Balanced scorecard development of a strategic business unit

Abstract

Research confirms that strategic planning is essential for the improvement of business performance in both small and large organisations. Organisations around the globe all follow similar tactics, namely to attempt to execute a strategy to differentiate themselves from their competitors. A popular instrument used to support the strategic-management process in organisations is the Balanced Scorecard (BSC). The BSC is a popular performance-management framework strongly associated with managing the implementation of strategic plans. There is a difference between known performance-management programmes and the BSC. The BSC is a full, multi-perspective approach to achieving long-term, sustained growth, viewed more as a strategy-formation system than a pure measurement system. Constructing the first BSC of a Strategic Business Unit (SBU) is accomplished by a systematic process that builds consensus and clarity about how to translate the mission and strategy of the SBU into performance objectives, measures, targets and initiatives in four balanced perspectives: Financial, Customer, Internal Processes, and Employee Learning and Growth. The aim of the scorecard building and implementation process is to cascade strategy down to the operational level where real value is added. This process is also called "strategic alignment". The arguments presented in this dissertation are based on a combination of general literature research on performance management, the BSC and the development, strategic implementation and management of the BSC. The selection process of an SBU, and the rationale for the choosing to construct a BSC as a performance-measurement tool has been addressed. The dissertation further addressed the objectives and principles governing the BSC for the specific, chosen SBU. The development of the BSC comprises of ten steps, from the assignment of the scorecard champion or architect to the senior executive management meeting. Information gained from research done on the South African company under review, GP Retail Operations (Pty) Ltd, and more specifically the SBU of the Ackermans Distribution Centre in Durban together with the literature research have been used to develop the BSC within the specific SBU of the organisation. The BSC was tailor made for the specific requirements of the specific SBU in GP Retail Operations (Pty) Ltd. The results of the study on the SBU, Ackermans DC, have been summarised in the performance record sheet and an audit sheet derived from the literature overview and applied practical in-house research. The record sheet was created for each perspective of the BSC. The development of the BSC involved several challenges in embedding the information systems and the culture that helped receive, process, and analyse information for the creation of the performance-record sheet and audit sheet. A BSC requires time and effort to "get it right" and commitment to implement it.