Balanced Scorecard and Executive Summary
A balanced scorecard is a business analysis tool that provides various indicators for business development (Chavan, 2009). It can also be described as the management tool that maps an organizational strategic objective into performance metrics basing on four aspects: financial, internal processes, customers, and learning and growth (Figge et al, 2012). These indicators help in the evaluation of the performance of the business from different perspectives. Besides, these four perspectives provide relevant feedback in relation to how the strategic plan is executing so that necessary adjustments can be initiated. Traditionally, the financial performance metrics provided the needed information about the past events of the firm but failed to accurately predict the future performance (Bagdonieene, Daunoriene, & Simana, 2011). Therefore, the balanced scorecard provides the managers with the needed financial metrics that can be used to measure the firm’s metrics in a way that can translate the organizational strategy to actionable objectives for future benefits of the organization. One of the unique features of balanced scorecard is that it focuses on the business drivers and stresses on cause effect relationships (Hladchenko, 2015). In addition, the balanced scorecard uses the leading and lagging indicators to predict and implement the business strategy. The goal of using balanced scorecard in this study is to help improve organizations international and external communication and to monitor the performance. The balanced scorecard is also beneficial in this case since it will help the organization to streamline its operation in such a manner that matches its goals and to enable it to achieve a competitive advantage (Inamdar, Kaplan, & Reynolds, 2002).
Previously I have worked as a management trainee at Cleveland Clinic. Cleveland clinic is a multi-specialty academic medical clinic that integrates clinical medical care with research and education. The clinic has been existence from early 20th century and has offered exemplary services to the American people (Cleveland Clinic, 2017). The clinic employs hundreds of employees, physicians, and nurses. By 1970s, the Clinic had grown so big that they began surgery operations within their expanded facilities. By 1980, the clinic had incorporated pathology and laboratory department within its facility. The clinic also runs a research facility and spends more than $200 million on research. Currently, the Cleveland Clinic graduate program is one of the largest medical programs in the country. Due to their long history of success, Cleveland Clinic has gained a reputation as one of the top medical centers within the United States and beyond.
According to Yee-Ching (2009), the success of the company has always been based on their robust strategic plan. In 1989, the Cleveland Clinic developed its first strategic plan to accommodate the growing number of patients without compromising on their quality. The organization is currently concerned with the initiatives that would improve the efficiency of their operations. The organization has gone ahead to draft a strategic plan that would enable them to become more efficient and effective in delivering the services to its customers. Besides, they are determined to become the top medical provider of choice in the community by offering excellent medical services at all times. The mission of the organization is to deliver high quality and excellent medical services to the members of the community. The vision of the organization is to be the medical provider of choice for all Americans (Cleveland Clinic, 2017). In order for the organization to achieve its mission and vision, the organization needs to come up with proper strategies that would support its mission objectives.
Cleveland clinic is in its expansion mode and the management wishes to extend their services to new geographical regions that have never been reached. The management feels that whatever they are doing is becoming a routine, which is not beneficial for the organization. Furthermore, the management feels that they have not fully established their presence within the medical industry and it is now time to take up the challenge and expand their services to new areas. The organization needs to capitalize on their current levels of stability and their growing brand name to expand their operations to other new horizons (Sudinackas, 2005). To support the business expansion to new horizons, the organization needs to grow their revenues, profits, and cash flows. Therefore, the organization needs a good support of the internal resources, both financial and human, to support their expansion strategy (Ratnasingam, 2009). Also, the organization needs to be careful and keep an eye on how their expansion might impact the quality of their services.
Recently, the organization organized a retreat for the top level management. They were determined to come up with some strategies that would support their mission objectives. One of the strategies of the organization was to increase their profits by 10%. Other objectives of the organization were to enhance their staff motivation, increase the utilization of service, improve their response time, increase their customer satisfaction, and enhance their market share within the healthcare sector, and most importantly expand their geographical reach.
To implement the above strategies, the organization needs to come up with a fully developed balanced scorecard. Within our managerial department, we developed a framework that would be useful in ensuring that the management meets their goals. This report is a balanced scorecard of what needs to be adopted by the organization to enable them achieves its objectives. The balanced scorecard presented below will evaluate the organization’s financial, customer, internal process and learning perspectives. Kaplan & Norton (2005) explain that a lot of firms in the modern society have a major mission that concentrates on the customers. The client’s views on a business performance are of priority to senior management. A requirement of a balanced scorecard is that the administration interprets their broad mission statement on clients’ services into definitive measures that show the valuable aspects that lead to customer satisfaction (Othman, 2008).
According to Othman (2006), the balanced scorecard is a strategic tool used by the management to improve their performance. There are four main perspectives that have to be taken into account when developing the balanced scorecard.
Learning and Growth Perspective: This perspective entails employee training and enhancement of the cultural attitude. To any organization, the human resources form important part of organizational development (Martello, Watson, & Fischer, 2016). Highly knowledgeable and effective human resources will support the organization in achieving its objectives. On the other hand, the demoralized employees are less likely to support their organizations since they are not happy with their work. The current HR trend demands that employees should be subjected to a continuous learning process to enable them to cope with dynamic nature of the world (Inamdar, Kaplan, & Reynolds, 2002). The growth of the human resources can be attained by allocating a training fund managed by the relevant department. Learning and growth surpass the training and thus there is need for mentors and consultancy to support such initiatives.
Financial Perspective: Finances forms the core of most organizations (Hladchenko, 2015). In most organizations, the financial data is used to calculate the financial ratios, growth rate, and profitability, among other financial measures. According to Chavan (2009), the financial perspective focuses on drivers of revenues, costs, cash flow, and net income. From financial perspective, it is necessary to evaluate the growth rates and trends in revenues. An organization needs to know how much profits or losses they are making based on the financial data. For sustainable growth, an organization needs to increase their operating profits under low-risk operations.
Customers: Customers are important stakeholders for any business. The customer perspective is the central theme to the development of balanced scorecard. Customer oriented standards are useful, but they must be in line with the internal operations of a company to satisfy customers (Figge et al, 2002). The second level of the scorecard enables the managers to achieve and run the internal affairs of the firm in a way that ensures priorities on areas of competency. A business needs to work hard to increase its market share and this is only possible when the new customers are attracted to the business and the old ones retained. The customers’ needs to be satisfied at all times or else they will feel disappointed and move to other businesses. Apart from attracting the new customers, retaining the existing customers is equally important.
Internal process: The internal processes mainly entail how the business is running/operating and whether the product conforms to the business mission. The internal process majorly measures the efficiency of the business in delivering the services to their customers. The balanced scorecard helps to transform the vision and strategy as shown in the diagram below.
Cleveland Clinic Key Performance Indicators
For a good scorecard to work, the organization must incorporate the key performance indicators that should be streamlined with the strategy goals. Cleveland medical center has a variety of Key Performance Indicators (KPI) that range from financial, customers, operations, and employees. The key performance indicators are shown in the table below:
· Cost effectiveness
· Operational cost
· Cost of goods sold
· Gross profit
· Gross profit margin
· Net Profit
· Net profit Margin
|· Customer satisfaction rate
· Customer retention
· Number of customers
· Customer complaints
|· Quality of operations
· Delivery time
· Production cycle time
· Total inventory turnover
· Overall equipment effectiveness
· Waste reduction rate
|· Employee turnover rate
· Employee engagement safety
· Training program participation rate
Cleveland Clinic balanced scorecard
The following balanced scorecard is applicable for the Cleveland medical clinic. The scorecard captures the four major elements of balanced scorecard as shown in the table below;
|To increase their profits by 10%
To enhance the revenue growth 10%
To open more branches and increase their market share
|Increase the utilization of service
Increase the customer satisfaction
Enhance the customer satisfaction
Retain the existing customers
|Provide high quality services
Improve on response time
Maintain safety standards
From this perspective, Cleveland clinic aims to enhance their profits by 10% and also to increase their revenues by a similar percentage. All these strategies need to be achieved for the organization to meet its objectives. For Cleveland clinic to increase their profits by 10%, the organization needs to increase their revenues collection process, review their billing strategy, and develop an incentive program for their clients. Through their finance department, the organization will be able to increase their revenues collection and account receivables. The increase in the net revenues will then translate to increased profits.
|Financial Perspective||Objective||Metric||Target Value|
|To increase its operating profits||%EBIT/Sales||>3.0|
|To grow their revenue||Increase their sales||Target is >10%|
|To increase its market share||Expand their geographical reach||Open 10 more branches countrywide|
Leaning and Growth Perspective
This perspective involves the management of employees from the junior staff to senior management. The world is constantly changing and the employees should also change and adapt to the new technologies of the world. Technology is changing rapidly and there is need to constantly train the employees to adapt to the new changes in technology. From this perspective, the organization needs to develop peer recognition programs, review the benefits and package of the employees, and ensure that there is healthy competition among the employees. In addition, they can organize for training workshops, develop performance based compensations, and create motivation and recreational programs.
The key performance indicators under this perspective entail both the lag and the lead indicators. The lag indicators are the employee satisfaction rates, employee training program rates, and the employee engagement rates. On the other hand, the lead indicators are represented by the employee turnover rate.
|Learning Perspective||Objective||Metric||Target value|
|Employee Training||Training program participation rate||60%|
|Employee Motivation||Employee satisfaction rate||85%|
|Employee Retention||Employee engagement rate||70%|
The customer plays an important role in the success of the business. From the customer perspective, the organization will concentrate in providing excellent services that satisfies the unique needs of their customers. In the medical industry, the customers are very sensitive to the quality of services offered. If the organization offers low quality services, the customers are likely to look for other options since they fear for their lives. On the other hand, the customers are likely to attach their loyalty to the organizations that offer quality services. In medical industry, the organization gets its revenues from the patients to seek their services. Therefore, it is necessary to have a good number of clients who constantly seek the services from the organization.
|Customer Perspective||Objective||Metric||Target Value|
|Increase the utilization of services||Customer transactions||8 per session|
|Increase the customer satisfaction||Customer surveys||Target 9 out of 10 positive reviews|
|Retain more customers||Returning customers||Target 95% return rate|
The internal processes also forms an important part of any business organization. From the internal perspective, the organization should look at increasing their operational efficiency. The nature of the services being offered at the organization depends on their operational efficiency. High quality services results from highly efficiency operations. Therefore, all the operations should be made efficient to support the smooth service delivery processes. Besides, the organization should recheck their safety measures and ensure that all the operations are within the safety standards. Cleveland clinic will review their staffing and their workload to ensure that everything works efficiency. In addition, the clinic will review their electronic record and introduce an automatic dispensing machine that will streamline most of their operations.
|Internal process perspective||Objective||Metric||Target value|
|Enhance the response time||Introduce and review the patient automation system||Patients should get services within 10 minutes of their arrival|
|Provide high quality services||Introduce the automatic dispensing machines||Reduce medication errors for every patient|
|Maintain the safety standards||Constant training of the employees||One training session per month|
Advantages of Balance scorecard
The BSC will help the organization to align their business activities to the vision and strategy. Moreover, the balanced scorecard would enable Cleveland Clinic to monitor their performance and devise ways of improvement. The balanced scorecard would enable the management to enhance their decision making. Also, the balanced scorecard provides the organization with broad picture of the nature and the type of their operations.
A balanced scorecard is important in a business strategy in four broad perspectives: the financial, the customer, the internal processes and the employees. While offering high-level management data from the four viewpoints, the balanced scorecard helps reduce data overload by minimizing the measures they apply. The scorecard enables the management to work on a few steps that are essential to business. Great competition globally demands that businesses must have continuous improvements on their current goods and services. A scorecard gives a firm a goal of continuity of innovation and improvements for the creation of value and effectiveness. On the other hand, a balanced scorecard evaluates the financial standpoint of a company which is important to investors and shareholders. It shows whether the firm’s strategy, the application and administration are of value in the overall improvements.
Cleveland clinic is in its expansion mode and there is need to extend their services to new geographical regions that have never been reached. There is risk of slow development if they does not expand to new locations. Already, the clinic has established a brand name that will easily enabled it to establish in new locations. The organization needs to capitalize on their current levels of stability and their growing brand name to expand their operations to other new horizons. To support the business expansion to new horizons, the organization needs to grow their revenues, profits, and cash flows. Therefore, the organization needs a good support of the internal resources, both financial and human, to support their expansion strategy. Besides, Cleveland clinic needs to be careful and keep an eye on how their expansion might impact the quality of their services.
Therefore, Cleveland clinic should use the scorecard in their strategy of expanding their business, enhancing their efficiency, and increasing their profits. The scorecard puts strategy and not control as a priority. It lays down the goals and expects an individual to develop the behaviors and take measures to achieve the set goals. It is a tool that managers use to understand the interrelations they need to establish and deliver a good business strategy.
A balanced scorecard is a business management tool that gives the managers complex information in advance so that they can adjust accordingly and improve their businesses. The financial perspective has always been an important indicator for business strategy. However, it is a lagging indicator and focuses on the past as opposed to the future. The benefit of balanced scorecard is that it incorporates both the lagging indicator (financial) and the leading indicators (customer, employee, and internal business process).
The implementation of balanced scorecard by Cleveland clinic will be beneficial since it encompasses every organization unit. Besides, the balanced scorecard helps the organization to find the drivers of performance that can effectively be improved to support organizational development. Also, balanced scorecard emphasizes on what is important, focuses on business drivers, and stresses on cause effect relationship. Most importantly, the balanced scorecard will enable Cleveland Clinic to translate their vision into business strategy.
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