3.4代写留学生论文 Cost Management Technique 3: Balanced Scorecard
3.4.1 Literature Review
In the catering industry, financial performance measures mean shorter long-term profits (Bakke and Hellberg, 1991; Low, 1992; Spencer, 1994; Dugdale and Jones, 1996a,b; Horngren et al., 2005), and non-financial measures include the level of inventory and customer service related measures. Absolutely, the level of inventory can be measured by the amount of the physical inventory (Sarker, 1989) or the monetary value of the inventory (Krajewski et al., 1987); and the customer service can be measured by ‘earliness and tardiness’ (Krajewski et al., 1987), order fills rate, and ‘response time’ (Takahashi, 1994). Though it is difficult to quantify these non-financial measures, they have attracted increased attention from customer-driven organizations. According to Horngren (2005), managers would like to track progress in conducting strategy. Many organizations have introduced a balanced scorecard approach to manage the implementation of their strategies.
As Kaplan and Norton (1996a,b) put it:
‘Balanced Scorecard translates organization’s mission and strategy into a comprehensive set of performance measures that provides the framework for implementing its strategy… the BSC retains an emphasis on achieving financial objectives, but also includes the performance drivers of these financial objectives’.
It aims to solve the problem related to the historical nature of the financial measures of accounting systems (AICPA, 1994; Dearden, 1969, 1987; Hopwood, 1972; Johnson & Kaplan, 1987; Kaplan & Norton, 1996a; Merchant, 1985). It does so by not only focusing on the financial performances but also highlighting the non-financial activities that closely relate to the organization’s business.
As shown in Figure 3-4-1, the balanced scorecard consists of four perspectives: (1) financial, (2) customer, (3) internal business process, and (4) learning and growth. ‘The financial perspective identifies how the company wishes to be viewed by its shareholders. The customer perspective determines how the company wishes to be viewed by its customers. The internal-business-process perspective describes the business processes at which the company has to be particularly adept in order to satisfy its shareholders and customers. The learning and growth perspective involves the changes and improvements which the company needs to realize if it is to make its vision come true’(Kaplan and Norton, 1996a).
Figure 3-4-1,留学生论文代写 Balanced Scorecard Model (Kaplan and Norton, 1996a, p.9)
Source: Robert S. Kaplan and David P. Norton, ‘Using the Balanced Scorecard as a Strategic Management System’. Harvard Business Review (Jan.-Feb. 1996), 76.
Kaplan and Norton (1996a, p.31) assumed the following causal relationship: ‘measures of organizational learning and growth → measures of internal business processes → measures of the customer perspective → financial measures.’
As shown in Figure 3-4-2, this causal path implies that strategy is translated into a set of hypotheses about cause and effect (Kaplan and Norton, 1996a, p.30; Kaplan and Norton, 1996b, p.65). There is an assumption of cause-and-effect relationship which is essential as it allows the measurements in non-financial areas to be used to predict future financial performance. Moreover, ‘the financial measures say something about past performance while non-financial measures are the drivers of future performance’ (Kaplan and Norton, 1996a, p.8).
Figure 3-4-2, Relationship of Non-financial and Financial measures
The balanced scorecard attempts to balance financial and non-financial performance in order to evaluate both short- and long-run performance in a single report. If it is incorrectly implemented, ‘the organization may actually go faster in the wrong direction’ (Rousseau and Rousseau, 2000, p.25).
It is distinct from other strategic measurement systems:
‘…it is more than an ad hoc collection of financial and non-financial measures. It contains outcome measures and the performance driver of outcomes, linked together in cause-and-effect relationships (Kaplan and Norton, 1996a, p.31; Kaplan and Norton, 1996b, p.53); …and thus aims to be a feed-forward control system (de Haas and Kleingeld, 1999); … Furthermore, the balanced scorecard is intended not only as a strategic measurement system but also as a strategic control system which can align departmental and personal goals to overall strategy…’(Kaplan and Norton, 1996a, p.10).
That Jones and Sasser (1995, p.90) find considerable linkage between a high level of customer satisfaction and their loyalty. They write:
‘This high level of satisfaction will lead to greatly increased customer loyalty. And increased customer loyalty is the single most important driver of long term financial performance. Separate research has validated these beliefs’.
Other empirical investigations have shown the existence of a relationship between a high level of customer satisfaction and return: ‘…a high level of customer satisfaction yields a high return…’ (Buzell & Gale, 1987, pp.103~13). Kaplan and Norton (1996a, p.19) further point out that the balanced scorecard is a strategic control system which may be used to: ‘…clarify and gain consensus about strategy; align departmental and personal goals to strategy; link strategic objectives to long-term targets and annual budgets; identify and align strategic initiatives; and obtain feedback to learn about and improve strategy…’. With its alignment, the balanced scorecard helps unify all parties in a quest for a favourable guest experience that leads to positive financial outcomes.
3.4.2 Application of Balanced Scorecard (BSC)
3.4.2.1 Background
Balanced scorecard is suitable for those industries that especially focus on brand, customer, service process and labor intensive. As we all know, the catering industry is the classic service industry and is labor intensive, of which their revenue require customer satisfaction and loyalty. Otherwise, public praise affects revenue and profit of the restaurant tremendously. In some sense, the catering industry would best fit for applying the balanced scorecard.
BSC connects strategy to execution through strategy map and four dimensions of it, in order to decompose strategy into operation and guarantee its implementation (Horngren et al., 2005). Furthermore, the balanced scorecard should be applied together with the Key Performance Index (KPI) to convert strategy into general operation.
In the catering industry, it is common sense that improving service quality and customer delivery value and highlighting human resources is the essential for success as strategy. However, how to implement strategy effectively has always perplexed managers. Balanced scorecard offers the solution to the puzzle. Employees’ learning and growth leads to creating the learning atmosphere and advanced and clear enterprise culture, which is used to achieve internal process development; then it would continue to exploit new customer markets while keeping patrons, to gain the financial target finally. In the meantime, financial improvement would promote other dimensions to be enhanced in turn. (Figure 3-4-3)
Figure 3-4-3, Relationship of four aspects of BSC
3.4.2.2 Application Preparation
Conform to the theory of BSC, Chain Q should figure out some possible problems in the operating process which result in not achieving the target that is formulated by target costing through four dimensions of BSC, and conduct a series of measures to fix them.
① Finance Dimension: Like other industries, Chain Q runs the catering business for profit. This means to achieve profit increase, which could come true through increasing revenue and improving productivity (reducing cost).
② Customer Dimension: Customer value-orientation has an influence on company’s strategy, which leads managers to identify the customer value orientation for their restaurants. With perspectives as ‘different customers buy different kinds of value’, and ‘as value standards rise, so do customer expectations’, Treacy and Wiersema (1995) suggest three possible operating models which can be applied to establish market leadership. These are operational excellence, product leadership, and customer intimacy (Figure 3-4-4; 3-4-5).
Figure 3-4-4, Value Disciplines
Figure 3-4-5, Operating Model
To be a successful enterprise, it has to be advanced in one of the three value dimensions, maintaining an intermediate level in other aspects. The diagram indicates different value-orientation with a different strategy below (Figure 3-4-6):
Figure 3-4-6: Customer value orientation
According to the service attribution of the catering industry and the importance of customer satisfaction, in my opinion, the customer value orientation of catering enterprise should be positioned in ‘customer intimacy’. Chain Q has to formulate strategy based on customer dimension, to provide personalized service and maintain long-term close relationships with customers, for establishing a reliable brand. Meanwhile, managers also should consider customer value orientation when designing the balanced scorecard. Furthermore, the customer perspective could be expressed with such strategic topics as: value-added service, intimate relationship with customers (for their satisfaction and loyalty), and favorable brand image (for passenger source extension).
③ Internal process: The basic requirement of the restaurant is to guarantee customer’s satisfaction and comfort, then the Chain Q has to operate its management all centered by this characteristic. Therefore, the topic of internal process should emphasis on service process, environment, competitive cost and harmonious neighborhood.
④ Learning and growth: The catering industry is a labor-intensive industry so employees are crucial to a company’s success. Learning and growth aims to cultivate a skillful workforce. Therefore, Chain Q has to pay more attention on identification of employees’, developing employees’ high-level serving techniques and attitude and creating organizational learning atmosphere and culture.
3.4.2.3 Design BSC for Chain Q
After tackling the four perspectives, Chain Q has to formulate the KPIs for each dimension for completing balanced scorecard design as shown below (Table 3-4-1):
Table 3-4-1, Essentials of Four Dimensions in Balanced Scorecard
Dimension
Topic of strategy Strategic target KPI Measures
Financial Profit increase Revenue increase;
Productivity improvement;
(Cost reducing) Turnover;
Profit margin;
Table occupancy rate Financial report
Customer Value-added service;
Brand image Employees’ loyalty & satisfaction;
Customer’s loyalty & satisfaction;
Good reputation and brand
Customer satisfaction;
Customer loyalty;
New customer rate;
Regular customer loss;
Complaints rate;
Employees’ satisfaction;
Employees’ loyalty;
Core worker loss Customer feedback;
Consumption of Contract customer;
New contract number;
Contract loss;
Feedback;
Survey and feedback;
Questionnaires;
Core workers turnover;
Internal Process Service process;
Environment;
Competitive cost;
Supply management;
Neighborhood Standard process;
Comfortable environment;
Cost leadership;
High-quality raw material supply; Food quality indicators;
Service standardization;
Service personalization;
Informatization;
Reputation Experts evaluation;
Management assessments;
Customer feedback;
Experts evaluation;
Feedback and survey
Learning and Growth Motivated
high-quality employees Identification;
Characteristics of dishes;
First-class service ability and technique;
Learning atmosphere Employee understanding of company’s strategy;
Frequency of staff training;
Training results;
Service quality of staff;
Work environment;
Creativity of chef;
Learning atmosphere Survey , questionnaires;
Schedule of training;
Training assessments;
Customer feedback;
Experts evaluation;
Customer feedback;
Employee survey.
Followed by designing customer satisfaction survey form for Chain Q (Table 3-4-2):
Table 3-4-2, Customer Satisfaction Survey Table
(Score 1 to 8, 1=maximum satisfaction; 8=extremely unsatisfied)
Item 8 7 6 5 4 3 2 1
Environment
Comfortable & enjoyable
Clean
Facility
Service
Service efficiency
Service attitude
Dishes
Quality
Major course
Soup
Sides
Weight
Price
Total satisfaction of this consumption
Your comment
When managers of Chain Q obtain the KPIs of each dimension and the rating system, they would require a yard stick and measure to make sure the KPIs and BSC would be applied in general operation. For connecting strategy to execution and guaranteeing strategy to be the guideline of actual performance, Chain Q needs to establish a balanced scorecard, in order to decompose strategy into operation and guarantee its implementation. When Chain Q achieves the target of a balanced scorecard, this means it has completed its strategy for the year. Therefore, we should design the balanced scorecard for Chain Q as shown by Table 3-4-3:
Table 3-4-3, Balanced Scorecard
Perspective Project Target Weight Data source Support conduct Score
Financial (50%) Revenue $90million 22.5
GOP* 22% 22.5
Customer (10%) Satisfaction CSI 10
Secret investigation score 5
Execution/
Operating
(20%) Business
process modification Score of modified process 5
Gross profit of modified process 5
Local dishes popularity 5
Personalized service 5
Resource utilization 5
Achieve fire-control/
safety/hygiene standard 5 S score 5
Learning and growth (20%) Staff turnover reduction Rate of staff turnover 5
Employee satisfaction improvement Rate of staff satisfaction 5
*GOP=Gross Operating Profit; CSI= Customer Satisfaction index
In order to facilitate the objective performance measurement, Chain Q should be formulates the scorecard as well. In much literature, there are only the indicators for balanced scorecard without the scoring part, which troubles managers. Actually, the scorecard only resolves the scale problem of assessment, ignoring the correctness of KPIs. What has to be identified is that, strategy, target and indicators guide the operation, if the direction is wrong, measurement is useless regardless of how accurate the measurement is. Therefore, most literature focuses on projecting and designing strategy, target and indicators, neglecting scoring description.
Below is the scorecard designed for Chain Q, which is used to offer information for evaluation (Table 3-4-4).
Table 3-4-4, Score Card for Balanced Scorecard Application in Chain Q
Employee name supervisor
Target Point Item Actual achievement Score Comment
Financial 25 Revenue Percent Complete:
5=above 105%
4=102~105%
3=100~101.9%
2=95~99.9%
1=90~94.9%
25 GOP:22%
Customer 5 satisfaction Annual survey:
5=above score 90.1
4=85.1~90
3=80.1~85
2=75.1~80； 1=below 75
5 Secret investigation Invite experts investigate annually
5=above score 90.1
4=85.1~90
3=80.1~85
2=75.1~80；1=below 75
5 Gross profit Target gross profit comparison
5=fluctuate less than 1%
4=1~1.5%
3=1.5~2.0%
2=2.0~2.5%
1=2.5~3.0%
5 fire-control/
safety/hygiene standard achievement Score according to lowest standard:
5=90.1
4=85.1~90
3=80.1~85
2=75.1~80；1=below 75
Learning and Growth 5 Employee satisfaction Annual Survey:
5=more than 85.1
4=80.1~85
3=75.1~80
2=70.1~75；1=below 70
5 Employee turnover rate 5=0~5%
4=5.1~10%
3=10.1~15%
2=15.1~20%
1=more than 20.1%
3.4.2.4 Comparison and feedback
Chain Q constructs target and standard for each KPI combined with its own business experience and strategic requirement. A green sign for excelling standard KPI, yellow for standard and red for failing. Especially, the red range has to be analyzed immediately to figure out the cause-effect relationship for enhancing its quality.
3.4.2.5 Establish effective support system
The effective support system has to be connected to Chain Q’s incentive mechanism. In other words, inspiring means consolidating individual behavior that conform to organizational target, inducing business participators to develop human resource maximized to achieve company’s target.
i) Corporeal incentive system
(1) Balanced scorecard salary
For implementing strategy effectively and guaranteeing those related functions of strategy executed in each specific job, Chain Q has to link employees’ variable salary (mainly performance-related salaries) to individual performance, when basic salary depends on personal job and ability. In other words, the salary regulation should integrate ‘pay-for-performance programs’ with basic salary method to conform to competitive labor force market for obtaining high quality employees. Contemporary, balanced scorecard salary suggests that variable salary / should reflect the change of company strategy and boost strategy to be executed effectively. Therefore, the salary of every employee from managers to primary staff all should be linked to their performance. Then designing the model of the salary balanced scorecard can take place (Table 3-4-5):
Table 3-4-5, Salary Balanced Scorecard
Item Measurement indicators weighting
Financial (60%) Profit 18%
Return on capital employed 18%
Scope of reducing cost 18%
New market growth rate 3%
Current market growth rate 3%
Customer (10%) Market share 2.5%
Customer satisfaction 7.5%
Internal process (10%) Environment 5%
Working atmosphere 5%
Learning and Growth (20%) Techniques and ability 10%
New award 5%
other 5%
(2) Vacation with pay and additional welfare
Towards to those employees who make great contribution in the process of implementing balanced scorecard and general operation, Chain Q prepare to reward them with vacation with pay and additional welfare (e.g. housing allowance, children education, transport allowance). Those rewards would enhance employees’ confidence and sense of belonging, guaranteeing the balanced scorecard to be implemented successfully.
ii) Spiritual incentive system
Chain Q also has to consider employees’ spiritual aspects, such as sense of honor, sense of responsibility, and achievability. The company could choose motivational pattern flexibly according to its own situation and traditional culture.