Page 283 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes

Notes The balanced scorecard has evolved from its early use as a simple performance
measurement framework to a full strategic planning and management system. The “new”
balanced scorecard transforms an organization’s strategic plan from an attractive but
passive document into the “marching orders” for the organization on a daily basis. It
provides a framework that not only provides performance measurements, but helps
planners identify what should be done and measured. It enables executives to truly execute
their strategies.

This new approach to strategic management was first detailed in a series of articles and books by
Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous
management approaches, the balanced scorecard approach provides a clear prescription as to
what companies should measure in order to ‘balance’ the financial perspective. The balanced
scorecard is a management system (not only a measurement system) that enables organizations
to clarify their vision and strategy and translate them into action. It provides feedback around
both the internal business processes and external outcomes in order to continuously improve
strategic performance and results. When fully deployed, the balanced scorecard transforms
strategic planning from an academic exercise into the nerve centre of an enterprise.
Organisations were encouraged to measure – in addition to financial outputs – that which
influenced these financial outputs. For example, measures of process performance, market share/
penetration, long term learning and skills development and so on. The idea being that
organisations could not directly influence financial outcomes, that these were “lag” measures,
and that the use of financial measures alone to inform the strategic control of the firm was
unwise. Instead, organisations should also measure in those areas where direct management
intervention was possible. In so doing the early versions of the Balanced Scorecard helped
organisations achieve a degree of “balance” in selection of performance measures. In practice
early Scorecards achieved this balance by encouraging managers to select measures from three
additional categories or perspectives: “Customer”, “Internal Business Processes” and “Learning
and Growth.”
The goal of making measurements is to permit managers to see their company more clearly –
from many perspectives – and hence to make wiser long-term decisions. Modern businesses
depend upon measurement and analysis of performance. Measurements must derive from the
company’s strategy and provide critical data and information about key processes, outputs and
results. Data and information needed for performance measurement and improvement are of
many types, including: customer, product and service performance, operations, market,
competitive comparisons, supplier, employee-related, and cost and financial. Analysis entails
using data to determine trends, projections, and cause and effect – that might not be evident
without analysis. Data and analysis support a variety of company purposes, such as planning,
reviewing company performance, improving operations, and comparing company performance
with competitors’ or with ‘best practices’ benchmarks.
A major consideration in performance improvement involves the creation and use of performance
measures or indicators. Performance measures or indicators are measurable characteristics of
products, services, processes, and operations the company uses to track and improve performance.
The measures or indicators should be selected to best represent the factors that lead to improved
customer, operational, and financial performance. A comprehensive set of measures or indicators
tied to customer and/or company performance requirements represents a clear basis for aligning
all activities with the company’s goals. Through the analysis of data from the tracking processes,
the measures or indicators themselves may be evaluated and changed to better support such
goals.

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