This exercise provided me with a different perspective of planning by defining the destination and charting the routes that lead to it. Prior to this, I conceived a budget as a mere resource allocation framework to calculate future costs based on forecasted sales. Learning Lessons Linking it Together If we were to place Body Glove in a Balanced ScoreCard, the company appears to have focused mainly on the customer dimension leaving other areas unattended (Figure 1). This framework provides us with a great platform for aligning our activities with strategic goals linking all components in a cause-effect way. For instance, if Body Glove intends to increase Meistrell’s family shareholder value it could consider the avenue of increasing productivity by improving the cost structure or reduce the working capital needed to support the business. Such activities in isolation are pointless if they do not feed into a master plan. Figure 1: BG’s areas of focus in a BSC
Source: Author based on Kaplan & Norton (2001)
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Importance of Having the Right Performance Indicators in Place According to Kaplan & Norton (2001), a performance-based culture emerges to link everyone and every unit to the unique features of the strategy. Indicators enable our employees to define what they must do to contribute to the end goals of the organisation. In the case of Body Glove, performance was not explicitly related to any performancebased incentive. An environment of this nature is prone to uncertainty and, whilst the informality of the culture could have assisted in communicating what was expected, a systematic approach of indicators provides a clear direction mitigating miscommunication. Obsolete Systems? Diagnostic control does not always give us enough information to identify potential problems. For example, if Body Glove’s sales employees are salaried, their wages may be in line with the projected budget, but if sales went below projected...