The business strategies that are included in the balanced scorecard for Norwalk Division are: maximising return on all development spending, satisfying customer needs, and the development of employee skills. The strategy that is not embraced in the balanced scorecard is the one in regard to driving management responsibility to the lowest level. This strategy was not included because there needs to be a balance in responsibility through the organisation. Employee targets and incentives are closely linked to the performance of the division; more responsibility given to staff at lower levels could increase the possibility of managers setting strategies for their own benefit and division. This could lead to discrepancies between organisational goals and the goals set by management for a specific division.
New measures that need to be developed and included in the balanced scorecard are return on research capital, product profitability, product development time, number of products under development, and number of employees participating in training programs. The measures developed need to be directly related to the objective and have the ability to provide feedback for that particular area.
(b) A Balanced Scorecard developed for the organisation will differ to one that is specifically developed for a certain division in an organisation. The objectives of an organisation as a whole are marginally different to the objectives that are set for a division or department. Organisational objectives which are statements that articulate what the organisation hopes to accomplish will include all of the objectives across the different divisions of the company; where as divisional objectives are aimed explicitly at that division. This may result in different measures used in the scorecards to evaluate performance relating to the specific objective.
For example, Chadwick Inc. operates in many businesses including personal consumer products and pharmaceuticals. The organisations overall objective is to produce high quality products and get them to the market faster at lower costs. For its part, the Norwalk Pharmaceutical Divisions objective is to increase the yield of new products and to reduce the time and costs of the product development cycle. This divisional objective becomes a part of the company’s current objectives and is the objective that is focused on when developing the divisional scorecard.
The divisional balanced scorecard was decided by the president of Chadwick Inc. to be developed in a way ‘that was right for the division’. This decentralised decision-making and authority approach may create conflict between divisional scorecards and those of the corporation. This approach to developing a divisional scorecard may give rise to negative consequences. Managers may focus too narrowly on their own units performance and strategies rather than attaining the overall organisations goals. It could also lead to inconsistencies at the organisational level.
The advantages of decentralisation outweigh its limitations and should be adopted in the organisation. However, to overcome the conflict of discrepancy between organisational and divisional scorecards, top management needs to allow for decentralisation only to a certain extent and ensure that each division is being mindful and taking into consideration the overall organisational objective.
(c) The business strategy of a company or division is used to illustrate how all the individual activities are coordinated to achieve a desired result. Developing a strategy is vital as it is used to set the overall direction of the business. The business strategy for Norwalk was developed by one individual and within a few minutes. For optimal results and clear direction, a strategy should be developed over a longer time period and the balanced scorecard should not be created until all the participants involved have a clear understanding and vision of the business. From the beginning of the project it could be said Greenfield was not committed to the development of the balanced scorecard for the Norwalk division. He did not believe how dedicated Chadwick Inc. was to the concept.
Any Balanced Scorecard project will fail if it is seen as just another “management fad”. It needs sponsorship through active communication – communication that explains why the organisation needs the Balanced Scorecard and how it will benefit both the division and individuals. During the process there was also a lack of commitment from all the members, it took them several weeks before meeting and focusing on the project. The time spent developing a balanced scorecard is important, if it is rushed it could lead to negative consequences when it is implemented.
The divisions of Chadwick were advised that only hard data (financial data) is to be used in the balanced scorecard. Financial data alone only provides short-term strategies; non-financial data offers a closer link to long-term organisational strategies. Therefore by encompassing only financial data the balanced scorecard will provide only a short-term measure to evaluate the division’s performance.
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