A Critical Analysis of M&R’s Implementation of the Balanced Scorecard
The balanced scorecard is a strategic management system that helps organizations track and manage the execution of their strategies. McWatters and Zimmerman (2015) note that with a balanced scorecard, managers can describe and measure their strategies and track the execution of strategies and monitor the results. The balanced scorecard is generally essential because it helps managers in organizations understand whether or not they are accomplishing their goals and whether they are on the right track to accomplish future goals. Case 14.1: Global Oil narrates how the Marketing and Refining (M&R) Division of the Global Oil Corporation incurred losses in 1990. However, a reorganization of the business process in 1993 led to a turnaround. A myriad of changes was made under the balanced scorecard framework. They included linking compensation to performance, collecting regular customer feedback to enhance continuous improvement of services, and in-depth staff training to enable them to respond to the new approach (Zimmerman, 2020). Furthermore, a team of young managers with creative ideas was recruited to evaluate the organization’s performance. They identified 32 metrics based on four perspectives in the balanced scorecard: financial, customer, business process, and learning and growth. M&R management team implemented the balanced scorecard across the organization after thorough research. Their efforts were successful, seeing that the division made more per barrel compared to competitors, and its return on assets (ROA) surpassed the industry’s average.
The balanced scorecard framework is associated with various strengths and weaknesses. Firstly are the strengths. The primary strengths of the balanced scorecard framework are that it adopts a holistic approach for judging and controlling an organization’s performance, facilitates better understanding of business strategies at all organizational levels, and brings an organization’s strategies to the centre of management focus (Jones, 2016). Amid its strengths, the balanced scorecard framework has some drawbacks. These include requiring a lot of data and that for it to succeed, it must be tailored to an organization and receive immense support from top leadership. Other limitations include a lack of focus on external factors and competitors and a lack of important dimensions such as the time dimension and risk analysis (Jones, 2016). Furthermore, the balanced scorecard framework is complicated for some organizations, is sometimes restrictive and could make an organization not respond fast to the dynamic business environment, and cannot succeed without a cultural shift.
Whether the Adoption of the Balanced Scorecard at M&R Was Responsible for Turning around the Organization’s Financial Performance
In my view, M&R’s adoption of the balanced scorecard was to some extent responsible for the turning around of the organization’s financial performance. By saying to some extent, it means that the implementation of the balanced scorecard framework was not the only factor responsible for the enhanced financial performance. Besides the balanced scorecard framework, the management instituted changes that had an equal chance of contributing to improved financial performance. These included introducing a one-stop shop that made it convenient for customers to shop for fuel and snacks and changing the compensation plans for employees to receive more bonuses if the company achieved its predetermined goals. Therefore, my view is that implementing the balanced scorecard framework led to improved financial performance, but full credit cannot be given to this approach. Other factors enhanced improved financial performance, as discussed above.
Question: The balanced scorecard framework has four perspectives, namely financial, customer, business process, and learning and growth. How do these perspectives interact or interfere with each other?
Jones, P. (2016). Strategy mapping for learning organizations: Building agility into your balanced scorecard (1st ed.). Routledge.
McWatters, C. S., & Zimmerman, J. L. (2016). Management accounting in a dynamic environment (1st ed.). Routledge.
Zimmerman, J. (2020). Accounting for decision making and control (10th ed.). McGraw-Hill.