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Balanced Scorecard The Balanced Scorecard represents a newly developed system created in the early 1990 s by David Norton and Drs. Robert Kaplan from Harvard Business School. It is generally known as a management system (not only a management system) that enables organizations to clarify their vision and strategy and translate them into action (Arveson, 1998). The Balanced Scorecard examines both the internal business processes and external outcomes (Arveson, 1998) to enhance strategic performance ad results of a companys business. Although the Balanced Scorecard system uses traditional financial measures, however, it finds them to be inadequate to improve strategic performance of the organization.
In its turn, the Balanced Scorecard system proposes to examine the organization from four perspectives: - The Learning and Growth Perspective; This perspective supposes that the organization should imply both individual and corporate various trainings, courses, seminars and other educational programs with the aim of corporate and individual self-improvement. The founders of the Balanced Scorecard system consider that learning is extremely important for further successful development of the company. - The Business Process Perspective; According to this perspective, the attention should be also focused on internal business processes (namely, support processes and mission oriented processes). The implementation of various business processes and methods allows the managers knowing the peculiarities of their business, how well their business is running, and whether its products and services conform to customer requirements (the mission) (Arveson, 1998). - The Customer Perspective; The Customer Perspective suggests that the company should emphasize on the importance of customer service and satisfaction. According to this perspective, satisfied customer is one of the most important aspects of any business, as it is a compound and important index of future success of the company and its effectiveness in the market. - The Financial Perspective. Finally, the last but not insignificant perspective includes the traditional demand in financial information. Kaplan and Norton dwell on importance of timely and accurate processing and implementing of the corporate database and other financial-related data.
No wonder that the Balanced Scorecard is extremely important for the effectiveness of any business. Saatchi and Saatchi's leadership team faced a number of tough choices in 1990 s. The managers of the company decided to undertake effective measures for enhancing their global business strategy and defining a new vision as well as set stretching three-year financial goals (Business Intelligence n. p. ).
According to Business Intelligence Case Study Saatchi & Saatchi is a full service integrated communication agency that provides its customers with range of services from communication and marketing strategy, advertising scripts and production for all media channels to consumer research and forecasting. The company takes its origin from two brothers, Charles and Maurice Saatchi, who created the agency in London in 1970. Although the company developed and grew phenomenally and actively adhered to strategy of mergers and acquisitions with other companies, their performance gradually went to decline. Finally, in 1990 s the company was on the brink of bankruptcy.
According to words of Paul Melter, Worldwide Director of CompaSS (CompaSS is the balanced Scorecard programme) in result of numerous mergers, the company consisted of essentially competitors connected through common ownership. First of all, the Saatchi team decided to reform their global strategy and to make some structural changes. The structural changes began with new personnel being appointed at the top of the organization (Business Intelligence n. p. ).
The next step included defining the three-year goals. According to this detailed blueprint for Saatchi's comeback, the strategic goals declared: - To grow Saatchi's revenue base better than the market; - To convert 30 % of incremental revenue to operating profit; - To double the earnings per share. The management of the company understood the importance of building shared vision and used a management tool; to create a Saatchi's team that will shape and implement Saatchi's new vision into action. At their next step, Saatchi & Saatchi invented new growth strategy and set a number of desirable financial goals.
The companys management had to undertake certain structural changes in order to realize the goals and strategy. The investment plans for business units were also re-shaped and re-prioritized. Saatchi's team examined financial data related to every agency and determined their financial profitability. According to the results of financial checks, the management divided agencies into three broad categories: lead, drive and prosper agencies, where each category had different strategic changes. In result of those financial health checks Saatchi's team was able to define the requirements in future investments for each agency examined.
For examine, the majority of the agencies were considered prosper. Prosper agency was generally recognized as an agency with limited potential and was not expected to grow dramatically. However, prosper agency achieved high margins. A drive agency had the aim to maintain or slowly increasing their revenues together with margins.
Finally, the lead agencies were the largest ones, which expected rapid growth. Correspondingly, the major part of Saatchi's investments was defined to be allocated there. Further, the Customer Perspective, as a part of successful Balanced Scorecard strategy was also implemented. As Paul Melter, Worldwide Director (CompaSS) notes, Saatchi's analysis has shown that between 20 - 30 percent of Saatchi & Saatchi's client base made up 70 - 80 percent of its revenues. In such a way, each agency had to focus attention on the large revenue earning clients (Business Intelligence n. p. ).
The Balanced Scorecard strategy was so effective for Saatchi & Saatchi that is still remains to be Saatchi's global business strategy. Their financial goals were achieved in 2000, even 6 months prior the supposed deadline. Saatchi's management considers that the Balanced Scorecard was a massive contributor to that success (Business Intelligence n. p. ). References: Arveson, P. (1998). What is the Balanced Scorecard?
Retrieved October 12, 2006. web Business Intelligence Website. Building A Strategic Balanced Scorecard. Retrieved October 12, 2006. web Definitions of Terms. Retrieved October 12, 2006.
web Rohm, H. A Balancing Act Part 1. Retrieved October 12, 2006. web Streambscol Website. Balance scorecard-balance scorecard collaborative driving breakthrough results.
Retrieved October 12, 2006. web
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