Total Quality Management
We have had a very positive experience working with Organized Change. They designed a survey for one of our global teams to help design an organizational change and develop scenarios for our strategies. Organized Change is a dependable collaborator who can be relied upon to help us meet our goals.
Historically, traditional financial reporting systems provided information about past performance and were incapable of offering information about future performance . In recent years academic scholars have given increasing attention to the importance of strategic measurement systems including both non-financial and financial measures. Increased attention stems from the realization that traditional measurement systems and markers of success (financial reports, annual reports, etc.) were not providing a complete and accurate picture of a businesses level of success and interaction amongst the management process itself. The balanced scorecard answered the call for a multi-source business performance management system by including both financial and non-financial markers in it framework. The theory behind utilizing more than one source of measurement is that you have the opportunity to paint a more realistic picture of the present and are better enabled to achieve desired future results.
Successful businesses monitor their operations, human capital and finances; but also continuously survey the industry state of affairs and monitor competitors. The balanced scorecard provides a framework to manage that process. “The balanced scorecard lets executives see whether they have improved in one area at the expense of another .” Essentially the balanced scorecard is a framework of the four most important aspects of an organization (financial, customer, learning & growth and internal business process) that enable predictions to be made about performance on a number of levels.
Since the concept of the balanced scorecard was introduced in the early 1990’s, balanced scorecards have become a fertile field of theory, research and consulting practice. The rapid growth of consulting offerings linked to Balanced Scorecards solely at the branding level alone is indicative of the success of the tool as a function of buzzword recognition and successful marketing strategies . “While the underlying principles were sound, many aspects of Kaplan & Norton's original approach were unworkable in practice .” However, the balanced scorecard has evolved from its birth as a measure selection framework to a check and balance strategic management measurement tool. After a number of iterations second and third generation BSC’s address some of the early identified short-comings.
"The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals .” Plainly stated, the BSC is a multi-source business performance management system based upon the most important organizational measures  . These major components (measurement categories) are termed 'key performance indicators' (KPI’s) and include: Financial, Customer, Internal Business Processes, and Learning & Growth measures.
Financial – includes measures such as operating income, return on capital employed, and economic value added .
Customer – includes measures such as customer satisfaction, customer retention, and market share target segments .
Internal Business Process – includes measures such as cost throughout, and quality. These are for business processes such as procurement, production, and order fulfillment .
Learning & Growth – includes measures such as employee satisfaction, employee retention, skill sets, etc. .
Each measurement category provides either a concurrent, lagging, or predictive indication of success . Concurrent measures provide a real-time indication of the organizations success; whilst lagging and predictive measures respectively speak to the historical and future success.
The balanced scorecard suggests that an organization be viewed with respect to each key performance indicator (KPI) . Furthermore, that within each measurement category five key factors be selected in order to develop metrics, collect data and allow for analysis relative to each KPI . “A decision to undertake development of a Balanced Scorecard is a decision to undertake a journey, not work on a project ”. The journey involves two phases: building and implementation. Essentially, the balanced scorecard answers four basic questions :
1. How do customers see us? (customer perspective)
2. Can we continue to improve our corporate value? (learning and growth perspective)
3. What must we excel at? (internal business perspective)
4. How do our shareholders view us? (financial perspective)
The balanced scorecard has three basic assumptions: (1) a cause-and-effect relationship exist amongst measurement categories, (2) a strategic plan and/or business strategy exist and is in place, and (3) the most important drivers (measures of success) have been correctly identified. Essentially by answering the four basic questions a company creates the benchmarks to which their strategic goals are set. Once the goals have been defined, and KPI metrics are articulated a strategic process map is drawn (see figure below ).
BSC variations seen are typically born from slight modifications in order to apply the performance management system in a setting that it was not originally designed for (i.e. public, or government sector). The BSC can be successfully developed and implemented outside the private sector following a few minor modifications of the KPI’s included as indicated by figures below . Although adoption of the BSC was slower in the nonprofits, government, and health care provider entities the use within these sectors has grown substantially over the years .
More recent iterations to the original BSC have yielded 2nd and 3rd generation BSC’s. The second generation BSC modified the original model to include a graphical representation of the strategic linkages and objective across the KPI’s . Third generation BSC’s made a further refinement to include ‘Destination Statements’ at the end of the design process. Destination statements are defined to check the objectives, measures, and selected targets . Culture has also been suggested and successfully incorporated as a fifth KPI [7, 14]. The adaptability of the BSC across sectors and industries gives it greater utility .
Traditionally, health care providers tend to view their organizations as being mission-centered and driven. Based upon that perspective health care providers have often mistaken their commitment to vision as an application of the BSC; falling short on aligning their goals and strategies back to their mission . Additionally, hospitals also shied away from financial measures in order to refrain from placing a numeric value on life . In 2001, Crandon hospital began utilizing the BSC in order to provide better financial reporting and more comprehensive information to its shareholders and board of directors. The hospital adapted the four BSC perspectives for their organizational purposes to include: customer satisfaction, clinical quality, operations, and financial. Following the implementation of the BSC the hospital Vice President stated ‘while dashboards simply reported collected information in a summary format, the BSC actually indicated how the hospital was doing’ as a business . Major challenges faced during the building and implementation process reported were: selecting indicators, timely data collection, and stakeholder continued education. The major benefits resulting from the implementation of the BSC were: being able to identify and respond negative trends in a timely fashion, a decrease in the rate of patient falls and board appreciation of how the BSC framework perspectives clearly highlight the correlations between customer, clinic and operation. The organization was able to successfully apply the BSC framework to their business by adapting the perspectives and gaining buy-in from the leaders of the company and staff inclusion. Most importantly, Crandon tied all actions, objectives, and goals to the strategy, mission and vision of the company.
BIOCO, a mid-sized biopharmaceutical company successfully implemented the BSC at the corporate level and adapted it all the down to the individual employee level. This success was possible because they secured commitment from the top management, invested in training, defined strategy maps and articulated how progress would be tracked . Implementation and development started at the corporate level and successfully cascaded to the departmental and individual employee levels. Eventually, BIOCO also added culture as a fifth perspective in order to allow for continued positive relations and communications with the IT department as a function of embracing the cultural differences that existed between the IT department and the rest of the organization.
Company P undertook the BSC journey in order to enable quick responses to bad company decisions and to emerge from the one hundred million NTD debt they held from June of 1989 to 2004. The BSC’s ability to integrate strategy, organizational framework, mission and vision into strategic management systems that included customer value as an operational value led to their success. While Company P had an excellent technical team and over 30 years of experience they needed a way to reduce costs, continue to provide quality products, and initiate client profit-sharing. Company P took six steps to define and implement their BSC: define a vision, company and competitor analysis, addition of a technical perspective, objective setting, action plans, plan execution, and performance evaluation; and in 2005 following BSC implementation Company P achieved earnings in the tens of millions .
The balanced scorecard (BSC) was first developed in the 1990’s in order to allow businesses to utilize both non-financial and financial measures in order to align business strategies and goals with the strategic plan. The goal of the balanced scorecard is to integrate the main organizational measures of success into a plan or framework if you will; a plan that is in alignment with the organizational mission, goals, strategic plan, and allows for modification in response to unanticipated change. Historically the balanced scorecard consisted of three components and was originally designed for private sector business application. To date the core aspects of the balanced scorecard are referred to by a number of things (perspectives, key performance indicators, drivers, measures, indices, etc.); and the original model has undergone several variations. It is important to continue to think critically about the KPI’s utilized. Incorrect KPI identification may result in costly and ineffective goals and strategies that prevent or deter organizational success . The balanced scorecard is now successfully utilized in the public, private, and not-for-profit sectors after only few minor industry specific modifications to the overall framework are made.
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