Comparing Balanced Scorecard with a similar technique like EQFM Business Excellence model.The Balanced Scorecard and the European Foundation for Quality Management (EFQM)Business Excellence Model are both 02 techniques that measures an organisation’s performance for further improvement by generally identifying current shortfalls in performance in areas of particular concern to the management of the organization. Both have been widely used in modern times and benefit from the support of intermediaries such as current and potential users, consultants, and software suppliers. The purpose of our report is to compare the two techniques. Although there are strong similarities, the two approaches come from very different backgrounds and are designed and using different processes.
It can be also seen how the 02 approaches have a fundamentally different theoretical and methodical basis and in turn, how this suggests a contingency, which should inform decisions about the choice of either approach. So lets individually look into both the methods in general.Balanced ScorecardThe Balanced Scorecard’s a system that conveys an organisation’s strategy as a set of measurable goals from the perspectives of internal, external stakeholders, and the organisation itself.
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If these goals and associated measures, and targets are well chosen, the balanced scorecard will help managers focus on the actions required to achieve them, so helping the organisation achieve its overall strategic goals and realise its strategic visions.Situations of application • Focusing management agenda on achieving strategic goals• Supporting two way communication of strategic priorities and organisational performance• The prioritisation of investment and activity behind strategic goals• The alignment of goals and rewards behind common strategy across an organisation.• Supporting continuous learning about strategic “cause and effect” relationships affecting anOrganisation.Outputs • A clearly articulated statement of vision and strategy.• A set of measurable strategic objectives spread over four “perspectives”: each measure with agreed targets.• A set of priority “initiatives” linked to the strategic objectives and measures.Process of work The Balanced Scorecard builds on key concepts of management activity concerning:Causality – the belief that managers can identify things to do that will lead to key outcomes being achieved.Learning – the belief that given appropriate feedback, managers will identify ways to improvePerformance.
Team Working – the belief that most organisations rely on management activity performed byteams as well as individuals.Communication – the belief that clear communication of goals, priorities and expectations arenecessary to achieve high levels of performance within an organisation.Although many variations exist, most Balanced Scorecards are built on a core idea thatmanager’s need information on a reduced set of measures selected across four distinct”perspectives” of performance.Measurement information is usually collected at least quarterly, circulated in the form of paperor electronic reports, and these reports are used to inform regular meetings of the managementteam.
Generally Balanced Scorecard information is not directly useful for cross industry comparisonsor other Benchmarking activities.Best fit instances Forward looking workshop baseddesign process involvingmanagement team, building on existing management plans, but looking for a “step change” in performance. Creation of a set of strategic objectives that are “unique” to the organisation.Issues The major challenges in BalancedScorecard design are the selection of measures – an activity that is often undertaken using specialist external support and the introduction of new ways of working that actually make use of the information generated by the Balanced Scorecard usuallyattempted as an “in- house” exercise.Advanced users extend the Balanced Scorecard within an organization through “cascading” the creation of a pyramid of linked smaller Balanced Scorecards that “feed into” the Balanced Scorecard for the wholeorganisation and themodification of related business processes (e.g.
budgeting and planning) to include reference to the organisation’s Balanced Scorecard.?Business Excellence ModelA framework designed to assist organisations achieve business excellence through continuous improvement in the management and deployment of processes to engender wider use of best practice activities. It enables the calculation of scores against a number of criteria that can be used for either internal or external “benchmark” comparisons. It is hoped that the results of these relative comparisons will lead to increased focus on improving key process performance, and so generate “business excellence”Situations of application . • Driving continuous improvements in processes within an organisation.
• Providing information on external “benchmark” levels of performance of key processes.• Provision of “best practice” checklists for use within Business Planning and Review activities.Outputs • Sponsorship and commitment of entire management team.• Introduction of “embedded” management processes to use outputs to drive continuous improvement.
Process of work The Model assumes that excellence requires of an organisation:• Results Orientation;• Customer Focus;• Leadership and Constancy of purpose;• Management by Processes and Facts;• People Development and Involvement;• Partnership Development;• Public Responsibility, the model considers relative performance by an organisation in the areas of enabling activities and observed results. It does this using five “enabling” criteria (Leadership; People; Policy & Strategy; Partnerships ; Processes) and four “results” criteria (Performance; Customers; People; Society). Current performance is evaluated as a score across the nine criteria by checking the organisation’s alignment against a total of 32 standard statements (e.
g.: “Processes are systematically designed and managed”). Scores are attached to the answers to these questions either on the basis of internal “Self Assessment” or with the assistance of outside assessors.
Scoring uses an universal scoring and weighting system that treats all types of organisations alike (no adjustments are made for size or industry). The scoring system has been designed to allow an organisation to benchmark its score against those other firms, or against scores from prior assessments. Also a weighted “total” of these scores is usually calculated. Wider introduction of quality management systems by an organization tends to improve scores – but in general the Excellence Model does not itself provide information on how low scores can be improved. Results are generally produced in “report” format and circulated, usually on an annual basis.Best fit instances Data driven Self-Assessment against standard criteria, looking at current and recent performances. Assessment Processes are typically notoperated by whole management team.
Opportunities for improvement are identified against poor performance relative to standard criteria.Shortcomings The Self-Assessment process needs to be applied rigorously in order to be effective. EFQM recommends a graduated approach starting with the use of simple questionnaires and progressing through detailed questionnaires to workshops as the organisation becomes more familiar with the approach. The use of external assessors is often in connection with an actual or simulated European Quality Award application process. The relative complexity of the criteria statement scoring system, and the need for comparability between implementations (to allow benchmarking) requires the process to be conducted by suitably trained and experienced personnel (“assessors”). This encourages the use of a Self-Assessment process run by “project teams” rather than managers themselves, and legitimises the use of external consultants (with access to benchmarking data, for example). This leads to a relatively “low impact” assessment process, but one that is often done external to the management team.Apart from sharing a number of similarities, the Balanced Scorecard and the EFQM Business Excellence Model are based on fundamentally different concepts about how best to improve the performance of an organisation.
The BSC favours a clear focus on the specific strategies adopted by an organisation, providing a strong tool onto which other management processes can be built – at the expense of a more complex design processes: the BSC is based on a dynamic and individual abstraction rooted in explicit cause and effect relationships. The BEM is based on a static design derived using plausible logic and contains a standard set of strategic objectives applied to all organisations using BEM equally and only implicit representations of the generic cause and effect relationships that link the strategic objectives together. But the use of this standard model facilitates the use of a much simpler design process, and the benchmark comparison of BEM outputs between the entire universe of organisations using the tool. Both models seem to have strengths and weaknesses depending on the purpose for which they are being used. This working paper has considered specifically their utility in connection with strategic performance management, and has observed fundamental differences that create a considerable disparity between the models.
While the design of the BSC supports its usage as a strategic management tool, the BEM’s original design as a diagnostic tool raises serious doubts about its effectiveness as a strategic management tool. Some proposals have been made concerning ways to adapt BEM to be more useful in this respect but even these cannot get around the fundamental shortfall of the BEM its lack of explicit strategic relevance to the organisation using it. Current the BSC is clearly the better and more appropriate tool in my opinion.