Internal Business Process Perspective
Duke Children Hospital was facing a major crisis under the leadership of Dr. Jon Meliones. He felt that the company’s open warfare could simply be resolved by having a common objective in all the departments. To achieve this mission Meliones encouraged the three main groups in the center that is the administrators and the caregivers; physicians and nurses to cut costs reduce expenses. This approach was strongly rejected by the caregivers who insisted their job was to save lives but not assist the organization in saving money. With the administration insisting that caregivers should cut costs, most staff felt less motivated thus affecting the quality of their performance thus worsening the financial situation in Duke Children Hospital. It was then that the administration mission became improving employee motivation, gaining financial stability and improving the organization programs. To achieve this goals Meliones appointed leaders in each employee group to assist in coming up with a balanced scorecard which would help harmonize the two conflicting objectives; reducing costs and improving health care (Meliones, 2000). Though he still continued to encounter some degree of rebellion the company had started to move towards the right direction in by the following three years whereby the huge operating losses began to change to operating margins. To further yield positive results, the operating units were assigned additional mandate to make independent decisions in operations that would incorporate specific needs of their local market, competition and available operating resources. In that light, the company would have similar mission and goal but the operating units would have independent corporate scorecard measures (Hameed, 2010).
Scorecard measures can be most effective through the use of business units such as human resource, finance, purchases, and information technology. These units at times act as cost consumers since they require funds to operate, but with the balanced scorecard approach these departments can be changed to be strategic partners. The importance in these departments is noted in its ability to improve employee motivation and awareness of their job description which result to quality improvement, cost reduction and functionality of the entire organization. The strategic partners or support units are more effective in reaching to individual employee because they can decentralize their decision making process which is essential in innovation and also the fact that they can strategize their operations to be exactly in line with their specific resources. The corporate strategy as note in Duke Children Hospital is best achieved by breaking it down into unit goals where they can set individual more specific goal.
The scorecards are more effective when the entire team is aware of them and what they are expected to do. As the process is being developed, it is essential for the top management to clearly communicate the goal objective to all units, divisions and the entire corporation. Proper channels of communication also play vital roles in determining how the entire team accepts and appreciates the goal. It is essential for the organization communication channel to be two sided whereby information can easily travel from top to bottom and bottom to up, meaning that corporate team can easily communicate to the junior staff and vice versa. Individuals from all the sectors can truly communicate new ideas of doing business they can also assist in providing important strategies to improve existing programs. The new strategies or balanced scorecard can be communicated using different modes such as newsletters, company intranet, brochures, organized speeches, training seminars and videos, the mode chosen may tend to reinforce the message. Therefore, for the significant changes in strategies and improvement of the corporate position the company must ensure the entire institution is aware of the decided goals and their required contribution, it also essential to pay close attention to the set communication channels.
The Balanced Scorecard was beneficial to Duke’s Children Hospital, it assisted in reducing operational cost and the period a patient stayed in the hospital thus turning the company’s profit around within the specified period of time. With the increase in profit the company was also able to rate highly when it came to customer satisfaction. The new strategies were all very successful when in motivating the entire body of employees which was the actual cause of the improved patient service and reduced employee turnover. The Balanced Scorecard strategy was introduced to Duke’s children hospital to assist in achieving the hospitals desired goals and at the same time manage resources. The strategy achieved this two aspects quite well since by the third year of operation cont per patient had declined by 33% and patient duration in the hospital had also declined to 31%, further net margin increased by $15 million which was actually higher than anticipated. Customer satisfaction on the other had done remarkably well and the company ranked top after a comparison with 28 other institutions. According to Meliones the Duke’s CEO they also embraced the Balanced Scorecard strategy because they wanted a solution that could also act as learning and teaching tool in addition to monitoring how the entire organization was performing.
The Balanced Scorecard is used to score performance of an organization and it comprises of four main perspectives; customer, financial, internal and learning perspective. How well an organization embraces these perspectives is the measure of its efficiency and performance. In a complex organization such as Duke Children’s Hospital according to Kaplan and Norton the five principles of strategy development and assist in determining how effective their approach was in attain organizational objectives. In Kaplan’s book the five sections are translating the strategy to fit specific organization goals, aligning the company to establish strategy units, involving all members of the organization in strategic planning, ensuring strategy is a continuous process and besides proper use of leadership to introduce and embrace change. All these sections are noted in Duke’s strategic planning thus acting as clear evidence that the company strategies were well coordinated and successful (Kaplan & Norton, 1996).
United Airlines is one of the largest airlines in United States soon becoming the largest airline in the region. Previously the company strongly believed in mergers to increase its market share and gain competitive advantage, but recently as stated by Jeffery Smisek the company has introduced other approaches to assist in attain it objectives. After wide reading and through research on the company, we can strongly say that aspects of the balanced Scorecard approach are practiced by United Airlines. In previous research we noted that customer and financial perspectives are strong pillars in achieving the company’s mission, value and goals within the next three years. Just like other established airline companies United Airline feels the urgent need to set it goals and mission with a focus of the ‘five approach goal’ used to determine an efficient and successful airline. The five approach requires an airline company to observe punctuality, time, cleanliness in its planes, have strong financial position and besides safety. The Balanced Scorecard strategy is used by the company to streamline its approach gearing achievement of the five focuses of airlines. With proper implementation of the Balanced Scorecard and monitoring all its perspectives especially customer, financial and internal perspective United Airline can achieve its three main objectives of increasing customers size, increasing purchases and increasing customer referrals and recommendations.
Objective Measure Target Action
Increase customer size.
United Airline has merged with Delta Corporation before and intends to merge with the Continental airline. According to United Airline the merge will attract new market and increased customer size in the existing routes especially in the company’s main route; United States of America to China. This objective of the company increasing its customer size can easily be measure during the company’s statistical data. Analyzing the difference between the number of passengers using the airline before the merge and comparing to the number after the merge can give clear analysis. The desired target in this area will be ability to maximize all the company resources in all its 170 countries. Thus making the set increased customer size of 170million size a reality. First step towards this mission is to harmonize all its branches in all countries. This will mean that the company will implement customer perspectives that require passengers’ satisfaction, financial perspective and besides internal business process perspective.
Increase revenue and customer purchases are expected after the merge. Financial records and other statistical data such as flight numbers and employee turnover can assist in increasing revenue. The company target in this objective is to increase its finances significantly and reduce operation costs after the merger. Maintaining company stability isessential during mergers. The first step is to ensure stability of existing internal structures and change slowly after the merger. This will ensure costs are distributed, decisions are decentralized and customer and employees are always satisfied.
Increase customer satisfaction therefore enhancing referrals and recommendations from existing customers. To receive referrals new markets should become essential and the existing markets should also increase. This means that statistical data showing their number of existing customers in a market in the previous period compared to the number of customers currently should help tell if any progress has been made in that perspective. The target for this objective are mainly the company’s existing customers and besides the entire organization which include company employees. Existing customers provide a good base for referrals but company employees to are very essential in this area. Motivated employee will tend to speak good things regarding a company. Meaning that they too can be good bases for recommendations. With this regards United Airline approach to incorporate internal business perspective in the scorecard is a good move.
A huge majority of organizations that do not have customers in the traditional sense are usually not for profit and in most cases non governmental organizations. A good example of such an organization would be a children’s home. In most cases, such organizations, though geared towards providing certain services to a particular group of individuals, does not set out to attract such individuals. In fact, most of the time, it is these individuals that seek out such organizations.
Due to the fact that profit making is for such organizations, not the main motivation for operating, the manner with which they apply the Balanced Score Card concept will definitely be different compared to other organizations out to make profit. It is even plausible to argue that in such organizations, the four perspectives are not really operated equally. Understandably, the customer perspective in such organizations cannot be operated at the same level as the financial perspective or the internal business processes perspective.
In such non governmental organizations, the internal business processes perspective and the financial perspective would undoubtedly be operated differently and accorded greater importance. Largely due to the fact that such organizations usually rely heavily on donors and other interested sponsors, focus must be on the financial and internal business processes perspectives. In the case of the former, a majority of such organizations must ensure that their finances not only remain in a healthy condition in order to stay afloat, but that funds are not mismanaged, in order to ensure it is able to attract and maintain its sponsors and donors. When it comes to the internal business processes, metrics developed under this perspective are important in ensuring that the organization remains true to its mission, a key characteristic when it comes to meeting preconditions for funding.
It is indeed true that at times the interests of stakeholders can conflict. Perhaps a very good and practical example would be the scheduling of live football matches in countries such as Spain, England and Germany. Within such popular soccer leagues, it is not uncommon for kick off times for various soccer matches to be changed even at the last minute in an attempt to accommodate the interest of a given stakeholder, usually at the expense of another. For instance, in the English premier league, fans often end up feeling short changed due to unpredictable kick off times. On the other hand, such inconveniences for the fans usually come about due to television networks and broadcast partners such as Sky attempting to ensure that plum fixtures are aired at a time that they are most likely to attract the largest number of viewers. The end result is however a conflict between the interest of fans and the television networks, as fans who travel to watch the games live, usually prefer that games are played in the early afternoon on Saturdays. On the other hand in an attempt to ensure attention is solely focused on certain fixtures, television networks usually end up advocating for shifts in kick off times, even to Sundays as late as 8PM, a very inconvenient time for traveling fans, some of whom must report for work early Monday morning. This is indeed a classic example of how conflicts between stakeholders within a given organization (the English Premier League) may arise over a business process (match scheduling), with the lesser stakeholder, in this case the fan, usually finding themselves on the losing end.
The situation Toyota finds itself in is perhaps a clear demonstration of what can happen if the perspectives within the balanced score card are not operated equally. Due to changing interests, as well as a skewed operation of the perspectives in which there is excessive emphasis on the financial perspective, areas such as quality control within the company seem to have suffered. The departure from a culture that encourages equal focus on the customer, internal business processes, learning and growth as well as financial perspectives, was no doubt, bound to result in undesirable results. A simple change that can perhaps ensure that the interests of stakeholders are brought into sync, would be to ensure that all stakeholders are not only aware of the culture and history of Toyota, but to ensure that its mission embodies this culture. This would ensure that all stakeholders share the same interests: that of ensuring quality first. By ensuring quality, the financial perspective might suffer a bit initially due to the undoubtedly more expensive quality management processes, but will certainly improve with time as customer satisfaction levels also improve. Choosing to ensure all stakeholders are in sync and support greater focus on quality will result in improvements within all other 3 perspectives, especially the customer and financial perspectives. By establishing quality metrics that are not only in line with the organization’s tradition and culture, while at the same time agreeable to the concerned stakeholders, Toyota will ensure that the internal business process perspective is also given the consideration it requires, something that may be wanting in its current approach.
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