Benefits and Issues of Balance Scorecard in Commonwealth Bank of Australia
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This report discusses the benefits and issues of implementing the Balance Scorecard in Commonwealth Bank of Australia. It covers the benefits of BSC in reaching strategic objectives, issues related to implementation, and common barriers in the financial services sector.
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StrategicPerformance MeasurementSystems SPMSs
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Contents INTRODUCTION.......................................................................................................................................3 MAIN BODY..............................................................................................................................................3 1.The benefits of BSC in reaching strategic objectives of that bank........................................................3 2. The issues related to implementation of the BSC in that bank.............................................................5 3. Common barriers to successful scorecard implementation in the Financial Services sector in general. .................................................................................................................................................................7 CONCLUSION...........................................................................................................................................8 REFERENCES..........................................................................................................................................10
INTRODUCTION A system for strategic performance management can be described as a method utilizing informationtoimprovecorporateculture,structuresandprocessespositively.Forpolicy implementation, the Performance Measurement System is essential (Tan, Zhang and Khodaverdi, 2017). A defining characteristic of the SPMS is that it seeks to deliver financial and non- financial metrics to management, presenting multiple viewpoints that integrate the plan with a consistent range of success indicators. There are different kinds of tools in order to measure performance of business entities and one of them is balance scorecard. The project report is based on a bank that is Commonwealth bank of Australia. It is a multinational bank that works across different nations. The report covers detailed information about benefits and drawbacks of balance scorecard in financial entities. MAIN BODY 1.The benefits of BSC in reaching strategic objectives of that bank. The BSC is an effective tool of selecting a balanced collection of metrics and objectives which represent the organization’s strategic direction and enable organizations to fulfill the needs of their stakeholders and to identify, interact and assess their execution. In other words, balanced scorecard is a policy performance monitoring method a quarter-standard, standardized report that managers may use to track and control the implementation of their operations by their employees (Cheowsuwan, 2016). This is useful for companies in order to achieve goals and objectives in a planned manner. Such as in the aspect of above mentioned Commonwealth bank of Australia, this can be helpful for reaching strategic objectives in such manner that are as follows: Better strategic planning- An important framework for building and communicating strategy is given by the Balanced Scorecard. A Strategy Diagram visualizes the company model and help managers learn about the cure-and-effect interactions between the different strategic targets. The strategy map phase means that there is an agreement on a range of interrelated strategic goals. In order to create a complete picture of the plan, the
outcomes and primary factors or drivers of potential achievement are established. In the context of above bank, this can be helpful for making effective strategic plans which may be used to achieve overall objectives in quick time and planned manner. Basically, it is essential for business entities to prepare their strategic plans so that goals can be achieved and it becomes possible be help of balanced scorecard. ï‚·Bettermanagementinformation-TheBalancedScorecardmethodologyallows companies to establish key metrics of success for their different strategic objectives. It means that companies measure what matters practically. Analysis reveals that BSC approach that companies prefer to provide improved knowledge on quality control and decision-makinghelpsinbettercirculationofinformation.Suchasintheabove mentioned Commonwealth bank of Australia, it can be beneficial for their managers to makeeffectivewayofcommunicationofmanaginginformationamongdifferent departments. ï‚·Better organizational alignment- The Balanced Scorecard helps organizations to align their corporate framework closer with the strategic objectives (Osati and Manouchehr, 2016).Organizationscaninsurethatallcompanydivisionsandsupportservices collaborate towards the same priorities to implement a well-executed plan. To do that, the introduction of the Balanced Scorecard and the relation of the plan to activities will benefit. Such as in the aspect of above bank, they can make an effective alignment or coordination among their various departments as well as among various branches located at different nations. By doing so, they will be able to achieve their common goals in a similar way and time frame. Thus, this is also a main objective of balance scorecard for above mentioned Commonwealth bank of Australia. ï‚·Enhanced performance reporting- The Balanced Scorecard can be used for leading report and dashboard layout. Which means that the management analysis centers on crucial business problems and facilitates organizations in tracking their plan implementation can use this tool. Like in the above Commonwealth bank of Australia, by help of balance scorecardwayofpresentingperformancereportsgetenhancedwhichleadsto achievement of goals. It becomes possible because if performance reports will be effective and efficient then this will be beneficial for internal stakeholders such as for
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managers and board of directors to take corrective steps in order to achieve overall objective in an effective manner. ï‚·The Balanced Scorecard can help manage diverse company units- Big companies have a broad variety of teams, groups and branches all of which work best with the same policy. For e.g., hundreds of thousands of people employed in travel, public protection, or parks and leisure could be in one broad municipality this community of workers could be so numerous that they cannot communicate with one another even at the highest level of management. Same as in the above bank, their branches are across different nations. By help of balance scorecard, they can make proper communication among various branches (Waluyo, Handok and Vitasari, 2017). Due to which, objectives of above bank can be achieved in an effective manner and time frame. So these are some common benefits of balance scorecard tool which can be helpful for above mentioned banks in order to achieve their common goals and objectives of various branches. Though, it is essential for above bank that all branches need to have balance scorecard. 2. The issues related to implementation of the BSC in that bank. There are different types of issues which occur in order to implement balance scored in the above which are as follows: ï‚·Poorly defined metrics- Metrics must be transparent and relevant. They should be displayed with clearly understood visual indicators. Evaluations must always be obtained at the appropriate level for decisions and specified so as to enable assessments to be implemented uniformly around the organization even though their output expectations vary (and should be). A system of sloppy or incoherently specified metrics is prone to attack by individuals who want to escape responsibility. This is main issue which occurs in the aspect of above bank regards to implementation of balance scorecard. Such as their poorly defined metric can become a barrier for above bank for making implementation of this tool (Lasdi, 2017). ï‚·Noprocessimprovementmethodology-BalanceScorecard'sprogramsprovidean efficient and reliable way of identifying and resolving root causes until output problems
are detected. It is therefore possible to develop strategies and close efficiency gaps. When the organization does not provide established methods and toolkits to solve process issues, it will eventually hinder the performance enhancement plan when too much time is diverted away from everyday activity because a problem solving strategy is applied for any new performance difference. There can be no change and efficiency begins to deterioratewhilethisoccurs.Thisisalsoakeyreasonorissuewhichleadsto implementation barrier for above mentioned bank. Due to no improvement in process in the above bank can be an issue for above mentioned bank. ï‚·Too much internal focus- Balance Scorecard systems have an effective and consistent manner in which root causes can be detected and addressed before performance problems are established. Strategies and smaller performance differences may therefore be created. When the company doesn't have strategies and resources to address workflow issues, the performance management program can eventually become impossible because there is too much effort to be expended in daily tasks, as a problem solving approach must be required to overcome the potential performance gaps. Any improvement can occur, and as this occurs, performance continues to decline. Due to higher internal focus, it becomes for above mentioned bank in order to implement balance scorecard. This is so because it highly focuses on internal aspect and in the above bank there are too many stakeholders which include internal and external stakeholders. Hence, this is also a key issue which is linked to barrier in the implementation of balance scorecard (Muda, Erlina, 2018). ï‚·Lack of a Formal Review Structure- Scorecards performs well when reviewed as much as possible to create a difference. If a metric meaning varies every day and the factors under management regulation may be changed every day, the metric will be updated daily. In addition, metric analysis sessions will be held in line with a uniform agenda and specifically specified responsibilities for all members and a follow-up commitment of all decided acts. This is also a key reason or barrier in the implementation of balance scorecard in the above mentioned bank. Due to lack of formal structure, there can be issues for above bank to measure actual level of financial performance.
3. Common barriers to successful scorecard implementation in the Financial Services sector in general. This is not essential that balance score card needs to be applied in only non financial organizations. It can be applied in financial organizations too. It depends on companies that how well they apply this tool. Herein, below common barriers to successful scorecard are mentioned below in such manner: ï‚·Limited understanding of the balance scorecard- Though, balance scorecard is not so complex process to understand but in financial organizations, it becomes difficult for them to apply. It is so because financial companies focus on generating higher amount of revenue as well as balance scorecard is mainly focused on assessing non financial goals of companies (Siadat, Abdollahi and Garshasbi, 2017). Thus, this is a main barrier for financial organizations to apply this tool in their operations. ï‚·Lack of Efficient Data Collection and Reporting- The simple fact that the structures already exist for gathering and recording financial metrics is one of the key explanations why businesses overemphasize financial indicators at the expense of other critical operational variables. Businesses actively planning to define the necessary few indicators and allocating capital to automating data collection and monitoring continue to yield successful performance. In many organizations, unfortunately, they are not captured if data collection consumes too much time and energy. Therefore, it is crucial to evaluate key measures of success and companies can be sure that the analytics expenditures are expendedonthemostappropriateknowledgeinordertomaximizeoperational efficiency. Such as in the financial entities, this becomes difficult to collect data and reporting. Hence, this is also a key issue for financial companies in order to make implementation of balance scorecard. ï‚·The strategy is not formulated in a strategy map- It is also a problem for financial companies in order to apply balance scorecard. This is so because in the financial business entities, there can be strategy gap due to lack of coordination among various departments. The Scorecard is rooted in the strategy of the organization that will put the company from top to bottom and direct all actions and decisions against organizational objectives (Hamdy, 2018). A Balanced Scorecard without a plan can potentially occur. But it does not, in fact, enforce the true essence of the concept that expresses the
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techniquebycontactenhancementthroughsuccessassessmentandthatfacilitates progress and initiatives. Without a strategy background, the BSC could be developed; nevertheless, it would be treated as an alternative performance improvement method and would only benefit other advantages of the BSC. The core principle of the BSC is therefore to use the approach of the enterprise as a causal mechanism for its success goals. So it is also a main issue for financial companies in order to implement balance scorecard. ï‚·Inadequate IT support- The Balanced Scorecard should be regularly revised with new and operationally appropriate details to support the company's business dialogue and learning processes. Any phase of a BSC Initiative involves inputs. IT will serve as a facilitator in different phases of the BSC initiative and play a significant function as a service. But in the aspect of financial companies, it becomes difficult for them to implement balance scorecard in the absence of proper service of information technology. New behavior, communicationandcollaborationshallbesupportedbytheBSC.TheBalanced Scorecard initiative will possibly be useless if knowledge is not correctly inserted into the framework. And where the necessary information has not been gathered and processed by those who would benefit from the Scorecards and their repositories, it does not pose any major barriers to the introduction of the Balanced Scorecard proposal or validate the expenditure made in the financial institutions (Abadi and Widyarto, 2018). CONCLUSION On the basis of above project report this can be concluded that balance scorecard is one of the key tool for strategic performance system. The report concludes about detailed information about key benefits of balance scorecard in the chosen commonwealth bank of Australia. As well as issues are also mentioned in the aspect of above bank regards to implementation of balance scorecard. In the end part of report, problems in financial companies are also mentioned related
to execution of balance scorecard. Overall report concludes about role of balance scorecard along with its issues.
REFERENCES Books and journal: Tan, Y., Zhang, Y. and Khodaverdi, R., 2017. Service performance evaluation using data envelopment analysis and balance scorecard approach: an application to automotive industry.Annals of Operations Research,248(1-2), pp.449-470. Cheowsuwan, T., 2016. The strategic performance measurements in educational organizations by using balance scorecard.International Journal of Modern Education and Computer Science,8(12), p.17. Osati, M. and Manouchehr, M., 2016. Performance measurement of electricity suppliers using PROMETHEE and balance scorecard.Management science letters,6(6), pp.387-394. Lasdi, L., 2017. Balance Scorecard sebagai Rerangka Pengukuran Kinerja Perusahaan secara KomprehensifdalamLingkunganBisnisGlobal.JurnalWidyaManajemen& Akuntansi,2(2). Muda,I.,Erlina,I.Y.andAA,N.,2018.PerformanceAuditandBalancedScorecard Perspective.International Journal of Civil Engineering and Technology,9(5), pp.1321- 1333. Siadat, S.H., Abdollahi, A. and Garshasbi, L., 2017. Evaluating the Impact of Information TechnologyonKnowledgeManagementPerformancewithBalanceScorecard Approach.InternationalJournalofKnowledge-BasedOrganizations(IJKBO),7(2), pp.27-42. Hamdy, A., 2018. Balance scorecard role in competitive advantage of Egyptianbanking sector.The Business & Management Review,9(3), pp.424-434. Abadi, S. and Widyarto, S., 2018. The Designing Criteria and Sub-Criteria of University Balance ScorecardUsingAnalyticalHierarchyProcessMethod.InternationalJournalof Engineering & Technology,7(2.29), pp.804-807. Waluyo, M.R., Handoko, F. and Vitasari, P., 2017. Kontruksi Model Continuous Improvement PadaPengelolaanKoperasiXYZBerbasisGreenManagementDenganPerspektif BalanceScorecard(StudiKasusDepartemenEkspansiAngkutanLimbah).Jurnal Teknologi Dan Manajemen Industri,3(1), pp.26-33.
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