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Measuring Success with a Balanced Scorecard Approach Bryan Council July 25, 2011 Regis University
In addition goal congruence will be discussed as well as why some of the consulting engineers lack a sense of urgency about the need to change. Next the balanced score card will be evaluated to see if it will be successful in motivating organizational change. The role that incentives play in motivating the engineers’ behavior will be examined. This paper will identify why Elite Engineering has been unsuccessful in achieving the change to an organization that supports collaboration. Then agency costs will be reviewed to see how they impact the organization. Performance measurement determines how well an organization collaborates and works as a team. . Finally the writer will identify his suggestions to improvement in the Elite Engineering organization.SUCCESS WITH A BALANCED SCORECARD APPROACH 2 Abstract Performance measurement is an important dynamic of any organization.
In addition. This is partly because employees of EE have been though several organizational initiatives. In the past bonuses and pay raises have been in direct correlation with the amount of billable hours the consultant creates.SUCCESS WITH A BALANCED SCORECARD APPROACH 3 Measuring Success with a Balanced Scorecard Approach Today’s turbulent market has caused many organizations to evaluate the message they facilitate toward their clients and staff. and teamwork. the organization has been unsuccessful in implementing succession planning. in the past. EE anticipates changes in the competitive market (Brennan & McIntyre. Evaluation of an organization’s effectiveness is imperative to successful short and long term goals. Second. The organization preaches teamwork and collaboration yet rewards employees for individual success(Brennan & McIntyre. Elite Engineering has a culture that does not buy into team accountability. First is currently no clear succession plan in the organization. 2009). change has not . collaboration. Although the company is financially successful. Elite Engineering’s (EE) is a small company in a competitive environment that has decided to put emphasis toward aligning its goals with its staff. executive management is concerned that this financial success is unobtainable. There are two reasons for this fear. Executive management hopes to combat these fears by changing the organization to one that encourages collaboration and teamwork. Company Background Elite Engineering is an employee-owned consulting company with approximately 50 engineering consultants. Therefore. 2009). which have not worked and thus gone away. The consultants specialize in failure analysis that makes up about 75% of the organizations business.
2009). Some of the consulting engineers lack a sense of urgency about the need to change as an organization. Goal congruence is needed because the organizations culture must support what the organization wants to achieve. Paul Johnson whether or not bonuses would change to include the new business goals. Agency costs have an impact on elite engineering because employees are more motivated by billable hours and therefore self gain than in trying to work together in the established business teams.SUCCESS WITH A BALANCED SCORECARD APPROACH 4 been achievable because the employees do not buy into the idea of teamwork or accountability. For example. the employees asked Founder and Chief Executive Officer (CEO). Incentives Incentives play a large role in motivating the engineer’s behavior at Elite Engineering. The business teams were created to allow the organization to pull from different . 2011). the programs at EE are driven to support individual success. Agency costs are costs associated with self-interest behavior. The organization wishes to have a culture that supports performance measurement together with teamwork. The reason for this is that initiatives have not worked in the past. Unfortunately this is not the case at Elite Engineering. Goal Congruence Goals congruence is making sure that the organizations goals are in harmony with what the organization wants (Fuel My Motivation. Regrettably. In addition the consultants seem to be more concerned with financials such as the current cash position of the organization and the top line target than working together in business teams to drive financial success (Brennan & McIntyre. This indicates that the employees are driven by incentives.
process. and learning and growth” (Kaplan. p. To achieve unified team synergy Elite Engineering executives should encourage staff involvement in diverse areas in the development of the scorecard (Kaplan. and because EE would like to develop a “team” environment additional measurements pertaining to team activities will provide additional value. 103). strategy and implementation of the plan become important factors to a company’s future success.SUCCESS WITH A BALANCED SCORECARD APPROACH 5 experiences and strengths. A Balanced Scorecard system provides a tangible measurement tool for assessing the “sources of corporate value at each of four levels or “perspectives”– financial. customer. COO Stuart Weismann’s initial draft of the scorecard includes these specific criteria’s. The scorecard itself initially has a large focus on individual measurement. & Norton. the employees at EE are not learning from one another’s experiences and expertise and therefore the company is faced with the impact of lost efficiency and effectiveness. 2006). 2006. . By avoiding the business teams. but requires further development of the measurement tools to ensure effectiveness. 1992). Balanced Scorecard Elite Engineering has a unique opportunity to align its staff with the new corporate direction through the use of the Balanced Scorecard method (BSC) (Kaplan. thus creating efficiency and effectiveness. An important misstep is that the scorecard fails to address the CEO’s emphasis toward a more team approach. The purposed BSC specifies certain changes in incentive that will be needed to facilitate EE’s new forward thinking plan. Transformation of the competitive environment in which EE operates has triggered CEO Paul Johnson to enhance his company’s five-year plan. As with most organizations.
This map will encourage the business directors to develop team goals that focus toward EE’s new vision. business team. Revenue measurements will be calculated each quarter to provide the staff with a baseline target. The internal process measurements need to be compiled by the business team and the accounting team. A weighted measurement system will provide all employees a solid understanding on what EE defines as important metrics needed toincrease its business. Human Resources will collect Learning and Growth measurements on an individual level. allowing customer satisfaction to be measured on a team basis. management. It is important for EE . as Joe Philips suggests the scorecard also omits the weight of each measurement toward the company’s goals. Last all financial measurements will be gathered and scored on an individual basis with team metrics serving as a bonus measurement. human resources. and client relations.SUCCESS WITH A BALANCED SCORECARD APPROACH 6 Additionally. The customer measures need to be administered and collected by client relations at the end of each project to ensure client accountability. Client Services will provide surveys for all customer measurements. Product reviews and crossfunctionality will be new team measurement assembled by Client Services and business team leads. Client referrals and percentage of revenue from new clients will be tracked on the individual level. Billability and percentage of write-offs measurements will be on the individual level and will be collected by accounting to ensure accuracy. Measuring each of the four criteria’s will encompass a collaborative effort from the accounting team. There also needs be a strategy map outlining how each of the measurements concedes with the company’s short and long-term goals.
Simply put. Accounting will want to assist business team leads in tracking cash flow by creating a thermometer chart relative to accounts receivable collected. Summary The first draft of the BSC provides a basic template for EE to build upon. it is imperative for leadership to communicate how these new guidelines align with the company’s short and long-term goals. execution of the Balance Scorecard will need to occur to ensure effectiveness. As EE changes its incentive guidelines. Last. once EE communicates this change and new direction. . combining these measurements with a unique scoring system will greatly assist staff in measuring their performance in relation to the top line. Each month client relations will prepare a pie chart indicating the percentage of new clients and their geographic region for the last 12 months. human resources can measure development of employee abilities by holding an annual scenario competition in which employees submit their solution to various problems. As indicated above it will be critical to include a section for weighting each of the measurements in relation to company goals. EE revenue’s growth and performance are of utmost importance therefore.SUCCESS WITH A BALANCED SCORECARD APPROACH 7 to collect all data in a timely matter to ensure that the BSC initiative is effective in the early stages.
Harvard Business Review. L.E. NovemberDecember. (1992). Kaplan. 62-77. McIntyre. 100-109. P. D. R. How to implement a new strategy without disrupting your organization. L. Healthcare Executive (23): 1. 24-28 Brennan. R. M. 71-79.com/goal-congruence. Harvard Business Review (86): 1. Harvard Business Review (70):1. Retrieved from http://www. D. Yeager. (2011).. pages 61-78. . March 2006.S. 2009. Retrieved from Business Source Premier database. R. Mastering the management system.html Kaplan.. Goal Congruence. Porter. Creating incentives for change by keeping score. What is strategy? Harvard Business Review.. and Norton. The balanced scorecard – Measures that drive success. (1996). J. (2008). 84 (3). IMA Educational Case Journal 2(4): 1-5 Fuel My Motivation.. p. D. and D. and Norton.fuel-mymotivation. Using balanced scorecards to align organizational strategies. (2006). (2008). Kaplan.SUCCESS WITH A BALANCED SCORECARD APPROACH 8 References Blooinquist.