in Villa Vittoria Guest

House, Coxs Bazar, Chittagong:


Here is the implementation of balanced scorecard for Villa Vittoria Guest House, Coxs

Bazar, Chittagong:
FIRST STAGE: DEFINING VILLA VITTORIA'S STRATEGIC
DESTINATION: THE VISION
A strategic destination statement provides the answer to how an organisation will want to
look like in the next three to five years.
It is important to understand the vision of the establishment as this will provide the
framework from which the balanced scorecard will be designed and implemented, ensuring
that the scorecard is customised to the expectations of the management of Villa Vittoria.

SECOND STAGE: DESIGN THE STRATEGY MAP


The Strategy Map shows the overall goals and competencies based on the four perspectives
of the Balanced Scorecard. A competency can be defined as simply the resource or ability that
is required by an organisation in order to achieve a particular goal. Competencies are

essential and can be referred to as the critical success factors since the presence or absence of
these can influence the success or failure of an organisation.
VILLA VITTORIA STRATEGY MAP

Five stages of guest cycle are:


1. Pre-arrival - enquiry, reservation and confirmation of booking
2. Arrival
3. Stay - Check-in, transfer to room, room occupation
4. Departure - Check-out
5. Post-Departure

THIRD STAGE: DEVELOP THE KEY PERFORMANCE INDICATORS (KPIs)


Based on the strategy map above and recognised hospitality KPIs, the following three KPIs
have been selected for Villa Vittoria:
FINANCIAL
Gross revenue per room
Gross/Net Margin
Average spend per guest
CUSTOMER
Number of positive feedbacks from guests
Repeat customers as a % of total customers
Number of complaints received

INTERNAL BUSINESS PROCESS


Average check in/check-out time
Average time to service a room
% of rooms with maintenance issues

LEARNING AND GROWTH


Staff Turnover
Number of training sessions provided in the period
Technological competence of staff

FINAL STAGE: DETERMINE INITIATIVES FOR THE TARGETS


There are action programmes that must be introduced to ensure that the targets are achieved.
Initiatives are primarily meant to facilitate the execution of the key performance indicators.
Examples include quality improvement programmes and marketing initiatives.
In order to be effective, initiatives should have designated start and end times, progress
milestones and require resources such as defined budget and time hours to implement them.

BALANCED SCORECARD FOR VILLA VITTORIA GUEST HOUSE

5. Balanced Scorecard to improve performance of Bangladeshi


companies
Broad performance measurement suffers from several weaknesses, according to industry
pecialists and academics. Measurement systems can fail to provide strategic direction, while
financially based measures can short-change softer, qualitative benefits. Ultimately, what is
required of a measurement programme is a set of standards that address both external and
internal processes and outputs for an organisation. More specifically, any new class of

rformance measures should increase the scope of the measurement focus beyond financial
porting to less tangible benefits; create value through a focus on quality, service and speed;
nd instigate organisational learning and innovation.

One useful tool is the balanced scorecard, developed by Robert Kaplan and David Norton.
They say, "The balanced scorecard provides executives with a comprehensive framework that
translates a company's vision and strategy into a coherent set of performance measures."
In addition, software from a range of suppliers can score the performance of departments,
business processes or technologies against a range of criteria.

An organisation must start with a statement defining its strategy and mission. It can then use
the scorecard to translate strategy and mission into objectives and measures.
These objectives and measures are generally organised into four perspectives: financial focus,
customer focus, internal business processes, and learning and growth focus.
One feature that has been noted repeatedly is the scorecard's ability to align organisational
action with strategy. The first step in scorecard development is the identification of and
agreement on vision: the linking of performance measurement to strategy.
After agreement on vision, the organisation must determine the critical participants and
processes that will make a difference to the success of the vision. These might include
shareholders, customers, internal processes, and organisational ability to innovate and grow.
The next task is translating the vision. Management must provide an integrated set of
objectives and measurements that allow employees to act on the words of the vision and
strategy statements. The scorecard, when implemented effectively across and down an
organisation, translates the organisational strategy into concrete measurements that can be
understood by all employees. Management must provide an educational programme to
explain the scorecard and its use to its employees.

In addition, management must seek to integrate business and financial plans. Unfortunately,
many organisations separate the budgeting process from the strategic planning that a budget
ultimately needs to support. Management must also be willing to accept feedback and learn
from the results of sing the balanced scorecard. All scorecard quadrants should undergo
short-term monitoring, to provide a double learning loop, so that management can adjust
scorecard measures that do not provide useful information.

6. Recommendation
There are some of the recommendations about the Balanced Scorecard (BSC). Because it has
been found that though the Balanced Scorecard (BSC) is the universal solution for the perfect
performance measurement, it sometimes fails. So the recommendations are:
The sustainability of the Balanced Scorecard (BSC) must have to be maintained by the proper
formulation process.

The leadership must have to be developed.


The total systematic development of the linkage must have to be maintained so that any
kinds of systematic error can be reduced perfectly.
The formal causal model must have to be well shaped.
The proper value driven map must have to be done perfectly.
The strategic linkage must have to be developed.
The financial drivers must have to be managed perfectly so that in the performance
asurement of the financial instruments, there may have no problem in the Balanced Scorecard
(BSC).
The implementation must have to be done perfectly and also in a proper manner, so that here
may have no sorts of problems.

7. Conclusion
The perfect performance measurement tool is the Balanced Scorecard (BSC). On the other
side, there are some of the measures but the perfect measure is the Balanced Scorecard
(BSC). It is the universal solution and it is the tool which is so much helpful in maintaining
the proper anagement. The company always try to manage its performance measurement
activities by the help of the Balanced Scorecard (BSC). It is very much sustainable and if it
can be implement perfectly, and then the perfect performance management for the
organization can be done.

8. REFERENCES AND BIBLIOGRAPHY


1) Aaker, D., 2000. "The Financial Information Content of Perceived Quality". Journal of
Marketing, pp.191-201.
2) Ahn, H., 2001. "Applying the balanced scorecard concept: an experience report". Long
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3) Alford, A., 1992. "The Effect of the Set of Comparable Firms on the Accuracy of the PriceEarning Valuation Model". Journal of Accounting Research, pp.94-107.

4) Amir, E., 1996. "Value - Relevance of Nonfinancial Information: The Wireless


communications Industry". Journal of Accounting and Economics, pp.53-66.
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from Sweden". Journal of Marketing Research, pp.129-45.
6) Anthony, R., 1965. planning and Control Systems: A Framework for Analysis of the BSC.
Graduate School od Business Administration.
7) Arthu, A., 1994. Customer Satisfaction Strategies and Tactics. Chicago: Arthur Anderson.
8) Ashworth, G., 1999. "Delivering shareholder value through integrated performance
management". UK: Financial Times.
9) Atkinson, G., 2000. "Measuring corporate sustainability". Journal od Environmental
Planning and Management, 43(2), pp.235-52.
10) Bainbridge, C., 1996. Balancing Act. Management Consultency, pp.30-33.
11) Banker, R., 1998. "An Empirical Investigation of an Incentive Plan Based on Non
financial Performance Measures". Working Paper.
12) Barth, M., 1994. "Estimation and Market Valuation of Environmental Liabilities Relating
to Superfund Sites". Journal of Accounting Research, pp.177-209.
13) Beaver, W., 1999. "What Determines Price-Earnings Ratios?" Financial Analysts Journal,
pp.65-76.
14) Bertrand, K., 1989. "Putting Customers First". Business Marketing, pp.30-34.
15) Bewer, P., 2003. "Putting the strategy into the balanced scorecard". International
Federation of Accountants.
16) Bewer, A., 2004. "Putting strategy into the balanced scorecard". Articels of Merit
Competition.
17) Birchard, B., 1995. "Making incount". CFO the Magazine for Senior Financial
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18) Booth, R., 1996. Accountants do it by proxy. Management Accounting, p.48.
19) Bowbrick, P., 1992. The Economics of Quality, Grades and Brands. New York:
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