To date, one of the best tools for correlating the overall development strategy of an enterprise with the workflow of each individual employee or specialized departments, as well as for operational control over the implementation of strategic objectives, is a balanced scorecard. The article discusses what it is and how it is defined.
Balanced Scorecard - definition, concept, differences from other management systems
Balanced Scorecard (BSC) — it is a well-functioning system of prioritization to achieve goals. Its use increases the productivity of employees and allows you to better manage the processes taking place in the company.
This scorecard was developed at the turn of the eighties and nineties. Two professors (Robert Kaplan and David Norton) studied twelve different companies. They found that the managers of business entities incorrectly prioritize the work of employees. Most focused on getting maximum profit in the shortest possible time, that is, there was a short-term orientation, and there was no talk of staff training, raising the average level of qualification in the company. As a result, the management hindered the development of their firms, since the average employee did not understand his role in the overall business of the company, which negatively affected the efficiency of his work.
To solve this problem, professors have developed a balanced scorecard, which has been tested in several companies. After that, it was recognized as unique, since it allowed the integration of both monetary and non-financial indicators of useful activity. Since then, its concept has been constantly developed and improved.
This system has many differences from other control systems:
- All processes occurring in the company are combined into a single mechanism;
- The system was created not only for managers, but also for each individual employee;
- It manages not only financial processes, but also other indicators that are important for the productivity of the company;
- This is not a system for obtaining indicators, but a system for managing through them.
Elements and objectives of a balanced scorecard
The balanced scorecard includes four projections, each of which plays an extremely important role in the implementation of the organization's development strategy:
- Finance;
- Clients;
- Internal business processes;
- Education and development.
As conceived by the developers, there are only four projections, each of which must be implemented, but, due to certain circumstances, the organization's management can include new projections.
Each projection is associated with a corresponding key question:
- How will the chosen strategy affect the financial position of the organization?
- What image should the company create for the client in order to implement the chosen strategy?
- Which internal processes are fundamentally important for the implementation of the strategy?
- What paths should be taken to realize the possibility of improvement and adaptation of the organization in order to fulfill the strategy?
Getting answers to these questions is the main step towards the implementation of the planned development strategy. It is very important that a causal relationship be established between the projections, since they must work in a complex, and not separately.
The solution of the issue of each projection sets certain goals for the company. The achievement of individual goals should also not be indirect, so a causal relationship should be established between them.
The principle of functioning of the balanced scorecard
It is customary to distinguish the following principles of the system functioning:
Preparing to build the system
The first thing to do when preparing to build a system is to clearly define your strategy, which, in the future, will be implemented, as well as assess possible growth prospects. Feature balanced scorecard is a consideration of all possible perspectives on the way of development and implementation of the strategy. That is why for the successful use of the system it is necessary to determine in advance possible prospects, as well as to form strategic goals for them.
Building the System - Steps
When all the necessary preparation activities have been carried out, you can proceed to building a system consisting of the following steps:
- Development of a map of goals, distributed over multidirectional perspectives. It is important to note that these should not be any abstract goals. It is necessary to define quite specific tasks and immediately proceed to their implementation. It's also important to note that perspective without a goal simply doesn't make sense;
- Development of indicators. It is with their help that the system is managed, so it should include only the most significant and, at the same time, indicators available for analysis;
- Development of planned values. Indicators and planned values should be considered separately, since the former remain unchanged for a long time, while the latter are constantly changing. It is also worth remembering that the planned values should be determined taking into account the maximum development, but be realistic and achievable;
- Development of activities to achieve planned values, that is, determining how exactly the strategy will be implemented in practice;
- Delegation of all derived values - each individual task must be assigned to a department or specific employees;
- Integration of the BSC into the system of employee motivation. Each employee must be interested in the successful implementation of the company's strategy and have a certain motivation.
Ensuring the performance of the SSP
In order to ensure the normal functioning of the BSC, the management of the company must regularly review the work and continuously monitor the process of implementing the strategy. In order to correctly assess the results of work for a certain period of time, it is necessary to answer the following questions:
When performing an analysis, it is important not only to evaluate how effectively the system works, but also to develop ways to eliminate existing shortcomings in order to make the required adjustments. Only constant analysis and control will ensure the performance of the BSC.
Balanced Scorecard - Example
To understand how the balanced scorecard works, the example of the organization CAC "Cable Plant" will help. This is a relatively large company that successfully uses this system in the implementation of its strategy.
The effective application of the BSC requires its development in accordance with the specifics of a particular organization, and not the use of someone else's sample.
| Component | Target | Index |
| Finance | Increasing the value of the company | Shareholder Value Added (SVA) |
| Increasing sales volume | Income | |
| Clients | Increasing marketing activity | Number of marketing activities |
| Increasing the share of significant customers | Sales share of significant customers | |
| Processes | Product quality improvement | Deviation percentage Rejection percentage |
| Increasing the efficiency of internal projects | Inner I 0 I | |
| Creation of a quality management system (based on 1E0-9000 series standards) | Percent completion of the certification project by 180-9000 | |
| Expansion of production capacities | Production area (m 2) | |
| Implementation of the EPP system | Number of EPP system users | |
| Development of the planning system | Forecast accuracy (plan/actual) |
Benefits of Using a Balanced Scorecard
- Drawing up a complete and objective picture of the business for management. The KPI BSC solution provides you with the up-to-date information you need to make the right strategic decisions.
- Occurrence warning crisis situations. Using the BSC, you can avoid serious crises, up to bankruptcy or takeover by competitors.
- Facilitate the interaction of organizational levels. One of the effects of using the BSC is a simplified diagram of the relationship between teams and individual units, which makes it possible to make work more efficient.
- Simplification of understanding of the developed business plans by all participants production process, which most positively affects the volume of products and labor productivity indicators.
- Security feedback at the strategic level and training. A balanced scorecard allows you to create a reliable communication channel, improve the skills of your staff, etc.
- Simplification of work with information. Assistance in the transformation and processing of a huge amount of data obtained from numerous sources into a simple and logically understandable system.
In order to work successfully, withstand competition, constantly improve the quality of work and have consistently high results, large companies need to quickly receive truthful information about their work in order to take timely measures to expand their own capabilities and improve the quality of the goods or services provided. The SSP is here to help.
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State Institute of Economics, Finance, Law and Technology
Department of Marketing
Course work
on the topic: "The use of a balanced scorecard in the enterprise"
Discipline: "Fundamentals of Management"
Completed by a student of the III course of 201 groups
Faculty of MSRIT
Skorokhodova G.O.
Checked by Doctor of Economics, Associate Professor
Levizov V.A.
Introduction
Chapter 1. Balanced Scorecard (BSC): essence, content and structure
1.1 The history of the creation of the SSP
1.2 The essence and structure of the BSC
1.3 Strategic map of the enterprise as a component of the BSC
Chapter 2. Implementation of a balanced scorecard in the enterprise
2.1 Construction and implementation of the BSC at the enterprise
2.2 Advantages and disadvantages of a balanced scorecard
Introduction
Today, in order to succeed in a dynamic environment, companies need to be able to quickly adapt to changing market conditions and outperform their competitors in terms of quality, speed of service, breadth of product range and price of products.
Strategic management accounting systems, one of which is the balanced scorecard, are becoming more widespread and used. The main purpose of the system is to provide the functions of collecting, organizing and analyzing information necessary for the adoption of strategic management decisions for the subsequent implementation of the results in the company's activities.
The Balanced Scorecard is a system for measuring the performance of the entire enterprise (system strategic planning) based on a vision and strategy that reflects the most important aspects of the business. The concept of the BSC supports strategic planning, implementation and further adjustment of the strategy, by combining the efforts of all departments of the enterprise.
This technology was developed relatively recently, in 1991, but since then the percentage of companies using BSC has increased many times over. BSC allows you to cover all indicators of a financial and non-financial nature in an enterprise, to display general conclusion on them and visually demonstrate the result.
The relevance of implementing a balanced scorecard is the ability to increase the company's shareholder value by increasing the efficiency of all business factors: finance, customer service, business processes, personnel. Also, individual elements of this system can be used to solve quality management problems and to support local improvements in company divisions, which makes its scope even wider.
The purpose of the work is to study the essence and structure of the BSC, consider the possibilities of introducing the BSC at the enterprise, as well as identify the strengths and weaknesses of the BSC.
The structure of the work consists of an introduction, two chapters, a conclusion and a list of references.
The introduction indicates the relevance of the topic, goals and structure of the work.
The first chapter discusses theoretical aspects balanced scorecard, namely the history of the creation of the BSC, its essence and structure.
In the second chapter, the prospects for the introduction of the BSC in the enterprise are investigated and its advantages and disadvantages are identified.
The final part of the work presents the relevance of the problem, conclusions and recommendations based on the research.
Chapter1. Systembalancedindicators(SSP): entity,contentandstructure
1.1 StorycreationSSP
balanced strategic scorecard
The history associated with the creation and subsequent development of the concept of Balanced Scorecard (balanced scorecard) dates back to 1990, when the Norlan Norton Institute began to study the issue of management effectiveness, as well as the search for opportunities and tools to improve it. This study- "Measuring the effectiveness of the organization of the future" took place within one year and had as its goal - the search for alternative methods of measuring efficiency, based on non-financial indicators.
The study was led by Norlan Norton Institute director David Norton, current director of the Balanced Scorecard Collaborative, and Harvard Business School professor Robert Kaplan, who served as the project's scientific advisor.
As the main hypothesis of the project, the participants of the study chose the following: "basing the methodology for assessing the effectiveness of an enterprise solely on financial indicators does not ensure the growth of the future economic value of the organization." At the end of the 80s. Professors Robert Kaplan and David Norton conducted a study of 12 companies. The study found that companies are too focused on financial performance, and in order to achieve them in the short term, spending on training, marketing and customer service is reduced, which in long term negatively affects the overall financial condition.
The authors proposed new approach to the implementation of the strategies. The approach was based on the statement, the meaning of which can be reduced to the following: "what cannot be measured cannot be controlled either." In other words, effective performance management involves accurate evaluation of performance.
Working on the project, the researchers studied, supplemented, improved various promising systems for assessing the activities of enterprises. Along with the improvement of traditional indicators, for example, indicators of business activity, completely new ones were created - indicators of timely delivery of a product or service to a client, product quality and time cycles production processes, performance indicators for new product development, indicators improvement, teamwork, leadership effectiveness, etc.
In the course of the research, various ideas, proposals regarding the content of the indicators of the system. For example, considered the possibility of including indicators of value creation for shareholders, productivity and quality, however, in the process of testing, the researchers came to the conclusion that the most optimal is a multifunctional system for evaluating the organization's performance, which eventually received the name "Balanced Scorecard" and included four main components: financial, client, internal and component of training and development (Figure 1).
Figure 1. Balanced Scorecard
They called their development "Balanced Scorecard" (balanced scorecard) to emphasize the balance ("Balanced") of the system, which should be measurable using a scorecard.
The authors of the system note: “BSC retains traditional financial parameters that reflect the historical aspect of past events. This is certainly important for industrial age businesses, for which investment in long-term capabilities and customer relationships was not critical to success. However, such financial criteria are not suitable for managing and evaluating the activities of companies in the information age, which is aimed at creating value through investment in customers, suppliers, employees, production, technology and innovative projects. The BSC complements the system of financial parameters of the already accomplished past with a system of assessments of prospects.
With the expansion of the popularity of the proposed methodology, its dynamic development, recognition by the companies in which it has found application, the number of tools and technologies that develop the original concept has increased.
So, over the past fifteen years, the balanced scorecard has become a powerful tool for implementing strategies and continuously evaluating their effectiveness.
1.2 EssenceandstructureSSP
Balanced system indicators (BSC, balanced scorecard)- this is a system of strategic management of a company based on measuring and evaluating its effectiveness on a set of optimally selected indicators that reflect all aspects of the organization's activities: financial, production, marketing, innovation, investment, management, etc.
SSP is a strategic management tool that allows you to link the company's operations with its strategy. The BSC reflects the balance that is maintained between short-term and long-term goals, financial and non-financial indicators, main and auxiliary parameters, as well as external and internal factors activities.
home a task SSP- increasing the shareholder value of the company, which includes the following sub-goals:
Creation of a management system for a company, an organization that allows the systematic implementation of strategic plans, translating them into the language of operational management and controlling the implementation of the strategy through key performance indicators;
Creation of performance indicators of managers of a higher level, including in an integrated form the tasks and indicators of managers of a lower level of the organizational and functional structure;
Ensuring the implementation of the strategy by the regular activities of all departments, managed by planning, accounting, monitoring and analyzing balanced scorecards, as well as motivating staff to achieve them;
Eliminating the gap between the company's goals and their operational implementation, as well as prompt response to changes;
Evaluation of the success of any costly project;
Linking the company's goals to the activities of the staff.
Main ideas SSP:
The company is successful only if the development goes according to plan, i.e. the company achieves its goals by creating and implementing strategic plans;
The actions of the entire company must be coordinated in such a way as to achieve the goals at the lowest cost and in the shortest possible time;
You can manage what you can measure. A manager of each level should have a set of key performance indicators that he uses in his activities.
essence SSP formulated two main provisions:
1) one financial indicators is not enough to fully and comprehensively describe the state of the enterprise, they need to be supplemented with other indicators;
2) this system indicators can be used not just as a comprehensive indicator of the state of the enterprise, but as a management system that provides a link between the strategic initiatives of the owners or top management and operating activities enterprise management.
Structure SSP.
The main structural idea of the BSC is to balance the scorecard in the form of four perspectives.
1. Financial perspective
Contains financial and economic indicators at the level of the company or business line, reflecting the strategic goals of shareholders.
Financial results are key criteria for evaluating the current activities of the enterprise and a measure for measuring the success or failure of the chosen strategy. As a rule, the typical goals within the framework of the financial projection are an increase in the profitability of products, profitability equity, net cash flow, net profit, etc.
The financial perspective shows whether the goal of the economy - the achievement of long-term economic success - can be realized in the end. Examples of indicators: turnover, income, price structure, capital structure, degree of debt, etc.
2. Client perspective
Contains indicators that characterize the reaction of the environment to the company's ability to meet customer needs in order to achieve financial goals.
This perspective covers the definition of key market segments, criteria and indicators of customer satisfaction, retention and acquisition of new customers, customer profitability, market share in target segments, indicators that determine the value proposition from the company, which in turn largely determines customer loyalty to the supplier. products or services.
3. perspective internal business processes
Contains indicators that characterize the effectiveness of business processes to achieve goals in the two above areas.
This perspective characterizes the internal processes of an enterprise, such as innovation process, product development, production preparation, basic resource supply, manufacturing, sales, after-sales service.
The process perspective indicates which processes achieve stakeholder and financial goals. At the same time, attention is focused not around listing all the processes in the enterprise, but focuses on those processes that are of key importance in transforming the strategy and strengthening competitive advantages. The efficiency of business processes determines the value of the company's offer, which determines the number of attracted customers and the final financial result. The indicators of this projection focus on the processes that make the main contribution to achieving the intended financial results and customer satisfaction. After the key business processes have been identified, indicators and criteria characterizing these processes are determined and performance indicators are developed.
4. perspective learning and development
Contains indicators of the ability to ensure the effectiveness of key business processes using the main intangible assets: the competence and culture of personnel, management and technological infrastructure.
This perspective allows you to describe the ability of an enterprise to learn and grow, which distinguishes people with their abilities, skills and motivation, Information Systems, allowing to supply critical information in real time, organizational procedures that ensure interaction between the participants in the process and determine the decision-making system.
Figure 2. Relationship between the main areas of the BSC
The above perspectives are classical, the most common, their relationship is shown in Figure 2. However, it cannot be argued that they are the only ones, because. the main point of the methodology is the formation and measurement of strategy, and it just so happens that this should be done precisely in the perspectives of finance, client, process and personnel. The company may choose other names (Personnel vs. Training and Growth) and other perspectives, such as Supplier. This will mean that the supplier this case becomes the most important figure for this company.
1.3 strategicmapenterpriseshowcomponentSSP
A strategy map is a visual model for integrating an organization's goals into the four components of a balanced scorecard. It is an illustration of the cause-and-effect relationship between the desired results of the client and financial components, on the one hand, and the outstanding results obtained in the main internal processes - production management, customer management, innovation and legislative and social processes. These critical processes create a customer offering and deliver it to target customers, which also contributes to the financial performance goal. In addition, the strategic map defines the specific capabilities of the organization's intangible assets.
The map details the scorecard, illustrating the dynamics of strategic development and sharpening the focus on key areas. A strategy map provides a universal and consistent way to describe a strategy in a way that not only sets goals and metrics, but also manages them. The strategy map is the hitherto missing link between the formulation of a strategy and its implementation.
Strategy maps are useful in that they eliminate the main contradictions in the activity. modern organizations, namely the discrepancy between their short-term and long-term goals. Short-term goals mainly relate to business processes, production financial activities company, relationships with suppliers, customers and competitors. Long-term goals are usually not so specific and definite, but in any case, they are designed to generate income in the future.
With the help of strategy maps, you can show what the managers of organizations are responsible for, as well as suggest specific measures of the organization's performance.
As a result of the use of strategic maps, the field of vision of the company's management is expanding, which allows increasing the number of controlled indicators.
Method compiling strategic cards on SSP:
Step 1 - articulating strategic intent and mobilizing the top management team and the organization for change.
Step 2 - translating the strategy into operational language, that is, into the format of a strategic map, BSC, a system of target indicators, a portfolio of strategic initiatives, and assigning responsibility.
Step 3 - deployment of the strategy at the level of the SBU (strategic business unit) and functional units.
Step 4 - translation and explanation of the strategy in the organization, linking personal goals and indicators of employees with the strategy of the organization, formation of a motivation system.
Step 5 - strategic alignment of all resources and processes, creating conditions under which the work on the strategy and its implementation was an ongoing process.
An example of an enterprise strategic map is shown in Figure 3.
Figure 3. An example of an enterprise strategy map
Using a strategic map, managers get answers to the main questions: what needs to be done to solve strategic problems, how the company creates its value, what processes are key in creating surplus value, etc. As a result of using the map when creating a BSC, the company's activities become more understandable and structured.
This structuring, in turn, leads to an integrated approach to managing the organization:
Quality management: customer orientation, leadership, people involvement, strategic quality management through standards, continual improvement, evidence-based decision making, mutually beneficial relationships with suppliers;
Marketing concept of the business: customer orientation, involvement of all employees and relationships with suppliers;
The process approach, which is an integral part of the process perspective;
Reorganization of management systems: a systematic approach to management and an evidence-based approach to decision making.
It is interesting that with such integrated approach the basic principles of management, consistent with the main goal of the enterprise, are translated into the BSC. That is, if an enterprise introduces a quality management system that is created through simple, iterative processes, then the main task of management will lie in the perspective of the process. If it is a company that connects its activities with the development of new creative technologies, then the management system will find its expression in the perspective of growth.
So, the BSC is a theoretical reflection of the enterprise, which allows stakeholders to choose a strategy from the formulated strategic map and move on to the specific implementation of the chosen strategy, and its communication to the level of an individual employee.
Chapter2. Implementationbalancedsystemsindicatorson theenterprise
2.1 BuildingandimplementationSSPon theenterprise
Building SSP.
Building a BSC should be based on five key principles:
1. Management changes must carried out top management. Successful implementation of the BSC begins with the realization that the new strategy brings significant changes. The organization must go through several stages:
Awareness of the need for change;
Leaders' choice. There is a change in the management structure of the organization in order to consolidate the changes.
2. transformation strategies in continuous process. When constructing the BSC, the so-called two-loop control process is used: tactical control ( financial resources and monthly reports) and continuous strategic management.
3. Bringing strategies before intelligence everyone member teams. First of all, the company's management must explain to its employees why this concept is needed, what results it will lead to, how it will affect each of the team members. Each employee must feel that he is a part of all transformations, and realize that the results of all planned changes depend on his work.
4. Involvement everyone employee in implementation strategies through them daily official responsibilities. The BSC concept implies that each employee must adopt a strategy and want to implement it in the course of their daily functional duties.
5. transformation organizations for implementation strategies. This means that each structural unit of the organization should take part in the implementation of the overall program. And for its successful implementation, it is necessary to unite all these divisions into a single whole. This is the main task of the SSP.
Development balanced systems indicators carried out in several stages:
- modeling - determination of the overall strategy, mission and vision for the development of the organization by conducting a survey of management;
- communication and relationship - BSC is integrated into the existing management system of the organization;
- technical integration- identification of parameters and data sources, determination of procedures for obtaining the necessary information from different sources, the relationship between the BSC module and the rest of the system modules should be developed;
- organization reverse connections- this process gives the company the opportunity to constantly monitor the implementation of the adopted strategy and the achievement of goals by analyzing the deviations of actual results from planned indicators.
Stages implementation SSP:
1. Analysis context. At this stage, the company's competitive environment is analyzed and the company's mission is formed or revised;
2. Strategic analysis. At this stage, the key aspects of the assessment are identified, the mission is detailed for these aspects, and strategic goals are set;
3. Corporate strategic cards. At this stage, there is a definition of the sources of the company's competitive advantages, the development of a system of indicators, the identification of cause-and-effect relationships, the coordination of long-term and short-term goals, the construction of strategic maps;
4. Strategic cards divisions. This stage is dedicated to the detailing of strategic maps to the level of units, in fact, a repetition of stage 3 on the lower level. managerial level, identification of responsible executors, setting specific operational goals and objectives of activities;
5. Implementation systems. At this stage, planning of measures for the implementation of the system is carried out, the system for monitoring the implementation and operation of the BSC is being built, and the BSC is being directly implemented. However, there are many obstacles on the way to the implementation of the BSC that make it difficult, slow down, and often make it impossible to implement a balanced system in organizations.
6. revision and adjustment SSP. A balanced scorecard cannot but develop along with the enterprise. The fulfillment of tasks, abrupt changes in the market require analysis and correction of the company's BSC. Revision and correction of the BSC, depending on the speed of changes in the organization, is carried out on average once a year.
Difficulties implementation SSP:
- unpreparedness organizations to implementation: ready for implementation can be considered an organization in which regular management has already been established, in which at least a formalized organizational structure, there is a staffing table and job descriptions, as well as the availability of planning and budgeting procedures for the organization's activities;
- resistance political systems organizations: Strengthening control over activities through the use of the BSC can be perceived as a negative motivational factor, which often leads to an increase in tension in the team, the manifestation and aggravation of conflicts, so the procedures for implementing the BSC should be planned taking into account the time and effort that will have to be spent on overcoming resistance to change;
- mentality managers and personnel: secrecy, elitism senior management does not allow for the very vertical integration from strategic goals to operational actions, the creation of which is aimed at the BSC.
Factors successful implementation SSP:
1. The implementation of changes in the company should be carried out under the leadership of its top officials. The constant participation of the executive management, involvement, active initiative and support is necessary.
2. The implementation of the BSC requires constant efforts aimed at implementing the strategy and goals of the company.
3. The implementation of the strategy should become a common task for all employees. Each employee must understand what is the purpose of his actions within the overall goal of the company. For this to happen, staff must be trained and informed about the changes that are taking place. In addition, it is worth encouraging the spread of scorecards in the company, so that both departments and individual employees created their own scorecards.
2.2 Advantagesandlimitationsbalanced scorecard
When developing and implementing a balanced scorecard, it is important to take into account its strengths and weak sides, Advantages and disadvantages.
So, capabilities implementation SSP for enterprises:
The need for a universal tool for assessing the activities of the enterprise;
Rapid adaptation of the company's activities to changes in the market situation;
Availability of prospects for globalization and internationalization of business.
Note strong sides SSP:
1. Necessary condition creation of strategic maps - development of the company's strategy.
2. Implementation of the enterprise strategy in specific tactical actions, accompanied by the control of its indicators.
3. Ease of perception by performers.
4. Possibility of graphical interpretation of financial and non-financial aspects
5. enterprise activities.
6. Bringing the company's strategy to specific goals for each employee.
7. Universality of application.
8. Initiation of positive processes in the company during the development and implementation of the BSC.
9. Binding to the personnel motivation system depending on the results achieved.
The SSP also has weak sides:
1. Blurring of BSC implementation.
2. Seeming ease of use.
3. Lack of quick results.
4. The initiative to develop the BSC can only belong to top managers.
5. Difficulty in assessing the importance of key indicators.
From the point of view of managers-practitioners, the following can be distinguished: Benefits SSP:
Linking operational and strategic management is achieved through a multidimensional and practical method;
Four main aspects (consumer, economic, innovative and financial) form an all-encompassing scheme for “posting” from top to bottom the strategy of an enterprise along all its hierarchical levels;
Discussions on the problem of implementing the strategy become objective due to the need to find units of measurement and thanks to the so-called strategic map;
The proposed management system enables broad, learning-oriented communication across all levels of the enterprise;
The new concept successfully integrates with the controlling system and is well aligned with management methods aimed at increasing the value of the enterprise.
It is also necessary to indicate certain limitations SSP:
Attention is overly focused on performance-based management and soft factors are ignored;
The unambiguity of certain links "goal - means" and "strategic map" is not provided;
Many measurement problems have not yet been solved;
Components of "wiring" from top to bottom in the hierarchy of the organization can inhibit the motivation for the implementation of the project;
The concept does not provide for conflict resolution mechanisms.
Thus, the balanced scorecard has both strengths and weaknesses. The task of the head and top managers of the organization is to correctly implement the BSC using strengths and the possibilities of the balanced scorecard.
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Currently, the most widely known in Russian management is the Balanced Scorecard - BSC (Balanced Storecards - BSC) *. However practical implementation BSC, according to various sources [for example, 2, 3], does not provide the expected increase in the efficiency of the enterprise. And many are looking for the shortcomings of the balanced scorecard, the elimination of which should increase its effectiveness, create its various modifications [for example, 4, 5]. Is it a matter of shortcomings?
Let's start with what a balanced scorecard is according to Kaplan and Norton, who founded it in 1992. They wrote: “A balanced scorecard transforms strategy into objectives and indicators grouped into four different areas, such as finance, customers, internal business process , training and advanced training”, having mutual cause-and-effect relationships. Further, they note that these set values of indicators are the strategic goals of the enterprise, and the BSC itself is a strategic management system.
However, strategy, as defined by theorists, starting with the founders of military strategy and strategy in management, is, in a very brief way, programs that “define a step-by-step sequence of actions aimed at achieving the main goals. ... They guarantee the correct use of resources, and also allow you to track the dynamics of development in the chosen direction. In management, strategy is: programs for creating new products, plans for the release and implementation of the current one, specific development projects, etc. Moreover, programs of different levels of the hierarchy with their respective planning horizons and the level of detail of plans. With its stages, deadlines, allocated resources. Strategy is step by step program achievement of the set main goal of the enterprise.
Thus, the BSC actually replaces the main goals of the enterprise with goals to achieve specific values of a certain number of specified indicators: a given number of man-hours of personnel training, a given number of rationalization proposals, a given percentage of R&D, a given number of documented processes and procedures, etc.
Accordingly, with strategic management, we achieve the main goal set for the enterprise and the specified final result of the enterprise, and with BSC management, we only achieve the specified values of the selected indicators. In addition, the set values of indicators can be achieved purely formally (without any benefit to the final result, or even to the detriment of it), and in violation of elementary ethics, and even by criminal means.
Let us recall the indicator of “crime detection” of the Ministry of Internal Affairs, and how it was achieved - in June of this year, the police officers of the former Dalniy police department, who “achieved” the specified indicators by torturing innocent people, received serious prison terms. And the crash of the train "Moscow - Chisinau" in May of this year, with human casualties, which occurred due to the fact that during the repair there was no restriction on the movement of trains, since it reduces the performance of repairmen and their bonuses.
This is understandable: in performance management “Employees will be interested in statistical performance if bonuses are linked to individual performance. This raises the risk that some employees will try to manipulate the statistics for personal gain. … Members of the organization only focus on those activities that are "counted" in the scorecard, in order to reap the greatest benefit for themselves. And about statistics, which can always be manipulated, Winston Churchill said: "Only those statistics are reliable, which you yourself have falsified."
And Peter Drucker, the founder of management by objectives (Management by Objectives - MBO), which, by the way, Kaplan and Norton did not even mention in their work, wrote back in 1954: “We don’t even know if something that can be measured can : reorganization of the structure, absence from work, labor protection, visits to the first-aid post, incentive system rationalization proposals, the procedure for handling complaints, etc. - at least somehow affect the efficiency of the work of staff. These are superficial indicators at best” and MBO is not a panacea for managerial inefficiency, MBO only works if you know your goals. Establish statistically significant causal relationships between strategic goals(financial and non-financial indicators) is not possible in practice. All this leads to the fact that a balanced scorecard, even if managers understand the cause-and-effect relationships of indicators, still does not let them understand what and how to do to fulfill and achieve the goals set for the enterprise. BUT Edwards Deming in his book “Out of the Crisis: A New Paradigm for Managing People, Systems and Processes” clearly substantiated the need to abandon employee performance assessments and management methods by goals, in particular, he wrote: “ Abandon management based on numbers, on quantitative indicators » .
All noted shortcomings are the fundamental properties of the balanced scorecard, in principle, significantly limiting the possibilities of its use for management purposes.
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"Balanced Scorecard. Disadvantages or misuse?"
| 19.10.2014 18:44 Khodorkovsky BSC Alternatives? |
| 19.10.2014 23:47 Here it is worth talking not about alternatives, but about which management system is the most effective - it brings the enterprise the maximum socio-economic result. And this result of the enterprise consists of the results achieved by the divisions of the enterprise, the results of employees. Actually, an effective management system should be focused on obtaining the achieved results at all levels, from the level of the enterprise, and to the level of specific employees. And it is these results that need to be evaluated and motivated. Thus, the most effective management system is a management system based on the achieved result, a system that ensures the achievement of exactly the specified result of the enterprise. And not achieving the set performance indicators (the number of hours of training, the number of rationalization proposals, etc.), which the BSC system provides! |
| 14.10.2016 19:14 Ulyukaev What will replace BSC? |
| 14.10.2016 21:48 Consultant Zhemchugov Mikhail, Ph.D. The BSC change has long been known: In practice, since the definition of the result of the enterprise can be quite distant, the initial assessment of the employee's performance should be carried out in relation to the expected results according to the following indicators:
And when the employee's product is sold to the consumer and the result of the enterprise is achieved, the final settlement with employees is made, this can usually be assessed only at the end of the quarter, or at the end of the project, and the main bonus is paid. |
| 25.01.2017 20:05 Alexandra A number of articles and books have been written on the balanced scorecard, so is it still possible to use it? |
| 26.01.2017 0:05 Consultant Zhemchugov Mikhail, Ph.D. We believe that the balanced scorecard (BSC) cannot be used in the real activities of enterprises, and this is not only stated in the article, but also our practice. Where BSC has made an impact is in defended dissertations and the profits of the consulting companies that promoted it. True, both of those and others have become much less. |
The balanced scorecard is not only a system for measuring the effectiveness of a company's activities, but also a management system that allows you to clearly formulate a strategy and plans for the future and implement them. The organization in the SSP is considered from the point of view of four perspectives: 1. Training and development. 2. Business processes. 3. Clients. 4. Finance. It is generally accepted that the criteria for any activity are financial indicators. Speaking about the positive side of the system, it is impossible not to note that the system convinced managers that non-financial indicators are also important for the organization. After all, financial indicators do not reflect intangible resources, and especially knowledge-based resources. In the balanced scorecard, financial indicators are preserved, but they are supplemented with indicators that reflect the factors affecting financial performance. The client component of the BSC shows the results of activities in the market segment. It includes key performance indicators for the implementation of the strategy. This component includes: 1. Customer satisfaction; 2. Attracting new customers; 3. Volume and share of the target market segment. This component allows managers to formulate a strategy aimed at consumers and target segment market. Indicators of the component of internal business processes are aimed at assessing the internal processes on which the satisfaction of customer needs and the achievement of the financial objectives of the organization depend. The fourth component of the balanced scorecard defines the infrastructure that needs to be created in order to ensure long-term growth and improvement. The component of personnel training and development is a set of criteria: 1. Job satisfaction; 2. Staff turnover; 3. Training and advanced training. The balanced scorecard, with the help of a set of components, translates the company's strategy into goals and objectives. As with any system, the SSP has certain advantages and disadvantages. The advantages of the system include: 1. Not only financial indicators are taken into account, but also non-tangible assets. 2. Reduces the occurrence of critical situations. With the help of the BSC, it is possible to avoid crises, such as, for example, bankruptcy. 3. Understanding of strategic goals by all employees of the company. 4. Translation of strategy into goals and actions. The system allows you to translate the strategy into specific activities. 5. Allows you to fully link the company's strategy with the operational business. 6. Covers everything key aspects enterprise activities. 7. Presentation of a complete picture of the business for management. Also, the balanced scorecard has negative sides: 1. The system cannot be adapted to any conditions. She is not universal. A system may be ideally suited to one industry, country, or organization, but will not work under certain conditions. Therefore, the BSC must be developed for a specific object. 2. When developing and implementing a balanced scorecard, you must be careful with data confidentiality. After all, in order for employees to understand the strategy, it is necessary to reveal to them all the mechanisms of work. And this can lead to information leakage. 3. Impossibility to adequately measure the effects of the implementation of the system. 4. Temporary rejection of the system by some employees of the organization. 5. The principle of responsibility for the overall result has not been implemented. 6. The problem of assessing important key components. 7. The complexity of developing and implementing a balanced scorecard. 8. Blurring of introduction. Usually, the implementation in the first stage is quick and easy. However, subsequent implementation is very difficult and takes a lot of time. The application of the balanced scorecard has positive sides and negative. But, despite the negative aspects, the balanced scorecard will be useful to all enterprises. BSC is the best tool for implementing the company's strategy.
Let's talk about the use of a balanced scorecard. There are a large number of theories that dispute among themselves the right to be considered the most effective management technology. One of them is the balanced scorecard. Despite the obvious efficiency and usefulness, like any other theory, it must be adapted to real conditions.
What is this article about:
- What is the complexity of applying a balanced scorecard.
- How to choose indicators related to the goals of the company.
- How to measure performance.
- Pros and cons of using SSP.
Applying a balanced scorecard: why and how
Accountant Key Performance Indicators
From theory to practice
It was smooth on paper, but they forgot about the ravines. Each business has its own "ravines", therefore, as many enterprises exist, there can be as many balanced scorecards. Even two organizations in the same industry, which are roughly similar in terms of key indicators, can significantly differ in the implementation of this system. Starting from differences in the capital structure and shareholder policies, to the gender and age composition of employees and temperament CEO- all these and a large number of other factors affect the formation of an individual management system for key indicators.
What determines the choice of KPI when using a balanced scorecard
It would seem, how can the capital structure affect the key performance indicators of the accountant Petrova? It's very simple: the company where Petrova works works mainly on borrowed funds, so a significant part of the payments are interest on loans. Moreover, delays cannot be allowed in any case: fines will grow exponentially, credit history will be damaged, the bank may require early repayment, and so on - the consequences can be extremely unfavorable. To avoid this situation, the goal of the accountant Petrova is to ensure on certain days that the current account has the amounts necessary to pay current payments on existing loans.
For this purpose, she has set a key performance indicator: “total number of days past due on loans per month.” The planned value of the indicator is zero days, low - 1 day, unacceptable - 2 days. If at the end of the month it turns out that out of all payments on loans, at least one or two payments were overdue by a total of 2 days, then the accountant Petrova this month will not receive a bonus not only for this, but also for other key indicators, even if she will over-fulfill them all.
How to balance indicators
By the way, what are these other balanced indicators? Petrov's accountant, fearing to be left without a premium for late servicing of loans, may begin to constantly keep large balances on current accounts, thereby disrupting the deadlines for settlements with other counterparties, because his shirt is closer to his body, and lose the variable part wages no one wants. To prevent this from happening, another goal of the accountant Petrova should be to make timely settlements with suppliers for the raw materials and components received. The KPI in this case could be the same - the total number of days past due on payments to suppliers - only the levels of completion will be different:
- excellent - zero days;
- planned - up to seven days;
- low - up to fifteen days;
- unacceptable - sixteen days or more.
It is not advisable to set more than four indicators for one employee, the calculations become much more complicated, the greater the number of indicators, the smaller the contribution of each of them to the total salary. The results obtained in this way will not justify themselves.
How to measure KPI so that the balanced scorecard works
The next step should be right choice way to measure KPIs. Let's explain with an example from life: a KPI was set for a purchasing manager in the form of meeting the standard for the amount of inventory. At the end of each reporting period, the inventory did not exceed the standard. Everything seems to be fine: the manager has a bonus, the inventory is normal - but for some reason there is not enough working capital all the time. It turned out that knowing the shipment schedule, the employee adjusted the delivery schedule in such a way as to minimize stocks for only two or three days at the end of the month. The rest of the time they were significantly different in a big way.
Both the wording of KPIs and how they are measured needs to be carefully considered because people do exactly what they are paid to do. They pay for the balance of goods at the end of the month - you will have the balance at the end of the month. If you were paying for the average monthly inventory measured accordingly, the result would be different.
There are many such examples. it back side medals called "balanced scorecard": a mistake in the choice of goals and indicators or in the way they are measured can lead to completely different consequences than expected.
How to set up the whole system
After making sure that all indicators are in principle chosen correctly and directly affect the company's goals, it is necessary to adjust the quantitative parameters of the system. There are at least three "lever" settings, not counting the actual selection of KPIs:
- The distribution of the significance of indicators among themselves, their relative "weight".
- The scale of performance levels of the indicator.
- The scale of the variable part of the salary as a percentage of the base rate (salary) depending on the level of performance.
By changing the digital values of these parameters, it is possible to regulate wages over a very wide range. For example, you can make the increase in bonuses by KPI achievement levels non-linear:
- Unsatisfactory - 0% of salary;
- Low - 10% of salary;
- Planned - 40% of the salary;
- Excellent - 60% salary.
With this distribution, employees will be maximally focused on the planned and excellent levels of KPI achievement.
These levels themselves can also be defined in different ways. For example, financial director, believes that in the conditions of a shortage of working capital, a delay in payments to suppliers for about seven days is acceptable. More risky - you can ruin relationships with suppliers and delivery conditions, and in order to pay on time, you need to be able to accurately plan upcoming payments and strictly adhere to the established budget. For these reasons, the accountant Petrova, who is responsible for settlements with counterparties, was set precisely such indicators for evaluating the effectiveness of her work.
By the way, for budget compliance, it would also be nice to set a separate KPI in a balanced scorecard. It can be formulated as follows: "The percentage of excess spending budget per month". And set performance levels from unsatisfactory to planned, respectively: more than 10%, from 6% to 10%, less than 5%. There will be no excellent level in this KPI, for exceeding planned costs over actual ones should not be encouraged. It is in this formulation that this indicator will stimulate Petrova both for the accuracy of planning and for the strict implementation of the spending plan.
Advantages and disadvantages of using a balanced scorecard
In general, the key word in the name of the theory is “balanced”. The difficulty lies in the fact that not only financial, but also non-financial indicators are used that characterize relationships with customers, the achievement of market goals, the optimality of business processes and the qualifications of employees. This is the main advantage of the system, which allows for flexible management by goals, but this is also its disadvantage.
Non-financial indicators are mostly very individual for each enterprise, and, unlike financial indicators, they are not formalized anywhere. This leads to difficulties in their identification and selection, determining the degree of their significance - "weight" - in comparison with others. The imbalance of indicators, as in the example of the accountant Petrova, can cause a bias in motivation and lead to the failure of other goals.
Difficulties in balancing the system and getting undesirable results lead many managers to become frustrated with this seemingly very beautiful theory. In practice, it can be very difficult to determine an indicator that would not distort the goals of employees, and at the same time its calculations would be simple, understandable and transparent both for performers and for their management.
The trial and error method is hardly applicable in this case. It is impossible to repeatedly experiment with payroll methods, this does not contribute to increasing employee loyalty, and may turn out to be more expensive than all possible positive effects combined. Therefore, before introducing KPIs, it is necessary to carefully calculate and predict the consequences.
Among the goals related to continuous development, the authors of the theory also describe indicators related to the personal goals of the employee. For example, “learn a foreign language” or “go to an exotic resort with the whole family” and so on. Say, it is necessary to introduce such indicators to employees in order to motivate them for self-development in the same way as for achieving business development goals. In my opinion, such recommendations cannot cause anything but a smile. This is one of those cases when the naivete of foreign theorists is shattered by harsh realities.
What to Consider When Implementing a Balanced Scorecard
The balanced scorecard is more of a motivation system, and does not replace operational control and business management, since it is often necessary to respond to deviations from the norm immediately, and not after summing up the results of the month, when it may be too late.
It is necessary to introduce management by key indicators in stages, without trying to cover the entire enterprise at once. You have to start with a few key personnel or departments.
This technology is one of the possible tools that must be applied thoughtfully and very carefully. You should not rely on magic coefficients that will solve all the problems of enterprise management overnight. We can recall the words of Henry Ford: “True and desirable is never unattainable. It only takes a little joint work a little less greed and vanity and a little more respect for life."