This is a comprehensive paper which carries out a discussion on financial and human resource management as it applies to Rainbow Lighting Incorporated. The paper briefly highlights the company and the management problems that the company is facing. It further pinpoints the importance of applying the components or principles of the balanced scorecard in the management of the organization. This is contained in the introductory part of the paper.
The paper further carries a discussion on how different companies have applied the balanced scorecard to enhance efficiency in management of finances and employees. This is contained in the literature review section of the paper.
The paper develops a balanced scorecard for Rainbow Lighting Incorporated. The scorecard shows how the company should align its goals to the activities and operations in order to maximise on output. The paper explains the benefits that will come with the scorecard, and the change of operational behaviour as a result of applying the scorecard. However, this is after the scorecard for the company has been developed.
Lastly, the paper gives a conclusion on the working of the scorecard and the benefits of the scorecard. The paper gives a number of recommendations to Rainbow Lighting Company concerning the adoption of the scorecard in its management.
The Rainbow Lighting Incorporated is a wholesaler company that sales residential, light fixtures. These products are primarily sold to contractors, builders, home centres, lighting showrooms and hardware and electronic supply businesses. The management of the functions of the company seems not to be an easy exercise more so that the Rainbow Lighting performs more of sales activities.
The management of its employees who mostly engage in sales function has proven to be of big challenge that has led to a crush in the output of the company. The company has been facing stiff competition from other firms that deal in similar products.
It is very hard for many firms to achieve good performance when employees are not working in unison; or rather when the when employees are not working in response to a single source of coordination.
Therefore, many companies are opting to apply the principles of the balanced scorecard in the management of the employees and other functions of the companies (LaChance, 2006). The functions and activities of the company can be greatly improved if it adopts and utilizes the balanced scorecard in aligning its goals to the activities (Searcy, 2004).
Spreitzer and Porath, 2012, observe that performance appraisal is an important tool that can be utilized in the management of employees of an organization. Organizations that have good performance appraisal systems in place have enjoyed good employee relations. Therefore, they have been able to maximize the input of workers and the resultant output of the firms.
Performance management combines many small elements of management that collectively ensure the successful management of employees of an organization. This is done to step up the performance of both groups and individuals within the organization. When it is being applied in organizations, performance management is seen in terms of a series of human resource management functions that focus on measuring the performance of employees.
These functions assess workers and give feedback response on the quality of work and assignments completed by the employees. It allows for open exchange of ideas and views that will help in streamlining programs that will ensure better performance in the future (Chari and David, 2012).
The recognition of the future potential of employees is a useful indicator of employee mobility and probable success in the career. Workers in organizations usually do have a big concern about evaluation of their work, which is carried out by their supervisors. Of the greatest concern is the outcome of the evaluations and their importance to the employees. Performance appraisal has no substantive meaning when it is not accompanied by reward.
Financial rewards are very much valued by the employees, thence, after carrying out a performance appraisal in the organization; best performers have to be given financial rewards as an appreciation for their remarkable performance. Most firms do carry out appraisals after the fiscal year has ended (Henderson, Raynor and Ahmed, 2012).
In performance management, the equal opportunities approach can be adopted. This approach centres on equality in pay and treatment of employees. Equality is based on legislation that comes from the human rights and human resource policies. Diversity management has been adopted due to the ineffectiveness of the equal opportunity approach.
Diversity management covers all the variations in characters and qualification of employees and codes these factors in the performance and reward system of firms. Diversity management does not pay much attention to the legal and ethical theses of equality in organizations. It argues for a more objective look to diversity as it applies to the organizational business (McDougall, 1996).
The Balanced Scorecard Approach in Management
Improving the performance of employees cannot be achieved in a day or a few days. It is a process that is conducted on a continuous basis. Management researchers have put forward a thesis, which implies that effective goal setting is critical in performance improvement within organizations. Effective goal setting cannot be used or based on as the major tool of achieving good performance. Many organizations do set very good goals.
However, the hardest task comes in the implementation process. Organizations fail to articulate the set goals and strategies leading to poor actions. When this happens, it becomes quite challenging to achieve the targets as laid down in the set goals. Therefore, performance can hardly be improved.
The problem of aligning organizational goals and focusing these goals towards the organizational programs has haunted organizations for a long time. The balance scorecard approach was developed in order to help mitigate this problem. This approach was developed in both the United States and Europe (Letza, 1996).
The balanced scorecard approach bases on measurable statistics. Metrics is utilized in the approach for the grouping of different though related organizational elements which are of importance to the success of the organization. The different categories of metrics do form a set of measures that assess performance.
This approach has been borrowed and applied in many organizations globally from the time it was developed. Organizations apply the approach differently though the basis of the concept still holds in all applications.
The concept has had good results in organizations where it has been utilized in management. By the year 2007, approximately one thousand top companies in the world had made use of the balanced scorecard approach in management (Chavan, M., 2009).
A balanced scorecard is composed of four major perspectives of management. These are customer, financial perspective of management, internal processes and learning and development in the organization. These four perspectives act as a basis in the formulation of the policies and targets of the organization.
The most important thing to consider in the application of the balanced scorecard is the understanding of the interaction the four perspectives in the firm. Lack of clear understanding of the working of the four management components work leads to serious challenges in the application of the scorecard. The four perspectives interact as in the diagram below which was presented by Kaplan and Norton (Thompson and Mathys, 2008).
Figure 1.0: The interaction of elements in a balanced scorecard.
To further simplify the scoreboard, Kaplan and Norton later presented the scorecard in an aligned manner as it appears in the figure below.
Figure 1.1: The aligned balanced scorecard.
This eases the understanding and applicability of the scorecard for performance improvement.
Financial indicators were the main focus of the ancient methods of measuring performance of organizations. However, modern methods focus on both financial and many other indicators which include high quality services, skilled employees, intellectual capital, reliable and prompt services, and other intangible business processes and actions. The balanced scorecard captures both financial and non-financial attributes in management which touches on the betterment of employees.
In short, the balanced scorecard process entails clarity and translation of organizational vision into strategic and effective communication in linking the strategic objectives of the firm to the measures of attaining the objectives. The third stage involves planning, target setting and alignment of strategic initiatives. Lastly we have the enhancement of strategic feedback response and learning (Veltri, 2011).
The scorecard guides, controls, and channels the whole firm towards the realization of organizational goals. Also, it makes organizations establish a clear conception of its probable future. Standard Australia can be cited as a firm that has effectively borrowed into the principles of the balanced scorecard in its management. This is a non-profit organization and currently leads in the technical information and standards sector.
It serves as a representative of Australia on the International Standards Organization and the International Electro-technical Commission. The company has made use of integrated technology in the management of its workforce. Performance management technology allowed the management of the firm to carry out goal setting for individual employees, teams in the organization and goals for the whole organization.
Also, the management developed performance criteria, assesses the competencies of employees which helps it in the identification of weakness and strengths of the workforce and gives feedback. The challenges that face individual employees and groups are identified (Chavan, 2009). The approach links the output of individuals to the competencies on the platform of integrated human resource management. This helps in the streamlining of working patterns in the organization (Hoque and Adams, 2011).
The balanced scorecard can be utilized to increase competitiveness and enhance accountability in the academic departments or institutions. Two major problems do prevail in the academic accounting. The first one concerns the management of academic institutions. This is because the main source of academic leaders has for a long time remained to be individuals who failed to seek leadership roles.
These individuals enter the academia, or they lack the management experience outside the academic field. The second problem is presented by the rising pressure to foster implementation of change in managing the academic field. The pressures do come from the government as it puts a lot of funds into the academic programs. This is not replicated in the quality of graduates who come out of these institutions (Barndt, McGee and Cataldo, 2011).
The academic institutions need to govern by establishing goals and objectives of the institutions. This should be part of the components of the strategic plan. After this, the performance measures can then be developed on which the results will be evaluated. The collegiate form of management, which is an old form of management, is changing.
Basing on the scorecard the academic institutions have to set long-term goals and objectives. Resource management principles can guide academic departments in the academic institutions as it covers both assets and people in these departments. The collective efforts of the department are significantly valuable compared to individual efforts (Barndt, McGee and Cataldo, 2011).
Big companies apply performance measurement in the analysis of their programs, processes and their staffs. However, as a result of the weakness of this mode of management, the organizations are changing and adopting comprehensive performance evaluation which comprehensively covers almost all the components of management. This is well highlighted in the balance scorecard Ding and Beaulieu, 2011).
The learning and growth component of the balanced scorecard is inclusive of employee training and the corporate culture attitudes that relate to individuals and the improvement of the organization. The commonly cited measures of the balanced scorecard put more emphasis on the capabilities of workers, the availability of information systems in the organization, and motivation and empowerment of employees of the organization (Garengo and Biazzo, 2012).
Learning is not only based on training of employees but also includes the mentoring, easing of communication between and among workers and the utilization of technological tools. Metrics that base on internal business process enables managers of organizations to evaluate the running of the business.
They also assist in the evaluation of the level of conformity of the products and services to the needs or requirements of the customers. Such scorecards include coverage on processes of innovation, operational procedures, and services that accompany sales (Wu and Chang, 2012).
The application of the balanced scorecard has aided many organizations whether public or private in improving management thus making them improve their performance. Just like it has been applied in other firms, the Rainbow Lighting Incorporated can borrow into the four main tenets of the balanced scorecard and develop its balanced scorecard to boost the general performance of the firm.
Rainbow Lighting Company is a lean organization. It deals in large sales of products which do not have a lot of variations. Therefore, the four major areas that the company needs to improve in order to uplift the performance are the financial sector of the company, the customer relations of the company as it entirely depends on its customers for its operations.
If the company fails to make sales, it will loose grounds for operation resulting in a shutdown. The other two aspects that the company will focus on are employees of the company who conduct the most important functions of the company. Finally, the quality of products of the company will be addressed. All the four aspects must work in coordination and integration so that the organization can reach its objectives.
The general strategy of the organization will be at the centre of the four perspectives of management will be. The strategy of the organization includes the goals, aims and objectives of the firm. The major goal of the company is to improve finance and human resource management in the company.
Therefore, the four aspects will need to work in line with the strategy of the organization. Alignment of the four functions to the strategies of the firm will ensure that all plans of the firm are channelled towards organizational goals. In this case, it will be easy to achieve goals by way of eliminating malfunctions.
Considering the management challenges that are facing Rainbow Lighting, the company the strategy of the company will be revised to capture areas that will aid in the mitigating these drawbacks. These strategies include streamlining the management of the finances and assets of the company; improvement of the performance and delivery of employees of the organization; ensuring that the products of the company are of the quality that meets the needs of customers; and increasing the customer base of the organization.
The customers are attracted through the quality of products and services that a company deals in. the customer services will be bettered through adjustment of prices, quality check of the products, employee training on interaction with customers and the offering of customer services like discounts, gifts and after-sales service.
The company will carry out performance management so as to attain a highly performing and productive workforce. The employees will be properly trained on various aspects of organizational functions and be rewarded for good performance after appraisal programmes have been run. Training will help the employees transferring their skills and abilities on the organizational duties.
The company will ensure that the products that are sold to customers are of good quality. The procurement procedures of the company will be reset to ensure that the products form industries are properly assessed. In addition, the procedures will ensure that these products come from industries that are known to produce quality products.
For the company to make profits, it has to ensure that it gets valuable output from the every financial resource that is used. This will be achieved through the improvement of accounting procedures.
The challenge of management in this modern era of management of organizations has necessitated a change in the modes of management. Modern management focuses more on good management of organizational finances and the employees.
Performance appraisal is one of the management approaches that have been widely employed in human resource management. Also, the balance scorecard approach has been absorbed in management as it covers a wider scope of management of firms. Different organizations utilize the scorecard differently though the basis of the approach remains the same.
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