Implementation of balanced scorecard for productivity improvement

Upali Marasinghe

Every organization needs a good leadership to have a smoothly running of an organization. The commitment of top management of any organization is another vital factor which leads to the improvement of productivity.

The good leadership and commitment do not make much good results unless productivity concepts are introduced to any organization. The most popular - productivity concepts are 5S, Kaizen, Quality Control Circles, Total Quality Management, Total Productive Maintenance, Green Productivity, Balanced Scorecard and Six Sigma.

Creating a perfect productive environment

Out of them 5S, Kaizen, Quality Control Circles can be implemented with the participation of all members in the organization including the top management. Balanced Scorecard is a newly introduced concept which is very useful to managers in planning, directing, organizing, evaluating and controlling their organization. It can be introduced as a comprehensive tool for managers to identify the direction of the organization and it opens avenues to make suitable timely changes to an organization.

The top management should always be conscious about the vision of the organization. To reach the vision of the organization, different kinds of measures can be taken.

Any manager should look into the various aspects of the organization in order to make continuous changes in the journey of excellence in the organization.

The Balanced Scorecard summarizes the all aspects into few main facets, namely financial perspective, process perspective, learning and growth perspective and customer perspective. They are the four facets which covers the whole organization.

Financial perspective is very known to everyone because any organization is very concern about the financial achievements. Hence, everyone tries to control finance and tend to minimize the expenditure. In order to have a sound control of expenditure, managers should be very concern on the different cost factors.

Priority should be on main expenditure items which affect strongly on the benefits/profits. Some cost factors should not be given much priority as they don’t make a substantial contribution to the profit. So the cost factors which contribute substantially on profits can be identified as key result areas of the financial perspective.

Under the process perspective there are some important processes, which enhance the speed of the flow process of the organization and there may be some less important processes. More important processes can be stated as key result areas of the process perspective.

The processes which fall under the key result areas should be given much attention and frequent observation is needed to speed up the process. Even though the finance control is sound, an organization cannot meet its goals if process is not running smoothly. Hence, to have a smoothly running of an organization process perspective should also be looked into. Other perspective, learning and growth is also very important in order to achieve the vision of the organization.

Even though the process and financial control is sound, the employees should have a good knowledge, skills and attitudes to operate the system properly. Hence, main areas of educating employees should be identified in order to enhance their required skills and knowledge. Such areas are called key result areas of learning and growth perspective.

The fourth one is customer perspective. The customer perspective can be divided into two areas, namely internal and external.

The organization should be aware of customers satisfaction. Different measures have to be taken to keep the internal and external customers satisfied. Management should be aware on main areas which the customers can be satisfied. They are called as key result areas of customer perspective.

To have a sound operation in the organization, all perspectives should be given equal attention. Therefore, managers should always be alert on all perspectives. They should have a measurement system for each perspective. In order to have a measurement system key performance indicators should be developed for each perspective. Each key result area may have one or more key performance indicators. So four perspectives may have more key performance indicators. So performance of the organization can be measured using the KPIs time to time or periodically. Periodical evaluation of KPIs gives a clear picture of the performance of the organization and it says the direction where the organization moves and to move.

By developing the KPIs to financial, process, learning and organization and customer perspectives, managers can understand the organization and take the measures whatever need for the improvement of the organization. If managers can understand shortfalls of the organization by studying the KPIs, they will be able to take remedial actions to make the organization productive. Managers can measure the performance continuously by observing the KPIs and it leads to the sound performance of the organization. Sound performance means good results. It means high productivity.

After developing the key result areas, a strategy map can be developed. Components of Strategy Map are linked to the vision of the organization. After developing the strategy map the top management can understand the direction of the organization. Accordingly the top management can plan main future activities such as training their employees, introducing new technology, financial control, customer satisfaction development etc.

Therefore the Balanced Scorecard is a one strong productivity development tool to improve the effectiveness and efficiency in any organization. It means productivity improvement of the organization.

The writer is Director, National Productivity Secretariat.