Being results-focused, it subscribe to the assumption that ‘what you measure is what you get, and it entails setting and communicating strategically aligned goals and measuring and rewarding goal achievement. As a multimeasure, multistakeholder approach to organisation-wide performance management, it recognises three key stakeholders – shareholders, customers and employees and for this reason the approach is frequently confused with the so-called ‘triple bottom-line’ approach to defining and evaluating organisational performance. Both approaches certainly acknowledge that shareholder value creation is not the only legitimate organisational objective and, as such, both challenge the defining corporate mantra of the 1980s and 1990s that promoted the doctrine of shareholder value creation’. However, rather than seeing shareholder, customer and employee interests as distinct and unrelated, the balanced scorecard sces all three as being bound together in the organisational value creation process, or ‘value chain’ (Kaplan & Norton 1992, 1996a, 1996b; Mooraj, Oyon & Hostettler 1999). Figure 3.2 summarises the four facets or phases of value creation identified in the balanced Scorecard model, along with the associated stakeholder interests and functional responsibility areas for each. The first is internal learning and growth, which covers employee commitment, capability, learning, creativity and well-being. This is primarily a human resource management responsibility. As the developmental accent suggests, the balanced scorecard is very much in line with the assumption that people are the organisation’s most valuable resources. The second area of value creation is that of internal business processes. This aspect of performance measurement is predicated on employee learning and growth where the immediate emphasis falls on production line and supply chain technical efficiency. In functional terms, this is the domain of technical and operations management professionals. The third facet is the realm of the external customer: the end user of the outcomes of internal processes and the source of market value creation. Here, functional responsibility lies chiefly with sales and marketing professionals. The final facet is that of financial value realisation for the organisation’s owners. In the case of companies, these are the shareholders. This could be said to be largely the functional realm of finance and accounting managers rather than HRM professionals. Regardless, the hypothesised value creation process brings together not only employees, customers and shareholders but also professionals from all of the main functional fields. In this sense, it is a formula for the integration of both stakeholder interests and functional expertise, with human resource managers taking a lead role. The model is also said to enable the systematic evaluation of the downstream’impact of particular human resource development initiatives on process, customer and financial outcomes. Kaplan and Norton (1996a, 1996b) propose that the model should be applied by means of strategic indicators and goals for each of the four areas of value creation that cascade through the organisation and seek to strike a balance, first, between ‘lag indicators (i.e. measures of past results achieved) and ‘lead indicators’ (i.e. KPI-related performance enhancement goals for future attainment) and, second, between short- term financial goals and long-term developmental goals. Goals that are transmitted from the apex to the base of the organisational structure will thus serve to communicate strategic business objectives throughout the whole organisation to the point where the goals of individual business units and individual employees at all levels align with the organisation’s overall strategic success factors. Figure 3.3 provides an example of a personal scorecard applied to individual employees as part of the organisation-wide goal-setting process. Note that the instrument requires KRAs, indicators, goals and weightings to be set in each of the four generic KRAs prescribed by the balanced scorecard model. Key phases Strategic indicators (examples) Key stakeholders (and responsibility areas) Shareholders {accounting professionals) 4 Financial How do we look to Shareholders? Lag: . Return on equity • Revenue growth Lead: • New or existing product revenue mix 3 Customers How do our customers see us? External customers Lag: sales and marketing professionals). Market share • Customer satisfaction Lead: • On-time delivery • Customer-specific product development 2 Internal business processes What must we excel at? Internal customers’ and others in supply chain (engineering. IT and other systems management professionals Lag • Product defect rate • Unit product cost Lead • Supply chain officiency 1 Internal learning and growth How can we continue to improve and create value? Employees (human resource professionals) Lag • Rate of new product development • Employee job satisfaction Lead: • Develop strategic competencies • New product development time Promise and perils of balanced Scorecards The balanced Scorecard is undoubtedly one of the most comprehensive and cohesive models of “best practice’performance management to have emerged in recent decades. Its attractions are numerous and substantial. For example, it is results-based, uses Figure 3.2 The balanced Scorecard Sources: adapted from Kaplan & Norton 1996, 1996b.
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