Balanced scorecard

Balanced scorecard and information it contains

A balanced scorecard is a modern effective tool which is immensely of considerable impact in any business. It is basically used in fact finding, solution provision, as well as a platform for strategic implementation. In order to effectively measure how well a strategy is working in an organization, a method of analyzing a number of perspectives rather than the financial aspects is required.

The Balanced Scorecard approach presents a viable alternative to a firm as it enables prediction of future performance and implementation of a strategic plan. The Balanced Scorecard approach was developed by Robert Kaplan and David Norton in 1992 as a performance measurement and management system.

Therefore, the Balanced Scorecard entails a management system which takes the strategic objectives and visions of an organization and then groups them into four perspectives which are then measured and evaluated independently. The four perspectives are:

  • Financial,
  •  Customer,
  • Business process
  • Learning and Growth.

Departments that collect the data and how the data from a balanced scorecard is used by the various departments within a hotel

In a balanced scorecard, there are a numerous activities performed by different deportments. It is divided into two, ‘Scorecard’ used to signify performance measures that have been quantified, and ‘balanced’ used to show that the system is unbiased.

These departments include;

  • Finance
  • Customer care
  • Procurement
  • Development and design

Finance department

It is in finance department where all the business operations are concentrated .Moreover the financial objectives gains must be realized in respect to the goals set. The set strategies must be adhered to for successful execution and implementation of data found in a balance scorecard .The ideal strategies used to propel the progress of the organization in the previous financial year should not be neglected but be looked into hence better financial gains.

The staffs in this department are organized into various units on a fact finding mission on how to lower the cost, and avoid unnecessary expenses to enhance profit margins than the previous financial year. Hence it is the mandate of the out bound staff to submit relevant data to the finance manager, who in turn presents it to a board meeting for analysis, then making a critical decision on the implementation of the appropriate strategy for effective operation.

Nevertheless, customers needs and what entails to their services should not be compromised thus bringing a setback in what was supposed to be realized in the balance scorecard .While focusing the idea of limiting the incurred expenses, the department concerned should be careful not trend on the traditions of the running of that organization which may result in a negative impact to the personnel who are to execute the set goals.

The financial perspective of the Balanced Scorecard aims at addressing the drawbacks of financial metrics. It focuses on the shareholders’ view of the firm and the financial goals that they desire. The goals are dependent on the stage of the firm in the business life cycle. For instance, a company at the growth stage has the main goal as growth in revenue. Similarly, a company at the sustain stage has its goal as profitability which is measured by such ratios as return on capital. A firm that is at the harvest stage aims at reduction of cash flow and capital requirements.

Customer Care and Relations Department

The success of any firm or organization depends solely on the traffic of clients flow. Effective strategies are set to enhance sales volume and aim at attracting potential customers .The clientele in this business are the core vital organs to run it health wise hence profits .Quality service delivery should be the utmost good faith within the concerned units in this department .The virtues of business, like honesty, politeness and trustworthy should not be ignored .This leads to good reputation of the company and can help out do the competitors. With this in mind, the relevant field officers should bring forward the issues at hand that can be affecting clients. This is done by a proper analytical scorecard, which caters for the bureaucracy of the hotel.

The main aim of this perspective is to establish the potential customers of a firm. It also evaluates the value proposition of a firm in serving the customers. Most organizations find it challenging when choosing an appropriate value proposition. Michael Treacy and Fred Wiersema in The Discipline of Market Leaders affirm that there are three disciplines that a firm can choose from. These are as follows:

  1.         i.            Operational excellence: these firms base their focus majorly on low price and convenience.
  2.       ii.            Product leadership: these firms strive to produce the best products in the market through innovation.
  3.     iii.            Customer intimacy: these firms focus on the long term relationship by articulating the needs of their customers.

The value of a firm as determined by customers is mainly based on time, quality, performance and cost. Therefore, poor performance from the customer perspective is indicative of future decline.

Procurement Department

It is in this department were all the purchasing power is entailed. It is concerned with the overall procurement of all the materials needed for the smooth operation of any business. The relevant officer here is liable to proper decision making, and is assisted by his or her subordinate staff who give him data to feed in the scorecard for effective decision making. Case in point, the hotel uses a balanced scorecard to ensure that no irrelevant purchase is done.

Development and design

This is the department where the final outlook of a product is determined with the current trends and customers preferences as well as the taste. It is mainly utilized by firms seeking ambitious results for their business processes, customers and their financial stakeholders. This department is therefore the foundations upon which the Balanced Scorecard is established. This perspective is mostly product-centered. This includes: product research and staff training and corporate cultural attitudes that are related to both individual and corporate self improvement. In this department, a scorecard can be of help pin the sense that it will assist the relevant managers in coming up with the utmost perfect decision in the final product. Case in point, in the hotel, the balance scorecard will ensure that, for instance the food prepared is of the desired quality to the targeted customers.

How can a balanced scorecard determine a hotel’s room rates for a particular time of year or day of the week?

A balance scorecard can act as a very vital barometer to measure the traffic flow of the clients in respect to the supply and demand rule. When the set strategies incline with the desire effects in the organization goals, the concerned units involved should share the intelligences and work out with the relevant department. They should check other competitors room rates, their demands in respect to theirs and come up with pocket friendly room package rates that caters for all ages.

How can a hotel’s balanced scorecard be used by a food and beverage department?

The main aim of any business is to cut down and do away with unnecessary expenses hence more profits. In hotel industry, food stuffs and drinks which are consumed in large quantities should be focused more by the department concerned. The objectives of the balance scorecard must be adhered to, and the needs of the customers must be looked into. With an effective balance scorecard, ascertaining the rate of food and drink consumption can be achieved.

  How will management use the information to determine staffing needs?

Management controls all the operation of any given business. This is relayed all through from the top management level up to the subordinate. Effective communication skills are essential to successful detailed strategic decision making and implementation. A balanced scorecard can be used to evaluate the effectiveness a staff is. This can be of great help to the management in determining who to hire and fire. Depending on the performance of the organization, the management with the help of the scorecard can determine on the mode of staffing to use. It can either be on contract, meaning long term or short term or on a locum term, meaning on a day to day basis.

In addition, apart from increasing or lying off staff, balance scorecard can assist in catering for some basic needs of the staff, for instance uniform, shelter, or even transport.

 Other management choices that must be considered when reviewing a hotel’s balanced scorecard

 The welfare of the personnel should be considered as far as the set goal strategies are concerned so as to achieve the desired objectives in a balance scorecard. The vital organs in running the organization should be given enough funds and the workers prearranged for in service training through workshops and seminars to catch up with the modern trends in the hospitality industry

Implementation of a Balanced Scorecard

A Balanced Scorecard should enable a firm to improve its processes, motivate or educate its employees, enhance information systems, monitor the progress, achieve increased customer satisfaction and financial use.

Discussion

The hospitality industry has adopted online booking or e-booking services for the customers. However, use of internet based transactions has led to increased cases of fraudsters through cyber attacks. Internet based transactions are therefore faced with risks of financial loss through phishing and hacking (Bhasker, 2006). The hospitality sector therefore stresses on staff training and enhancement of information systems in order to minimize the possibility of losses. The use of information technology in the hotel and hospitality industry has helped in advancing their operations. Hotels searches and bookings are nowadays carried out in real time systems which have increased accessibility.

The co-alignment principle has been embraced in the hotel and hospitality industry. This principle enables hotels to gain maximum returns and operate at optimum levels. It also enables the companies to measure and compare their performance with similar firms in the industry. The co-alignment principle gives room for detailed and strategic planning as concerns operational refinement and service provision (Rawat, 2010).

Many organizations within the hotel and hospitality industry have adopted the concept of customer Relationship Management (CRM). This is an all inclusive process that is aimed at improving the quality of interactions between existing and prospective clients by applying relevant and efficient information. Customer Relationship Management is a program that rewards and recognizes trustworthy guests. The management of a hotel is able to articulate the needs specific to a client through observing the hotels’ databases. Databases are widely used due to their ability link and manage files together hence reducing redundancies and ineffectiveness. This includes information pertaining to check-in and food supplies purchasing among others. Database systems are widely used by sales and marketing departments of various organizations or firms as they assist in establishing current and future clients. This has personalized the way in which marketing is done.

Benefits of using a Balanced Scorecard

The Balanced Scorecard enables the translation of strategy into measurable parameters. The strategy formulated is then communicated to all the employees of the firm hence achieving an alignment of individual goals with the firms’ strategic objectives.

Drawbacks of using the Balanced Scorecard

The limitation of the Balanced Scorecard mainly surfaces during the implementation process. The Scorecard is heavily dependent on a well defined strategy that exhibits a clear understanding of the links between strategic objectives and the metrics. When a well-defined strategy is lacking, the Balanced Scorecard is unsuccessful.

The use of lagging measures to describe past performance is often misleading. This can be countered by identifying leading which can be used to plan for future performance. Generic metrics that have been successfully utilized by other firms are not usually suitable for other firms. Each firm should therefore strive to identify it own metrics in order to establish its own strategy.

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