Balanced Score for the Balanced Scorecard: a Benchmarking Tool

Topics: Strategic management, Balanced scorecard, Strategy map Pages: 33 (10394 words) Published: September 17, 2010
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BIJ 15,4

Balanced score for the balanced scorecard: a benchmarking tool M. Punniyamoorthy
Faculty of Production and Operations and Finance, Department of Management Studies, National Institute of Technology, Tiruchirappalli, India, and


R. Murali
Faculty of Human Resources and Finance, Department of Management Studies, National Institute of Technology, Tiruchirappalli, India Abstract
Purpose – The purpose of this paper is to create a model called “Balanced score for the balanced score card” and to provide an objective benchmarking indicator for evaluating the achievement of the strategic goals of the company. Design/methodology/approach – The paper uses the concepts of “Balanced scorecard” proposed by Robert. S. Kaplan and David P. Norton. This paper also adopts the model given by Brown P.A. and Gibson D.F. and the extension to the model provided by P.V. Raghavan and M. Punniyamoorthy. Preference theory is used to calculate the relative weightage for each factor, using the process of pair wise comparison. The balanced score for balanced scorecard provides a single value by taking into account all the essential objective and subjective factors – be it financial or non-financial. It also provides a suitable weightages for those parameters. The target performance and the actual performance are compared and the analysis is made. Findings – Information from a leading organization was obtained and the balanced score for a balance scorecard was calculated for that organization. The variations were analyzed through this model. The depth and objectivity in the analysis is highlighted. Research limitations/implications – This provides a single bench marking measure to evaluate how far the firm had been successful in achieving the strategies. The paper has adopted the preference theory which limits the weightage to be accorded to the factors concerned. However, further refinement can be provided by the usage of analytic hierarchy process for arriving suitable weightages. Practical implications – The organization can calculate the balanced score by themselves, by assigning appropriate importance to the activities – as they deem fit. It is a tailor made benchmarking information system created by the firm for itself. Originality/value – This is of value to the top management to identify the important activities and setting suitable target measures to be achieved in those activities. The variations are arrived by comparing the targeted performance with the actual. This will help the firm to take suitable actions under those parameters where there are significant deviations. Keywords Balanced scorecard, Benchmarking, Corporate strategy, Analytical hierarchy process Paper type Research paper

Benchmarking: An International Journal Vol. 15 No. 4, 2008 pp. 420-443 q Emerald Group Publishing Limited 1463-5771 DOI 10.1108/14635770810887230

Introduction Businesses houses are continuously striving to be successful amidst the increasingly competitive and constantly changing environments. To achieve that, they must be willing to adopt any processes and accept any benchmarking standards which would help them in not only doing things right but also in doing the right thing.

The bench mark so accepted should be a: . reference or measurement standard for comparison; . performance measurement that is the standard of excellence for a specific business; and . measurable, best-in-class achievement (“On what is a benchmark?”, available at: Competition has become so intense that managers do have less time to respond to market situation. Efficiency in operations and profitability are the key words in driving the organizations today to remain competitive. The rapid technological developments and improvements in communication have forced the manager to deal with a large...

References: Analyst (2001), “Accounting for intangibles Skandia reporting model”, Analyst, October. Best Practices LLC (1999), Best Practices Bench Marking Report, Developing the Balanced Scorecard, Best Practices LLC, Chapel Hill, NC. Brown, P.A. and Gibson, D.F. (1972), “A quantified model for facility site selection application to the multi product location problem”, AIIE Transactions, Vol. 4 No. 1, pp. 1-10. Corrigan, T.D. (n.d.), “Capital budgeting in the context of the balanced score card”, available at: Dye, R.W. (2003), “Keeping score”, CMA Management, 18-23 December/January. Evans, M.H. (n.d.), “The balanced scorecard”, available at: Hope, J. and Fraser, R. (n.d.), “Beyond budgeting”, BBRT, CAM-I, Europe White paper. Jhonson, G. and Scholes, K. (2001), Exploring Corporate Strategy, Text & Cases, 4th ed., Prentice-Hall, India, pp. 1-38. Kaplan, R.S. (1996), Mobil USM & R (a): Linking the Balanced Scorecard, Harvard Business School, Boston, MA, 9-197-025 – 6.l. Kaplan, R.S. and Norton, D.P. (1992a), “The balanced scorecard: measures that drive performance”, Harvard Business Review, January/February, pp. 71-9. Kaplan, R.S. and Norton, D.P. (1992b), The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press, Boston, MA.
Kaplan, R.S. and Norton, D.P. (n.d.), The Strategy Focused Organizations, Harvard Business School Press, Boston, MA, pp. 1-30, 369-80. Lingle, J.H. and Schiemann, W.A. (1996), “From balanced scorecards to strategic gages: is measurement worth it?”, Management Review, March, pp. 56-62. Miller, A. (1998), Strategic Management, 3rd ed., Irwin Mc-Graw Hill International Edition, New York, NY, pp. 313-45. Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York, NY. Porter, M.E. (1996), “What is strategy”, Harvard Business Review, November/December, p. 62. Ragavan, P.V. and Punniyamoorthy, M. (2003), “Strategic decision model for the justification of technology selection”, International Journal of Advanced Manufacturing Technology, Vol. 21, pp. 72-8. Skandia Reporting Model (2001), Skandia Reporting Model: Accounting for Intangibles – Edited Excerpts from the Supplement to Annual Report 1994, Skandia – Analyst, October. Stewart, A.C. and Hubin, J.C. (2001), “The balanced scorecard: beyond reports and rankings”, Planning for Higher Education, Vol. 29 No. 2, pp. 37-42. Stewart, T. (1999), “The status of communication today”, Journal of Strategic Communication Management, FebruaryMarch, pp. 22-5. About the authors M. Punniyamoorthy is a Graduate in Mathematics, with a BTech in Production Technology from Madras Institute of Technology, Chennai, and MTech in Industrial Engineering and Operations Research from Indian Institute of Technology, Kharagpur. He possesses ICWAI (inter) qualification and did his Doctorate in Management from Bharathidasan University, Tiruchirapalli. He is presently working as an Assistant Professor in the National Institute of Technology. One of his papers “A strategic decision model for the justification of technology selection” published in the International Journal of Advanced Manufacturing Technology, UK (Vol. 21, 2003, pp. 72-8) has been selected by the American Society for Mechanical Engineers as one of the best ten papers in the area of technology selection. M. Punniyamoorthy is the corresponding author and can be contacted at: R. Murali is a Post Graduate in Mathematics and has a Management Degree from Indhira Ghandhi National Open University. He is also a cost accountant and is presently a Fellow in the Institute of Cost and Works Accountants of India, which is the apex body of cost accountants in India. He has worked in one of the biggest Nationalized Banks of India having a large network of branches in India and abroad for more than 26 years and has also served for more than ten years in the staff training college of the bank handling in the areas of credit and human resources. He is presently working as a Lecturer in the National Institute of Technology in cost and management accounting, financial management, economics, strategic management and human resources related topics.
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