BSC and the systems of management (Part 5)
Balanced Scorecard and the system of Organization Design
The system of BSC could be a good basis for a system of delegation of authorities. When the Balanced Scorecard concept is implemented it helps every employee to understand their responsibilities. Also the exact logic of cooperation between all the main activities is forming with help of the new system. In other words BSC already contains a set of rules referring to the Organization Design. Specifically, Organization Design is defined as a formal, guided process aimed to integrate the people, technology and information of an organization.
Certainly some type of an organization design exists in every company but BSC makes it based on values. This comes to be the most important feature of cooperation between organization design and the system of Balanced Scorecard. The following paragraphs will describe the features of value – based model referring to the organization design.
A value based model for the organization design gives an important advantage: manager is going to have a possibility to control the results of their own actions. Self – control makes a strong impact on motivation of the employee. It often happens that employees begin working much better, trying to perform the task by the most efficient way but not simply to ensure a necessary minimum to be paid.
Special indicators, which allow easy and exact way to measure the performance of activities, are needed to be created for every manager. The measure units could be not only number-based but also could contain some scales of quality. Also such indicators sometimes may not be the same as operational indicators. The most important thing here is those indicators to be aimed to solve the existing problems and they should be focused on the directions of grows according to the strategic goals in order to show the employee the directions of self – improvement.
As for the organization design referring to the departments, such factors as strategic goals, operational tasks and indicators could be presented in the form of sections of duty regulations and orders from above.
A practical example
During one of the implementation projects in the big company, the implementers used a Balanced Scorecard as a basis for creation and development of the system of organization design. The distribution of the strategic goals among the departments was held by the system of BSC. While the project of implementation was continuing, some hidden problems were noticed and solved (for example, it was decided not to combine the two different businesses into the one as the only body corporate).
Also BSC was used to create the sections of duty: at first, functional responsibilities were determined, and then the strategic goals and the operational indicators for each employee were created which later became one of the most important parts of the contracts.
Summary
The logic of creation and setting a model of organization design was described in this part of the article. It still could be some specific features referring to the system of delegation of authorities as well as to the cooperation between the main activities of the company. It needs a managerial decision to choose the way of implementation BSC into the existing subsystem of organization design between adding several elements of value – based management (the part of BSC) or to reconstruct the whole subsystem. Sometimes the second alternative is the only choice. For example when the company aims to grow into the modern management system using the best scientific concepts, or if the situation in company is that bad, so nothing but reconstructing of the whole managerial system could help to fix the problems.
Conclusion
This article showed the most common ways of cooperating BSC and the basic managerial subsystems of the company according to the practical and theoretical issues. The features of coordination BSC and the strategic management system, the system budgeting, the motivation management and the system of organization design were described in five parts of the article. Certainly it was not possible to fully describe all the subsystems of company’s management could ever exist. We could later continue the description of the integration BSC into company. But the purpose of this issue was to show the logic of BCS to be able to coordinate with any subsystem with specific features inside the company. Whatever subsystems exist in the model of business all of them needs to be linked with each other and with the only center of coordination to be functioning directly to achieve the strategic goals of the whole company. This is the only way not only for BSC to be functioning well, but also for the company to be directed into its strategy being balanced, well thought-out and successful.
The map of the article
- Part 1: This part is the intro, the first part of the whole article. It also contains the pyramid of management systems;
- Part 2: BSC and the Strategic Management system;
- Part 3: BSC and the Budgeting system;
- Part 4: BSC and the motivation system;
- Part 5: Balanced Scorecard and the subsystem of Organization Design. This part also contains the conclusion and summary for the whole article.
