THE BALANCED SCORECARD IN AN INDONESIAN PHARMACEUTICAL COMPANY A CASE STUDY IN PT. DEXA MEDICA
1.1. Background of the Study
In modern competitive global economy, it is more important than ever to understand the process of value creation in the organization. The need to manage with a high level of customer focus, a clearer understanding of core business processes, the necessity of motivation and commitment of employees, the need for change on a continuous basis, and effective strategy implementation have led to the increased transparency of measuring business performance and the value drivers.
Owners generally have a pretty clear picture of the direction in which they want their company to go, but their strategy to achieve their goals is not very clear to anyone else in the company. Research shows that most companies fail to execute strategy successfully (Kaplan, Norton 2001). Thus, it appears promising to use the balanced scorecard methodology to integrate environmental and social management with the general management of a firm (Figge et al. 2001a, 2001b).
Kaplan and Norton (1992) presented the balanced scorecard (BSC) as a performance measurement tool. The founding idea of the concept is that measures should be chosen in a way that gains the active endorsement of the senior managers of the organization, reflecting both their privileged access to strategic information, and the importance of their endorsement and support of the strategic communications that may flow from the balanced scorecard once designed. The balanced scorecard has gained prominence as a way of integrating financial and non-financial performance measures into an overall control system (Atkison et al. 1997, Hoque, James 2000, Malina, Selto 2001, Simons 2000).
The BSC addresses the need for multiple measures of performance and provides a strategic framework, which specifically encourages the use of both financial and non-financial measures along four perspectives - financial, customers, internal business processes, and learning and growth - to measure organizations performance. In both research and practice, the BSC has received much attention, particularly as a tool for driving unit level strategy within many industries, including hospitality, health, manufacturing and banking. In 1996, Kaplan and Norton evolve the concept further to become a strategic management system, which they argue supports four managerial processes, namely clarify and translate vision and strategy, communicate and link strategic objectives and measures, plan, set targets, and align strategic initiatives and enhance strategic feedback and learning (Kaplan and Norton, 1996b).
The BSC appears to have all the answers for choosing the most appropriate measures of company performance, which are governed by the organization’s strategic orientation and external competitive environment. The success of the BSC relies on a transparent and well defined strategy as the basis for the development of specific and relevant performance measures. The BSC acknowledges that organizations respond to the environment they face in developing their strategy and their performance measurement system, in order to achieve their objectives (Kaplan and Norton, 1992, 1993,1996b).
The design of the BSC corresponds to one first level of description and investigates what the system does and why. The design includes the description of the contents of the BSC in the organization, what the BSC emphasizes and why the BSC points to the things it does. For instance, the perspectives in the BSC and why these perspectives were chosen in the organization are illuminated. The implementation of the BSC reflects a second level of description and focuses on how the BSC was transformed and evolved in the organization. The choices of BSC representations are illuminated through describing how the BSC was built, deployed and disseminated throughout the organization.
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