BPI-Week 2

Business Process Reengineering: Activity 1-Using Performance Measures

A balanced scorecard is a performance measure that looks at a company from four different perspectives. It is different from most performance measures that focus primarily on the financial position of the company. The balanced scorecard evaluates: Financial, Customer, Business Processes, and Learning and Growth. It takes into consideration all of these factors and measures the company’s effectiveness in these areas. A company can use a balanced scorecard to obtain input from customers to see how the company is doing in terms of customer service. With these results the company can then take the appropriate measures to meet the customer’s needs. The same can be done with employees in terms of business processes. An employee doing the work will have an idea of what can be done to improve the processes if there are any problems.

The balanced scorecard is an excellent measure when you are trying to reach long term goals for the company. When the information from all four areas is incorporated it can be analyzed to see how the company will do in the future. A company may be doing well financially in the short term, but if the other areas are not taken into consideration, the company could overlook factors that will be detrimental for the company’s profits in the future. For example if the company has a good product but has poor customer service, it will not be able to keep customers. Also if the company does not learn continually to keep up with trends, their product may become useless without the company noticing in time, which could lead to huge losses.

For the balanced scorecard to be a management system rather than just a performance measure, the company must look at their long-term vision. The management of the company must effectively communicate the vision for the company to all levels of the company. If the vision and strategy of the company is not understood by its staff then they won’t know what they are working to achieve.

When performance measures are used as a means of determining an employee’s wages it must be done in a cautious manner. It may cause an employee to act unethically in order to achieve the highest pay possible. Take for instance the example of a manager whose bonus is based on the company’s net income for the year. The manager might act unethically and manipulate financial information to get the biggest bonus. If there is a minimum income that the company must make in a year and that goal has not been met the manager may do the same in order to protect his/her job.

Performance measures can influence the behaviour of employees. For instance if an employee was watched to measure their performance he/she might feel that they company does have confidence that they are doing their job well. This might cause resentment toward the company and affect the individual’s work ethic.

References:

Course Notes Topic 2.2
http://www.balancedscorecard.org/basics/bsc1.html