Setting Up Balanced Scorecard Concept for Business Hierarchy
Intro
Classical BCS concept as it is known makes it possible to turn the vision into operational goals. But what if the problem of communicating the vision and linking it to individual performance appeared? The theory is brilliantly easy but how to implement such concept into an old business with its own traditions, relationships and internal processes especially if company has more than a hundred staff members?
Building BSC network might be individual for any company according at least to its key performance indicators had been determined. Surely staff hierarchy of organization is one of the most important factors as well. But it could be some common suggestions and ways to act helping any business to succeed in building its balanced scorecard. The main problem this article refers to is communicating the vision and linking it to individual performance. Let’s try to open our eyes on how it could be done using examples.
The role of linking process
The importance of communicating and linking process in BSC concept is purely comparable with communicating within the company. Originally business is presented as several people working together in order to achieve mutual interests (company’s objectives). Certainly differentiation of labour takes its place so communication between staff members becomes vital for company to succeed. Potential failure of building balanced scorecard network does not mean the death of business project but could cause loss of money and specialists’ working time.
Vertical cascading processes (Line structure)
There are two basic types of vertical cascading hierarchy of company – up bottom and bottom up. Both those types are popular among current businesses all over the world. As for balanced scorecard concept the most actual problem is to create projects and make it possible to turn the vision into operational goals. Setting up BSC network is not too hard in such type of organization structure as vertical processing company. But it could be some difficulties. Let’s look at both types in detail.
Vertical cascading processes (Line organizational structure)
Bottom Up line processes
Company with bottom up internal process could easily work using BSC concept. Bottom level staff knows exactly what key performance indicator’s properties are in use: min and max values, current value, measure unit, name, description and so on. Knowing that low level specialists are able to create their own projects and send it to the higher level staff. As for managers their work will be to bring together all information for indicators and analyze it. Top manager’s job in this case of BSC concept will be to report the overall projects for the whole business to shareholders and investors.
Bottom Up line processes in company
Up bottom line process
This type of organization structure is the most popular worldwide. Here top managers set mission objectives and execute full control on lower ranked staff. This concept means that BSC project is built by management. As for low level staff they need to get all the information for their actual goals including every indicator’s parameters as well as additional information (order letters, descriptions, statistics and other documents). One of the most problematic technical questions here is to set up both ways uninterrupted, regular and prompt communications of this kind: managers send data referring to goals to specialists; specialists send reports on their working progress to managers; managers send their opinions and corrections (if needed) to specialists. In order to make this process easy and fast special software might be very useful. Fortunately at the moment there are lots of programming decisions offered by information technology market aimed to realize balanced scorecard concept for business.
Up bottom line process in company
Divisional organizational structure
Companies with divisional structure could also use balanced scorecard concept. Technically it would be better to create perspectives (categories) for every division. It is understandable that if company had been worked for certain time with divisions’ priorities different from the Four perspectives (financial, customer, Internal process, innovation and learning perspectives). In this case classical BSC concept could be reformed to fit the current organization. Sure it might cause some unexpected errors but most of balanced scorecard functions (such as building well organized business planning, setting index, communications, gaining overall statistics and so on) will be realized: BSC stands not only on its exact categories and indicators. Rarely top management could make a decision to reconstruct the business to fit original BSC concept but it seems like an extremely risky way so only balanced scorecard fans could ever realize it.
Divisional organizational structure
As for technical visions detail of balanced scorecard system’s implementation into divisional company it should not be any more problems than vertical cascading hierarchy of company. The difference could be rather in BSC project’s building. Anyway the process of setting up the concept for a company should be planned according to its (company’s) special characteristics (market’s sector, internal processes, the size of a company and so on) and its staff members’ skills. Feature of divisional organizational structure is total independence of the sectors and departments. That might cause problems if the top manager or someone who is responsible for bringing together all information into overall project would make any mistake. As many other potential problems of business it could be predicted by using special balanced scorecard software products. In this case top manager will automatically receive the information for every category and would be able to analyze the whole company’s project via wide range of data visualization tools as well as make understandable reports and presentations for shareholders and investors.
Conclusion
Setting up balanced scorecard into a company with its own cascading process is not something extremely hard to do. But mistakes here could cause loss of money reserved for system’s implementation. This article described the common logic for implementation using examples of companies with vertical processes and divisional organizational structure. These two types are kind of basic so more sophisticated company’s structures are variations it. That is why basic logic presented here might be used almost for any company.
But it should be top manager’s decision on how to execute BSC implementation – use company’s own staff (for example IT department members), use outsourcer’s services to be more confident in success, or even hire an experienced specialist to operate with company’s balanced scorecard. Also it needs to be decided to use or not to use any BSC software and what exact software product to buy.
