The balanced scorecard helps a company in planning for its future endeavors so as to ensure that the company attains a sustainable competitive advantage which is based on its long-term survival in the competitive market and also increase in its profit margins. The Balanced Scorecard is an avenue which provides an approach into deciding the company’s strategies, the objectives which can make it to attain its strategic visions, and how it can deliver so as to get an outcome which is very desirable in the future.
The balances scorecard can help in the transformation of the strategic plans of a company since it provides a framework which gives the performance measurements which can help the decision makers in the company to identify how the performance can be measured and also what can actually be done in the measuring of the performance. This paper will focus on Pearson Plc. Company which is a publishing company and it investigates if the balanced scorecard has any link to the strategy and vision of the company in 4 measurement areas namely; the financial perspective, the customer perspective, the internal business process perspective and the growth and learning perspectives. The paper furthers the suggestions which have been tabled to be some improvements in the balanced scorecard and the limitations.
Vision and strategy
A strategy is a directional scope of an organization over its long-term abilities, which are usually aimed at achieving the set goals of a company. There are nine forces which can serve as a basis for a business strategy: the products offered, the market needs, the technology, the production capability, the methods of sales, the methods of distribution, the natural resources, the size and growth, and the returns in the profit levels. The decisions to a proper and successful strategy are determined by the products and services, the customers, the market segments, and the geographic areas.
In order for a business to be able to achieve its set objectives, it must be able to come up with a strategy which is suitable, like, for example, if the strategy’s aim is to increase the company’s total revenue, then the strategy has to be aimed at new investments, or even the launching of new products. A strategy is very difficult to be reversed, since when a company decides to implement a strategy, it is absolutely not possible to be able to switch the resources towards another direction.
The outcome of a good strategic plan is the goal setting of a company which is purely based on its vision and mission statement. The vision of Pearson Plc. Company is about the powering of the performance in in education where its current strategy is aimed at the provision of all schools with a flexible choice and the use of the new technology so as to establish the needed infrastructure which is essential for powering performance to all its stakeholders.
The success of our company which usually operates mainly for marketing and the acquisition of high profits are dependent on the management and the establishment of all the products and services that are being offered by the company (Miles, 2003). For our company to be able to compete and survive in the competitive market, it has to be very successful. A sustainable competitive advantage is a prolonged benefit that a company possesses and achieves by the creation of new products and services which are valued and targeted by the market and they cannot be replaced easily or even duplicated by the competition (Adrian and Rieple 2008). It requires that a company or a business unit is able to erect suitable barriers against competition by looking at the basis of competition and who the business is competing against. PEARSON has been able to have a sustainable competitive advantage because of its efficient market hypothesis and its consideration of price volume relation in terms of stock prices in the stock market (Hamel & Prahalad)
In order for a business to be able to achieve a set of objectives, it must be able to develop a suitable strategy, for example, if the strategy’s aim is to increase the company’s total revenue, then the strategy has to be aimed at new investments or launching of new products (Cobbold & Lawrie, 2002). Pearson’s marketing strategy is simple and it aims at the total satisfaction of all customers, which is one of the marketing tools that the company uses to create the product awareness among high and middle income individuals.
A balanced scorecard (BSC) is a management and a strategic planning system which is used in a business so as to align the vision and strategy of the organization, monitor all the organization’s general performances according the strategic goals that they have set, and also aids in the improving of the external and the internal communications in the organization (Voelper, et al., 2006). Strategic planning is a systematic process which is continuous and is aimed at guiding an organization into making solid decisions about its future, to be able to develop all the procedures and operations that are necessary for the organization to achieve its future set goals, and also to develop and determine ways on how the success of the company or organization will be achieved (Richard, et al., 2009).
The balanced scorecard (BSC) was developed by Drs. Robert Kaplan and David Norton (2004) as being a framework which could be used to measure performance of the organization where they were able to describe the balanced scorecard to retain all the aspects of the traditional financial measures which in most cases tell more about the past events in an organization where the customer relationships and the long-term capabilities were not considered to be critical for the success of the organization (Lynch, 2006) .
The Figure below shows a balanced scorecard which is suitable for use by the directors and managers of Pearson Plc. Company in aligning its business activities to the company’s vision and strategy and also in the monitoring of the performance against the strategic goals. Personal drive is the main factor in the execution of the Pearson company’s strategy which involves courage of the leaders and the managers, who in most cases are able to take responsibilities for their own actions and are also able to reorganize (Thompson & Strickland 2003) the company by showing great courage and readiness to jump into action so that new ideas can begin to take effect at once. The leadership in the Pearson Company has enabled it to soar into greater heights
The balance scorecard brings out 4 perspectives which show that there exist a balance between the subjective measures and objective measures, the driving forces of all the future results and the performance results, and the external and internal measures (Papalexandris, et al., 2005).
The Financial Perspective
The financial perspective in a business entails the decision makers to analyze the finances of the company where they can be able to determine if the management of the finances has achieved the company’s objectives and mission.
The financial perspectives in Pearson Company include the operating income which is shown in the Pearson’s income statement, economic value added, and the return on capital employed which is estimated to be about 13.3% in 2010 and 13.4% in 2009 (Appendix A).
The Customer Perspective
The customer perspective implies that customer satisfaction is very essential to a company or business. This is because it is the customers who consume the products and they have needs and wants which should be met so as to continue consuming the company’s products and also bring in brand new customers to the company. Pearson’s main aim is consumer satisfaction since the company believes that it is the customer that determines the profitability of a company. This includes measure like the retention of the existing customers, the total market share in the market segments, and consumer satisfaction.
In the customer perspective, Pearson used the customer’s satisfaction rates where they used polls to get the data where they targeted about 89% customer satisfaction. This is because the Pearson Company usually contacts online surveys so as to determine the satisfaction of all their customers so as to know how to plan for the future of the consumer welfare.
The Business Process Perspective
The business process perspective is what proceeds the customer perspective since a company should be able to analyze all the processes which it uses in satisfying the customer’s needs. This can help the company to analyze if its internal processes are efficient enough to meet the expectations of the customers and also it can enable the company to come up with new strategies on how they can improve their service and product delivery, and also improve in their efficiency in the future.
In the business perspective, Pearson used the metric of servicing all the calls coming to the call center by the potential customers where the target was to answer each call that came in within 30 minutes where the second target was to decrease the total number of calls which were dropped to 3% or less. This metric helped in measuring the incoming calls with the plan of the implementation of a phone tracker so as to track all the calls that comes in from the customers.
The Learning and Growth Perspective
The learning and growth perspective includes learning and innovation which are needed by the company so that it can attain a competitive advantage over its close competitors. Employee training and education is very important and the company has to motivate the employees. The key decision makers would be able to determine the strategic positioning of the company and also make sure that all the objectives and goals which have been set have been attained in the future.
In the learning perspective, Staff development is an important process in Pearson where the company encourages the training of employees so as to improve on the company’s efficiency. This perspective includes measures like the satisfaction and the retention of the employees, and the skills set. In this perspective, the employees of Pearson were supposed to each take some courses and training where they were supposed to be tested and those who succeed will have got a 90% in the test. The company will come up with a training module which will later be followed by a test.
Pearson has the ability to continuously come up with revolutionary innovations which help to boost the company’s sales and also widen the profit margins, this shows that Pearson has a great and a substantial innovation resources which are very hard to be imitated by the company’s close competitors and they are very valuable to the company. Through the human resource management, Pearson Company is able to provide skills through the training of all its employees around the globe which would equip them with all the knowledge and skills which are required to be able to produce a better output (Johnson, et al., 2005). The motivation of employees in a company is very vital since it contributes to the profitability of the company in terms of an increase in the output levels since the employees are very willing to work and produce more.
Strategic positioning of Pearson is at the point of gathering sufficient information concerning the internal and the external environments and also including the company’s stakeholders in making important strategic decisions. It is very important for the Pearson to take into account the future of the company by trying to access the suitability of the current strategy (Johnson et al. 2005). The stakeholders of Pearson Company are the key parties that have influence over the company and its future endeavors. Some of the major key stakeholders of Pearson Company are employees, customers, the government, investors, institutions, shareholders, and suppliers.
The BSC objectives of Pearson company is that the company intends and aims to be world’s leading publishing company in London and for that to be possible, the company it has to increase its turnover from the financial perspective by increasing its turnover by about 15% which then becomes the new financial objective of the company. This turnover is provided by the potential customers of the company’s products since they should be able to get all their delivering in a timely manner which makes the customer objective.
The company also has other internal activities like the filling of orders, production planning and control, and purchasing where all of those internal activities start with the customer receiving the order and ends with the customer getting all the delivering of the goods and services which in the end makes up the process objective. Another form of a process objective is where all the orders are entered in the production and planning systems. The innovations objective states that there is need for changes especially in the infrastructure so as to ensure that the company’s strategy is fully accomplished.
The measures which are the key performance indicators (KPI) of BSC are the parameters which are observable and are used by the company to attain its set objectives. The Pearson Company has a profitable growth objective which is measurable through the measurement of the company’s net margin growth.
The identification of the balance scorecard’s initiatives is very important since the initiatives act as the main drivers of the strategy and it also addresses the gaps which are between the BSC targets and the BSC measures and the measures which are geared towards performance (Kaplan and Norton, 2004). Niven (2002) argued that initiatives which are effective would help in closing the gap which exists between the desired performance and the current performance.
The limitations of a balanced score card are that it can take a very long time to implement the whole project where the company would be required to make time for investments so as to be able to implement on the project. The implementation in Pearson required that there be the participation of each employee since there were numerous data which were required which could take a very long time and the whole process to be tiring. The definition of the measures of the organization is also not a very easy task where the company would have to choose only those measures which can be linked.
A strategy map is used by a company like Pearson company As a communication tool to show how value can be created for the company since they demonstrate a logical connection in the strategic objectives which can be in the cause-and-effect chain form. It improves the general performance in all the objectives which are mainly found on the bottom row which can enable a company to be able to improve the internal process of the company’s perspective objectives which are usually shown in the next row up which further leads to the creation of desirable results by the company in the financial and customer perspectives which are shown in the two rows which are on top.
A strategy map links the shareholder, the management, customer, core capabilities, innovation, information technology, process management, value creation, and quality management where it helps in describing the strategy and then communicating the strategies to the top executives and the other employees in the company.
What I would recommend to the board of Pearson Company is that they should adapt a leadership management strategy. In order for a company to be successful in the competitive market there is a need to have good innovative leaders and also are very good in the decision making of the company. Some executives are solely to be blamed for the failure of the businesses and the companies that they manage because they prioritize the profit goal ahead of the customer satisfaction goal (Wright et al., 2005). The customers play a very important role in the existence of the company since however good the company’s products are, it needs the customers to purchase the products.
Customer satisfaction determines the profitability of the company and the total sales that a company makes because the better the customer satisfaction the more the consumption of the products. The executives of Pearson Company are leaders and they should come up with a good decision making process and have very good leadership qualities which would enable them to lead the company towards attaining its set goals and objectives (Sadler-Smith 2006).
The reason why I recommended the leadership management strategy is that leadership is crucial for the company. A successful organization should have a well-defined far-sighted stand and, above all, a good leadership management, which is innovative enough to be able to pursue the objectives of the organization. A goal is an endeavor to achieve something during a specified period of time and it is supposed to be realistic and specific. Such goals the company sets are then translated by its leaders into activities and objectives. The main aim of the executives of Pearson Company is to move the organization into attaining a high performance through the operational planning and making it a global visionary company.
In conclusion, a balance card can help a company to measure its performance which can lead to the success of the company but for the balance score card to be effective, there has to be good leaders in the company. Leadership in any organization starts with a vision, which is directed towards the goals of the company, and a good leader is the one who is aimed at scoring big successes for his organization. Leaders help when it comes to the strategic planning, which is a systematic continuous process and is aimed at guiding an organization into making solid decisions about its future, to be able to develop all the procedures and operations that are necessary for the organization to achieve its future set goals, and also to develop and determine ways on how the success of the company or organization will be achieved. This strategic plan is usually a long term plan of action which is designed by an organization in order to achieve its set goals and objectives (Thompson & Frank 2005).