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Date: 18 Nov 2006

BALANCE SCORECARD APPLICATION WITHIN EXPRESS

PUBLISHING S.A.

by Dimitrios V.Siskos

This paper is submitted in partial fulfillment of the requirements for the course Systems
concepts and thinking in Project Management (Msc in Project Management)

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Abstract
One of the most crucial issues for the organizations in the todays complex
business environment is the attempt to be competitive enough in order to
increase profits. This matter becomes more difficult when the organizations
dont act based on a systemic plan. In order to identify the way that a systemic
theory should be implemented in a corporation, this research will try to apply
the balance scorecard theory into my company Express Publishing S.A..
The root cause of the problem in my company is that there is no cohesion
among the departments of the organization. Thus it is a little difficult for the
upper level management to make decisions considering different views of the
problems. Unfortunately, the above mentioned problem has great impact to
the companys image, to our work performance and to customers satisfaction.
The desired outcome of this research is to deeply analyze balance
scorecard theory. Thereinafter the interactions between the related
departments of my organization, the steps which have to be followed and the
prospective outputs will be shown analytically within a business plan.
Profit maximization, better relationships with customers, retain learning
inside the organization and finally, improve the internal business processes
are the main outputs deriving by the implementation of the above theory.

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Balance Scorecard Theory

Balanced Scorecard is a method and a tool solely dedicated to the
execution of any organizations strategy. Its structure consists of:

- a strategy map where strategic objectives are placed over four perspectives
in order to clarify the strategy and the cause and effect relationships that
exists among them.

- strategic objectives which are smaller parts of the strategy interlinked by

cause and effect relationships in the strategy map.

- measures reflecting the intent of each strategic objective. Their prime

purpose is to measure that the desired change or development defined by
strategic objectives actually takes place. Measures in a balanced scorecard
never track business as usual unless it becomes a necessary part of the
overall strategy.

- strategic initiatives that constitutes the actual change as described by

strategic objectives.

The scorecard drives implementation of strategy from the following

perspectives:

Financial Perspective - measures reflecting financial performance, for

example number of debtors, cash flow or return on investment. The
financial performance of an organization is fundamental to its success..
Financial figures suffer from two major drawbacks:

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4
o

They are historical. While they tell us what has happened to the
organization they may not tell us what is currently happening, or
be a good indicator of future performance.

It is common for the current market value of an organization to

exceed the market value of its assets.

Customer Perspective - measures having a direct impact on

customers, for example time taken to process a phone call, results of
customer surveys, number of complaints or competitive rankings.

Business Process Perspective - measures reflecting the performance

of key business processes, for example the time spent prospecting,
number of units that required rework or process cost.

Learning and Growth Perspective - measures describing the

company's learning curve -- for example, number of employee
suggestions or total hours spent on staff training.

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The specific measures within each of the perspectives will be chosen to

reflect the desired change for associated strategic objectives. The method can
facilitate the separation of strategic policymaking from the implementation, so
that organizational goals can be broken into task oriented objectives which
can be managed by front-line staff. It can also help detect correlation between
activities. In many senses, the objectives chosen are leading indicators of
future performance. Effort we make today through the use of strategic
initiatives (change programs) is reflected in the future profits of the company.
In this way, current expenditure can be viewed as investment in the future of
the company.

Kaplan and Norton (1996 a, p. 31) assume the following causal

relationship: measures of organizational learning and growth measures of
internal business processes measures of the customer perspective www.thinkingfinance.info

6
financial measures. The measures of organizational learning and growth are
therefore the drivers of the measures of the internal business processes.
The measures of these processes are in turn the drivers of the measures
of the customer perspective, while these measures are the drivers of the
financial measures.
Balance Scorecard concept serves the whole company with the aims of:

Giving all employees a better understanding of the company

strategy.

Ensuring cohesiveness among departments within the organization.

Challenge a better profile inside the market.

In total, the scorecard is a tool whose purpose is to align the strategy

expressed in the actions actually undertaken to the strategy expressed in the
plan.

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7
Balance scorecard application within Express Publishing S.A.
Express Publishing is an editorial corporation. The company is in the
business of writing and publishing of English educational books. Its aim is to
achieve some goals, that will be shown directly below, in a period of two
years.
Despite profitability, my company faces many problems and most of them
are coming from the inside. Awareness, no cohesiveness among different
departments and lack of strategic plan, constitute a big menace for the future
stability and entity.
In order to measure and evaluate each one of the four BS
perspectives, we should firstly depict the organizational structures of
Express Publishing S.A.
Express
Publishing SA

Finance
Department

International
Department

IT Department

Warehouse

Editing

Figure 1

If we were trying to contrast the companys departments with the four

perspectives which Balance Scorecard provides, then we would have a new
transformed figure.

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Commercial

Express
Publishing SA

Finance
Department

FINANCIAL
PERSPECTIVE

Editing

Commercial

International
Department

CUSTOMER
PERSPECTIVE

Warehouse

IT
Department

INTERNAL BUSINESS AND

PROCESSES PERSPECTIVE

LEARNING AND GROWTH

PERSPECTIVE
Figure 2

Definition of the objectives

In order to apply BS, it is recommended to define the objectives of each
perspective. This approach corresponds to the basic idea of the Balanced
Scorecard concept that goals of the various perspectives build on one
another and finally affect the achievement of the financial goals. As far we
detect the objectives, the next step is to measure them in order to
evaluate them.

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Financial Perspective
Turnover is
gradually
>20%

Net margin
>12%

Gain a bigger
market portion

Increase
productivity

Customer Perspective
We offer the
best quality
English
books

Our price
corresponds to
market trends

Create a
flexible
customer
service
department

Design
continuously
innovative
products

Internal business and processes

We apply certified
quality processes

We have a functioning
product management

Our customer
participates in the
design of the new
productions

Learning and Growth

Our
employees
are
competent
and
motivated

We establish
the appropriate
learning and
growth
infrastructure

Provide a
Knowledge
Management
atmosphere
within the
organization

Recruit well
educated
personnel
which identify
with
companys
perspective

Figure 3
As we have already mentioned before, the above figure acts from
downstairs to upstairs. In order to achieve first-level strategic goals, we should
firstly implement all the processes required. Afterwards, we have to integrate
their outputs to the fulfillment of our scope.

Determine the best scenario

There are many different scenarios, which create a logical sequence, and
can guide processes to our goals. These scenarios start from the down levels,
follow some necessary paths and finally end up to the desired goals.
The figure below appears these lines, which apparently are consisted of
the achievement of every goal.

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Learning and
Growth

Internal business
and processes

Customer
Perspective

Financial

10

4. Increase
productivity

1. Net
margin >12%
2. Turnover is
gradually
>20%

3. Gain a bigger
market portion

5. We offer the
best quality
English books

8. Design
continuously
innovative
products

6. Our price
corresponds to
market trends

7. Create a
flexible customer
service
department

9. We apply
certified quality
processes

10. We have a
functioning
product
management

12. Our
employees are
competent and
motivated

11. Our customer

participates in
the design of the
new productions

15. Recruit well educated

personnel which identify
with companys
perspective

13. We establish the

appropriate learning
and growth
infrastructure

14. Provide a Knowledge

Management atmosphere
within the organization

Figure 4

Balance Scorecard provides a cause-and-effect chain among the

independent but interacting factors. Hence, there are many different lines
which are being generated from the bottom to top so as to build gradually the

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11
goals of this methodology. As we can easily identify from the figure 4, the path
that ends up to the most of the objectives is the one with red color.
In order to monitor goal-achievements, it is recommended to link the
identified strategic goals to measures. These measures are oriented to the
following requirements. Measures should:

1. quantify the benefit of goal achievement and not the amount

of effort required;

2. have a motivating effect on the employees;

3. cover the various aspects of a goal.

Further down, we analyze each perspective individually, determining the

measures which influence this. Obviously every increase or reduction to any
of these measures influences the outcome of the other perspective. Every
measure is acted by multi-criteria forces.
Thats why, we create a table below that shows in one side the, already
mentioned, strategic goals and in the other side theirs corresponding
measures.
The next step is to quantify each factor in order to measure it and finally
implement it.

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12

Learning and Growth Internal business and Customer Perspective

processes

Financial

Strategic goals

Corresponding measures

3. Gain a bigger
market portion

1. Net margin
>12%

8. Design
continuously
innovative
products

10. We have a
functioning product
management

Number of
released
innovative
products

11. Our customer

participates in the
design of the new
productions

12. Our employees

are competent and
motivated

Net
margin

13. We establish
the appropriate
learning and
growth
infrastructure

14. Provide a Knowledge

Management atmosphere
within the organization

Figure 5

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Defective
product
deduction

Average
number of
jobs/employe

Market
portion

Number
of new
customer

Decrease
product
returns

Deduct the
frequency of
mistakes
caused by
awareness

13
Milestone and Target Definition
The fourth part of the Balance Scorecard process is to set milestones and
targets to every of the previously mentioned measures. The output of this
action is the achievement of the final goal in two years.
Perspectives

Strategic Goals

Measures

Milestones
End of 1st
year

Financial

Target
End of 2nd
year

Net margin >12%

Net margin

11%

13%

Gain a bigger market

portion

Market portion

15%

20%

Customer

Design continuously

Number of released
innovative products

60

90

perspective

innovative products

Number of new
customers

100

200

Process

We have a

Defective product
deduction

<200

<100

perspective

functioning product
management
Our customer

Decrease product
returns

<450

<250

Average number of
jobs/employee

>3

>5

Deduct the frequency

of mistakes caused by
awareness

<20

<8

perspective

participates in
the design of the new
productions
Potential

Our employees are

perspective

competent and motivated

We establish the
appropriate learning and
growth infrastructure
Provide a Knowledge
management atmosphere
within the organization

Figure 6

Strategic Programs (Initiatives)

The last part is to decide what strategic programs we must follow in order
to achieve each objective. In the next table, we can see these programs for
the three of four perspectives: Customer, Process and Potential perspective. As
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14
we have already mentioned before, Financial objectives come out from the
successfully implementation of the other three perspectives.

Perspectives

Strategic Goals

Strategic Programs

Customer perspective

Design continuously innovative

products

Introduce an R&D department

Hiring or training of employees
with creative and innovative
backgrounds

Process perspective

We have a functioning product

management

Making available enough time

for product management
tasks

Our customer participates in

the design of the new
productions

Design an on-line erp system

embedding customer to the
production of the product

Our employees are competent

and motivated

Encouragement of job rotation

We establish the appropriate

learning and growth
infrastructure

Continually training of the

personnel

Provide a Knowledge
Management atmosphere
within the organization

Design a Lessons learned

department to record historical
data

Potential perspective

Figure 7
Close out
Balance Scorecard process is a very useful tool, which can have great
results in case it will be implemented correctly. However, many times has
reversely a result. Balanced Scorecard is sadly often used as a tool to
drive business as usual by many organization, and research made by
Balanced Scorecard Collaborative shows that about 50% of all users fails
to implement strategy. There are thus a number of reasons why the
introduction of the Balanced Scorecard may fail. Managers considering
implementing the concept should therefore consider the limitations as well
as the possible benefits of this approach, and further research is necessary

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15
in order to help them make the right decision. However, it will remain
impossible to predict the value of the Balanced Scorecard approach before
implementation.

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References
Goldratt, E. M. (1997). Critical chain. Great Barrington, MA: The North
River Press.
Senge, P. M. (1994). The fifth discipline. New York: Doubleday Currency.
Senge, P., Roberts, C., Ross, R.B., Smith, B.J., & Kleiner, A. (1994). The
fifth discipline fieldbook: Strategies and tools for building a learning
organization. New York: Doubleday-Currency.
Heinz Ahn, Applying the Balanced Scorecard Concept: An expertise
Report, Long Range Planning, 2001, 34, 441-461
http://en.wikipedia.org/wiki/Balanced_Scorecard

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