IBM as an Example of the Companies with Disproportionate Emphasis on the Financial Perspective
Many companies have suffered because of the act of placing uneven emphasis on various perspectives within the organization (Greenhalgh, 2004). IBM is one such company that is yet to recover from this disproportionate emphasis on the financial perspective, ignoring other perspectives. IBM was once the leading manufacturer of personal computers. It ignored the importance of keeping customers satisfied because after all the customers did not have any other choice but to buy its products.
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The firm also laid less emphasis on internal business processes, a fact that saw the employees’ work uncoordinated at some point. This firm also failed to lay emphasis on the learning and growth perspective of the employees. There was no clear mechanism that would allow employees to develop their skills and enhance their productivity within the firm. The consequence of laying disproportionate emphasis weighed heavily on this firm. New firms arose and were able to overtake it in the market. IBM is yet to regain its top position as the world’s largest producer of personal computers due to this mistake.
Examples of Organizations That Do Not Have Relevant “Customers” To Take Into Consideration
There are some organizations that do not have clearly defined relevant customers (Niven, 2010). One such organization is the Greenbelt Movement. This is an organization that is keen to ensure that the world is made free of any form of environmental pollutants. Its main role is to ensure that various firms around the globe act in a manner that will not jeopardize the environment in any way. This organization has no relevant customers that it serves.
This organization is dedicated to serving the natural environment. It may be said that the direct customer of this organization is the environment itself because it is under its protection. However, the main beneficiary and the ultimate customers of this organization is the future generation. They stand to benefit from this protection. They will live in a less polluted environment because of the actions of this firm.
In the Greenbelt Movement, the firm does not have direct customers that have to be impressed for the continuity and success of the firm to existing. On the other hand, firms that have relevant customers such as Coca-Cola Company can only succeed if they have the capacity to satisfy the needs of their customers. Firms with relevant customers will, therefore, act in a way that would satisfy the needs of their customers as a way of ensuring success.
An example of a business process where the interests of stakeholders are in opposition
Organizations are made up of complex systems with various stakeholders. Within the operational activities within the firm, it is common to find out that the interests of some of the stakeholders are in conflict (Kaplan, 2005). For instance, the interest of shareholders and that of the managers are always in conflict. Whereas the shareholders will always expect to earn maximum dividends from their investments, managers would always aim at reinvesting the profits of the firm.
This would always lead to serious conflict within the organization. While the shareholders would be expecting to earn most of the profits, the management will always insist on expanding the business through reinvestment. Another serious conflict may also arise among the departments. The finance department within the organization will always expect quick profitability hence high liquidity within the firm. It will always restrict most expenditure that does not generate direct income to the firm. This may put this department in conflict with the marketing department.
The marketing department believes that the best way to enhance the profitability of the firm is to ensure that it spends a lot on product promotion. Product promotion is a very costly venture. At times it may not result in instant profitability to the firm. As a result of this, the finance department may fail to see the importance of spending on product promotion. The finance department may, therefore, allocate the marketing department, a budget that cannot enable it to undertake its duties with expected efficiency.
To eliminate conflict between the management and the shareholders, there should be a clearly defined formula that stipulates how profits should be shared. The shareholders should know how much they should expect, and how much will be invested. To solve the dispute between the marketing department and the finance department, the heads of both units should agree on what the business should focus on in each financial year, and determine the amount that will be needed for each activity.
An example of a measure of learning and growth that could be critical to an organization, but difficult to measure
Learning and growth perspective has various measures. One of the most important measures within an organization is the ability of a firm to create more value for the customers (Niven, 2010). The market is increasingly getting competitive. New firms are introduced to the market, making products to flood the market. It is the responsibility of each department to ensure that customers get more value for their products in the market.
Although this is a clear measure that should be improved within the firm, it is not very easy to quantify the improved value for the customers. A number of factors make it difficult to quantify this value. In the current competitive market, there is a need to ensure that there is the constant improvement of value on products. It is, therefore, a continuous process that cannot easily be quantified.
Another reason is that this process involves value, and not amount. It is difficult to state the value quantitatively. This makes this learning measure difficult to quantify. Despite the difficulty to quantify the process, it is prudent to come up with a metric to help determine how to quantify this measure. The best approach would be to state the percentage increase in the use of the product and the increased level of satisfaction it offers customers compared to the previous state.
The most difficult aspects of simultaneously balancing the four perspectives in the balanced scorecard
The act of balancing the four aspects in a balanced scorecard simultaneously can be very challenging (Silverthorne, 2008). For instance, balancing the Learning and Growth perspective and the financial perspective simultaneously can be a big challenge. On one hand, the management will be trying to balance its finance to meet the needs of various stakeholders, including the shareholders. This would mean that the management will have a tight budget.
On the other hand, the learning and growth perspective will demand that the management embraces the need to subject all employees and other relevant stakeholders to a learning process as a way of improving their performance. This would mean that the management will have to spend more on the employees in a process that will not have an instant proportionate impact on the financial status of the firm. Balancing the two measures may, therefore, be very challenging.
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Greenhalgh, C. (2004). Building a Strategic Balanced Scorecard: Saatchi & Saatchi Complementary Case Study. Business Intelligence Company. Web.
Kaplan, R. (2005). A Balanced Scorecard Approach To Measure Customer Profitability. Working Knowledge. Harvard Business School. Web.
Niven, P. (2010). Financial perspective. EPM Review. Web.
Niven, P. (2010). Learning and Growth perspective. EPM Review. Web.
Silverthorne, S. (2008). Executing Strategy with the Balanced Scorecard. Web.