When evaluating the value and performance of a business entity, stakeholders are more concerned on the monetary value that their management team has been able to attain. When using this notion, there is tendency that non-financial benefits or performance of a firm may be ignored.
The use financial data have limitations as a measure of company performance; they only focus on one area of the many aspects that needs to be considered. According to balanced scorecard (BSC) management theory, the performance of a company should involve more than the financial part of it, it should address both financial and non financial parameters (Armstrong, 2006).
The hospitality industry is one of the world’s most competitive industries, firms operating in the industry need to focus on their financial gain as well as their non financial part of performance. Stakeholders when deciding whether a certain manager in the industry is performing effectively, they need to have a balance scorecard policy in their systems.
With over 1500 outlets across 38 states, chic-fil-A Inc. is the United States’ second largest chicken-based restaurant chain with an estimated value of $1billion, to evaluate its performance, management have implemented a balance scorecard policy.
This paper discusses how balance scorecard has been adopted in the company; it will evaluate the management strategy approach and offer recommendations on how they would improve it further.
Brief information about the company
The company’s success is built around the Chick-fil-A sandwich invented in the 1960s by the establishment’s founder Truett Cathy. It’s a private company based in Atlanta, incorporated in 1964 and currently employing over 57,000 people.
The 2009 sales revenue amounted to $ 3.2b representing an 8.6% rise over the previous year’s, with a 2.54% rise in same store sales. Chick-fil-A Inc. dates back to 1946, when two brothers Truett and Ben Cathy, opened a small restaurant called Dwarf House in Hapeville, southern Atlanta, at the cost of $10600.
In 1982, other restaurants begun branding and selling their own chicken sandwiches which took away a huge chunk of the company’s clientele, and in an effort to win back the customers, Chick-fil-A put out coupons in newspapers which drew more responses than had been anticipated leading into massive losses for the company, coupled with the delays in the construction industry, a crisis that led into the development of the company’s corporate purpose.
It recognized the importance of the Christian roots and faith to the organization which while not seeking to impose their faith on the team members and the clients but to influence them through their exemplary lifestyles, services and products.
According to its mission statement, Chick-fil-A endeavors to become ‘The Best’ among America’s fast foods restaurants. while their corporate purpose is “to glorify God by being faithful stewards of whatever is entrusted to them, and to positively influence all people that come in conduct with Chick-fil-A” (Chick-fil-A, 2011).
The company aims to “Become America’s Best Quick service Restaurant” (Chick-fil-A, 2011). It operates in the following operating guidelines and core values;
- Product differentiation.
- Customer satisfaction.
- Integrity.
- Professionalism and innovation.
- Creativity and Corporate social responsibility (Chick-fil-A, 2011).
The purpose of balance scorecard/non financial measures in the company
In general a balance scorecard aims at addressing four main pillars of a business; financial, internal businesses operations, learning and growth, and the customer; the main effect that the strategy aims at is to ensure all the four areas have been addressed when determining the performances and the efficiency of management.
When the areas are effectively addressed, managers are able to make strategic decisions that focus their organizations to a path of success.
When the system is used, it focuses on looking at the level at which customers are satisfied with the services and goods they are getting from a certain company; it is important to note that a customer is the most valuable thing in a business, it is through customers that businesses exist and prosper. In any firm, buyers are the end users of the products and services delivered by the company.
Many a times, stakeholders that form up the distribution channels such as wholesalers and retailers are also categorized as buyers. Therefore, their influence to the firm can be an opportunity as well as a threat as evident from their demand for better services and price changes (Collis and Rukstad, 2008).
The next important area that balanced score card should look into are the internal business processes that a business have enacted; when looking at this area, focus is on ensuring that policies set give the firm a competitive edge.
When referring to internal structure management should ensure that the structure grows and nature’s development and product growth; the human resources and physical assets combinations should be the main factor that needs to be looked into. The advantage of using this focus is that is assists in gauging a company’s ability to organize and strategize for success.
Learning and growth is another area that non-financial measurement strategies looks into; under this title, the main focus is on the ability that the company has to change and adopt new operating systems and policies.
To have an effective change policy, the management should ensure that its human resources are well managed that they can make decisions, innovate and invent methods that facilitate the growth of business (Fred, 2008)
Current performance measures as adopted at Chick-fil-A’
The company measures it performance using the efficiency level that different management segments have been able to attain; in the case that a certain segment is not meeting the expectations of the company, then the area becomes subject to reviews and improvement. The company’s measures can be classified under the following main areas;
Quality assurance measures
To ensure that there is quality in produced products the company has an effective supply chain management; the management starts quality measure of products from the supplier’s point of view. Different suppliers offer different quality of goods; the available information about the value of goods from a certain customer are interpolated.
One of the major aims of Chick-fil-A supply chain management is to ensure that that goods used in manufacture are of the right quality and quantity; this goes ahead as it is reflected in the final products of the company.
It has an integrated purchase system, where it aims at interpolating the demands for good that it has for a certain period of time; it is not always that a supply is constant throughout the year however it varies with time and season.
After understanding the amount required at a particular time Gantt charts are used to interpolate data and form the background of the case. Computers are used to give data analysis of the trend in supplies required (Wheelen, Hunger, 1998).
Chick-fil-A adopts a TQM management policy. This is a system where a company ensures that it vets all its processes and department for the betterment of the entire organization. It aims at ensuring that all stake holders in an organization benefit from the organization. The organizational culture adopted to ensure that an organization can adopt changes effectively.
Organizational structure should be made in such a way that all departments can integrate efficiently and enhance supervision. When departments communicate effectively, they create a level of efficiency in the entire organization.
An organization requires both human and physical resources for its operations. Management should ensure that these resources have been blend in the most productive manner. This will ensure that there is maximum resource utilization.
Industry (Product) Life Cycles
Firms in the fast food industry are always identifying ways that will help them to increase their competitive edge in the market as well as maximization their revenue generating potential. This means that a lot of resources are channeled into research and development, developing new products and other actions that are projected to increase the level of the work force.
Many firms in the industry start by introducing a new product campaign to the market to create a market niche for other successful products. Examples include chicken bucket from Kentucky Fried Chicken and Eat Mor Chikin from Chick-fill-A. As time goes, the product life cycle reduces and new products are introduced into the market.
Strategies used by firms to achieve such objectives include market differentiation and segmentation of the market. In summary, a new product in the industry will go through the introductory stage, then the growth stage, followed by the maturity stage and lastly the decline stage (Gurvis, 2007).
Strategic success factors
The US fast food industry is highly volatile in terms of competition and the management leadership of many firms is very careful in their choice of strategic management tools. Every decision made and action taken should be able to bring value to the firm.
Therefore, the management formulates and implements plan of actions that are aimed at enabling the organization to achieve the desired results. The strategic success factors include but are not limited to;
- Changing the competitive position.
- Investing in the latest technological tools.
- New product development.
- Diversification and.
- Corporate growth strategy.
- Christian culture.
- Moral ethics and values.
When the above parameters are measured, they are compared by the industries/companies expectations to gauge the company’s success (Porter, 2008).
Internal strength growth
Chick-fill-A Inc. has been able to distinguish itself from other fast food restaurants by developing unique and identifiable characteristics. Notable of them is its Closed-on-Sunday Policy tradition that reflects the company’s corporate purpose.
This is aimed at appreciating the spiritual way of life of its people and as well gives its employees’ quality time to rest and enjoy with family. It has enabled the company to attract high class clientele and honorable employees (Wheelen and Hunger, 1998).
Efficiency levels at the organization are high as compared to other fast food outlets. The company’s mission and vision statement is people centered thereby providing a solid ground to expand business operations. Technological innovations have seen the company automate many of its operations to increase service delivery.
Quality assurance is among the company’s objectives of becoming the leading fast food company in the delivery of products and services. Employees are highly trained to ensure that they maintain high levels of integrity in the delivery of services. Customer responsiveness is another key factor in ensuring that quality services and products are delivered.
The company is always developing new products to their existing portfolio of diversified food items. Personalized services are a new type of service delivery in the industry and the company has not been left behind because it ensures that it meets the customer’s demands. Additional services in the package include home delivery of products to the customer’s premises on order.
This has enabled Chick-fill-A to capture the high-class clientele and in the process the customer base has been improved. The drive through experience enables customers to be served at the comfort of their vehicles (Jack, 2001).
Level at which the adopted measures meets the level of Kaplan and Norton Balanced score card
Although the company seems to have adopted a different route to gauge its rate of performance, to some extent it complies to Kaplan and Norton Balanced score card, the main area that the two systems seems to be different is that Kaplan and Norton Balanced score card has focus on how an organizations prepares for a change and adoption of new measures, innovation and inventions.
Chick-fill-A strategy seems to have more focus on improving their deliveries and forget on the need to consider the drivers of the performance; employees (Thomas, 2010). (please see the appendix for a sample format of Kaplan and Norton Balanced scorecard).
The strengths of the performance measure approach adopted by Chick-fill-A
The main strength of the approach as adopted by Chick-fill-A is that the quality of products mades form part of the measures of management success; when the quality of products are used, then the management can know the areas to improve in the efforts of satisfying their customers (Niven, 2006).
The next strength of the method is the much focus that it places on its customers; the company when evaluating the level of performance seeks to get responses from customers on their level of satisfaction; when this happens, managerscan know the areas to intervene to improve customer satisfaction and probably build customer loyalty (Hall, Jones and Raffo, 2002).
Areas to impove/recommendations
When evaluating the level of performance, the management should ensure that it looks into personnel issues; they should ensure that they evaluate the level at which their company can adopt to change and how prepared its human resources are.
To look into the above parameters, the management should evaluate the number of staffs’ trainings, mentoring, and coaching that it has been able to offer over a certain period of time and the effects that they have impacted on the company (Kaplan and Norton, 2001).
Chick-fill-A leadership team should be sensitive to organisational culture/behavior and ensure that when they are measuring the company’s performance, such parameters be included. Personel matters in performance measurements are qualitative in nature but when interpolated they lead to quality decisions that are reflected in a company’s financail management.
In the frameworks of lerning and growth within an organisation, Chick-fill-A should measure the rate at which its company has embraced divesity and culture intelligence parameters; divesity and culture intelligence parameters are new management startegies that seek to prepaire a company on changes brought about by globalization (Mohan, 2004).
References
Armstrong. M. ,2006. A handbook of Human Resource Management Practice. London: Kogan Page.
Chick-fil-A Company Website, 2011. Home Page. Web.
Collis, D.J and Rukstad, M.G. 2008. Can you say what your strategy is? Harvard Business Review, 86(4), pp. 82-90.
Fred, D. 2008. Strategic Management: Concepts and Cases. New Jersey: Pearson Education.
Gurvis, S. 2007. Management Basics: A Practical Guide for Managers. London: Adams Media.
Hall, D., Jones R., and Raffo. C. 2002. Business Studies (Second Edition). Ormskirk: Causeway Press Limited.
Jack, E., 2001. Management Communication: the threat of group think: Corporate communications. International Journal, 2(3), p. 183-192.
Kaplan, S. Norton, D., 2001. The strategy-focused organization: how balanced scorecard companies thrive in the new business environment. Harvard: Harvard Business Press.
Mohan, N., 2004. Essentials of balanced scorecard. New York: John Wiley and Sons.
Niven, J., 2006. Balanced scorecard step-by-step: maximizing performance and maintaining results. New York: John Wiley and Sons.
Porter, M.E. 2008. The Five Competitive Forces That Shape Strategy, Harvard business Review.
Thomas, G., 2010. Managing Brand Performance: Alligning Positioning and Experience. Journal of Marketing management, 1(1), p. 68.
Wheelen, L. and Hunger, J., 1998. Strategic Management and Business Policy: Entering 21st Century Global Society, 5th edition. Reading, Massachusetts and Harlow: Addison Wesley.