Postgraduate Department of
Information Systems and Technology Management Shubchik O.A.
Donetsk National University
of Economy and trade, Donetsk, Ukraine
ANALYSIS OF MODELS FOR
FORMATION OF CORPORATE BALANCED SCORECARDS
The rapid development of the concepts
of corporate management and management technologies is the peculiarity of the
Ukrainian economy. Special attention is paid to the strategic management. The analysis
of the activities of large corporations revealed that without proper strategic
management, functioning is very risky. Research in this area lead to the
emergence of new paradigms, concepts and tools based on the balanced scorecard.
One of the most interesting ideas is a performance management system based
on the Balanced Scorecard (Balansed ScoreCard, BSC), which is offered by R.
Kaplan (R. Kaplan) and
D. Norton (D. Norton). [1] The main purpose of this concept is to put the idea
of corporate management into a reality, as well as to link the strategy to
operational activities and cost factors. The main feature of BSC is that it is
closely linked to the business processes that are aimed at meeting the needs of
customers, and that involves all employees. BSC-model is a component of a
well-developed system of corporate management and focuses the management of the
company on the adequate strategic development, in contrast to the traditional
management, which tends to be too focused on financial performance. BSC-model
reflects the expanding of information management capabilities by adding
non-financial indicators in assessing the performance of the bank to meet
management objectives. As a rule, non-financial criteria are closely related to
the key success factors, i.e. the strategy. In BSC-system key performance
indicators of the enterprise are grouped in different directions, which the
authors call perspectives (perspectives). They enable the corporation’s
management to determine the strategically important measures and focus on the
achievement of certain goals, using the knowledge of gained information on the
effectiveness of the following business processes: relationships with customers,
internal operations, financial support, innovation, development and training.
Kaplan-Norton BSC- model is not unique. Below we consider a number of
options that are also designed to evaluate the business activity and to link the
indicators used to the strategy of the enterprise.
Lorenz Meisel model (Lawrence S. Maisel) was proposed in 1992. [2] It has
the same name as the model of Kaplan-Norton. Meisel also defines four
perspectives on which business activities should be evaluated. Instead of training
and growth perspectives L. Meisel in his model uses the perspective of human
resources. It estimates innovation, and such factors as education and training,
development of products and services, expertise and corporate culture. Thus,
the difference between the two models is not very large. The reason for using
L. Meisel separate perspectives of human resources is that the management efficiency
of the company should be more attentive to its staff and evaluate not only the efficiency
of processes and systems, but also that of its employees. Meisel model was
first described in the work by LS Maisel "Performance Measurement. The
Balanced Scorecard Approach", in Journal of Cost Management.
K. McNair (CJ McNair), R. Lunch (Richard L. Lunch), K. Cross (Kelvin F.
Cross) in 1990, presented a model, which they called the Pyramid of efficiency.
[2] As in other models, which we consider, the basic concept is the link of a
customer-oriented corporate communication strategy to financial performance,
complemented by several key qualitative (non-financial) indicators. Traditional
management information should only come from the top level. The pyramid of
efficiency is built on the concepts of the global management over quality,
industrial engineering and accounting, based on the "actions”. The actions
refer to the things done by people or machines (equipment, machinery, computer
systems) to satisfy the consumer.
The pyramid of efficiency on four different stages shows the structure of
the enterprise, providing two-way communication and necessary for
decision-making at various levels of management. Objectives and indicators connect
its business strategy with operational activities. In other words, the objectives
are passed down through the organization, while the indicators are collected
from the bottom up to the top. At the top level the management of a company or
a bank forms corporate idea. At the second level – the objectives of
departments and divisions are specified in terms of a particular market and
financial indicators. Customers and shareholders determine what should be
assessed. The third level, in fact, is not organizational. Rather, it consists
of a number of areas within the business. These areas are cross-functional and
penetrate several departments. Here the objectives and functions are focused on
customer satisfaction and flexibility in production and are the links between
the upper and lower levels of the pyramid. The three objectives of this level
show drivers of the efficiency in two market goals and a financial one. In
addition, at this level, the operational objectives such as quality, delivery
time, the duration of production and the losses incurred from the defect.
Quality and delivery time are directly related to external actions, and the
duration of the production cycle and the loss from the defect serve as
indicators of internal actions a company or a bank.
At the bottom of the pyramid, i.e. in the area of operations, the actions
are estimated daily, weekly or monthly. At the top of the pyramid is financial
evaluation dominates, the periods of which are significantly higher. According
to the authors of the model, the system of indicators should be integrated so
that the operating measures at the lower levels have to be connected with the
financial ones at the top. Therefore, this model of corporate management is
able to show what underlies the financial measures and what they are managed by.
The model was published in Management Accounting in he work by CJ McNair,
Richard L. Lunch, Kelvin F. Cross "Do financial and nonfinancial
performance measures have to agree?" in November 1990.
Christopher Adams (C. Adams) and Peter Roberts (P. Roberts) in 1993
proposed another model, which they called ER2M ("You are what
you measure" in the journal Manufacturing Europe "). ER2M
acronym for Effective Progress and Performance Measurement. [ 3]
According to Adams - Roberts, it is important, first of all, what the
company does in the following four areas:
Services for customer and markets;
improvement of internal processes (efficiency increase and profitability);
management of change and strategy;
property and freedom of action.
According to the theory, strategic management consists of two consecutive
phases: the formulation of the strategy and its implementation. Formulation is
an analytical process that enables you to define "What to do?". Implementation
- on the one hand is the organizational process that helps to answer questions
"How to do?" and "Who will do?", on the other hand - this
is a process contributing to the development of management skills and
management of changes. The purpose of the system is not only to ensure the
implementation of the company's strategy, but also to foster the culture in
which constant changes are natural. Performance indicators should provide
decision makers responsible for implementation of the strategy with quick
feedback.
In conclusion, we state that the use of strategic management systems will
enable to show a more complete reality. This does not mean that financial
indicators have become less important, it means that they need to be balanced
with the other - non-financial ones. The most promising of these concepts is
BSC-model, which makes it possible to translate specific activities and
strategies in a fairly complete set of indicators, which actually form a system
of strategic planning and control.
Literature
1. Kaplan
R.S., Norton D.P. The Balanced Scorecard: Translating Strategy Into
Action-Boston (Ma., USA): Harvard Business School Press, 1996.
2. Stewart,
Thomas A. Accounting Gets Radical / / Fortune. - 2001. -Monday, April 16.
3. Norreklit
H. The Balance on The Balanced Scorecard - A Critical Analysis Of Some Of Its
Assumptions / / Management Accounting Research. - 2000. - ¹ 11. - P. 65-88