Lecture 8 + 9 - Strategy + MCS + Performance measurement + Practice perspective + BSC in use Flashcards
(!) Describe the balanced scorecard / BSC
General:
- Performance management system: Not MCS
- Overview of measures: Based on strategy
- Show relationship between strategi & MCS
- Balance short & long term perspective: Financial & Non-financial
- Should consider weight & amount of measures
- Provide opportunity to develop & communicate strategy
- Motivates toward strategic goal
- Often top down
- Strategic map communicate improvements
- (Performance depend on usage: Influenced by size & stage in PLC & market)
- (Powerful popular tool: Reputation an advantage)
Perspectives:
- Financial
- Customers
- Internal processes
- Learning: Employees & organization
Critique:
- Implementation, not idea problem: Yet common PM problem
- Questionable causal links: Complex irl, many usages & often short-lived
- Lack informal control: Ref. LOC
- Lack organizational context: Later tailoring to situation & context discussed
- Favourism & subjective weights: Risk of error & politics
- Valid & reliable measures require data analysis
(!) Describe the characteristics of an effective management control device
General:
- Eg. BSC
Strategic alignment:
- Measures causally linked to valued outcomes
- Effective, accurate, objective & verifiable measures: Increase communication
- (Rich yet sparse set of critical measures linked to strategy)
Promote positive motivation:
- Easier if strategic alignment
- Controllable & influenceable measures
- Challenging & attainable benchmarks
- Measures related to meaningful rewards
(.) Describe other areas for the relationship between strategy & MCS
Capital investment & strategic investment projects:
Strategic misalignment reasons:
- 1. Asymmetric info
- 2. Lack of understandability on investment implication
- 3. Lack of goal congruence
Strategic misalignment apperances:
- 1. Poor strategic fit
- 2. Low MCS responsiveness
- 3. Inefficient MCS
- 4. Inefficient capital use
(Interactive control & strategic change:)
- Often senior managers working in strategic uncertainty
- Focus on dialogue on budgets
- Low innovating firm get more innovation if interactive control
- High innovating firm get less innovation if interactive control
(!) Describe strategic data analysis in general, benefits & suggestions
General:
- Analyze & verify strategy, business model & linkages
- Identify trigger factors for strategic change
- Highlight most profitable activities & investments: Eg. NPV
- Rarely used: Yet more with BI & big data
- (Critical component of strategic control system)
Benefits:
- Improve resource allocation & target setting
- Enhance communication of strategic assumptions
- Help select performance indicators, measures & strategic value drivers: Eg. BSC measures
Suggestions:
- Less generic performance measures
- Ongoing analysis
(!) Describe strategic management & control
General:
- Measures & their relations as hypothesis to be tested
- Used for decision making & learning
- Require detailed data
Roles of classical controllership function:
- Attention direction
- Scorekeeping
- Problem solving
Roles from literature:
- Communicate strategic direction & priorities
- Determine if strategy is implemented as planned & results are those intended
- Provide info for learning, identify areas for improvement & adapt strategy to emergent conditions
(!!) Describe the barriers to strategic data analysis
Technical barriers:
Inadequate measures:
- Non-financial often lack standardization
- Quantifying qualitative result is major problem
- Risks of error & bias:
— Subjectivity
— Favourism
— Easy > Best measures
— Ignore unproven measures: Lack of trust
— Lack statistical reliability: Non-financial or small response number
IS problems:
- Lack centralized database for analysis
Data Inconsistencies:
- Difference across BU: Aspects, measurement & timing
- Easier with BI & big data
- Make analysis, comparing & assessing progress hard
_____________
Organizational barriers:
Lack info sharing:
- Fear of reduced power or personal position
- Require culture for sharing
- Prevent full picture & learning
- Potential objections: Others wont understand data. Too confidential
Uncoordinated analyses:
- Each function plan & focus on own analysis
Fear of results:
- Fear of looking bad in new system
- Fear of being proved wrong
Organizational beliefs:
- Risk of resistance if strong: Ref. Cognitive school
- Require ongoing analysis & evaluation
- Intuition & past experience maybe no longer valid
(!!) Describe practice theory
General:
Ref. Constructive view on BSC
- Focus on day-to-day use of MCS
- Gap between theory & practice: Reality more complex
- Usage < How it is used: First is contingency view
- Investigate response & ignorance
- Only apparent through experience
- Behavioral focus: People as strategy makers, not organization
- Top-down can foster resistance if people feel unimportant
- Take a step back in understanding MCS tool
- Interviews often best
- Across levels
- Importance of context & activities
- Ref. BSC as boundary object: Problem define usage, so tailor MCS
- Not just grass-root strategy
Relation to BSC & strategy:
- Study MA in the specific context: Adjust to firm
- Include MA in strategy formulation: Not just implementation
- Put more relevance in MA & use it to reframe strategic issues
- Many BSC usages
Difference to contingency theory:
- Fewer, simpler & narrower aspects: IRL many IV at same time
- Less abstract: IRL many IV simultaneously
- Acknowledge limited knowledge
- Often limited to survey studies
- Dont impose generic best way
- Dont impose generalizability: Eg. Prospector & Defender
- Dont assume clear categorization: Eg. Complete stability
- Understand MCS broader
Advantages:
- Help understanding MCS in practice
- Help TM understand other levels
- Increase users of MCS
- Help understand how MCS support creation of strategy
- Increase understanding of business model, customers & key strategic drivers
- Show potential for management control
(.) Describe strategic control systems in general
Key goals:
- Communicate strategic direction & priorities
- Develop mechanism determining if strategy achieve objectives: Planned implementation & intended strategies
- Provide info to modify actions: Goal achievement, learning, performance & adaption to emergent conditions
Requirements:
- Determine primary objectives of system
- Allocate resources to achieve objectives
- Develop formal & informal control systems to guide & evaluate routines & practices for strategic goals
- Establish mechanism to promote ongoing analysis of strategic succes & learning: Feedback loop, double loop learning & strategic data analysis
(!!) Describe the constructivist view on the balanced scorecard
General:
- BSC as open concept
- Many constructions, innovations & translations
- Usage different than original theory
- Adjustments common for MC practices: Explain SAP-problem
- Not contingency perspective: Heterogeneity > “Do this”
- Not strategy as black box: Adapt to local conditions
- Flexible: Relate to firm problems
- Highlight social construction: People part of creation & enacting
___________
BSC as boundary object:
Locally adaptable:
- Adapt to local needs & situations
Robust:
- Still common identity
- Financial & nonfinancial measures
- Leading & lagging indicators
- Organized by perspectives
- Relate to strategy implementation
___________
BSC as functional:
General:
- Problems –> solutions
- (Ref. Cases)
Problems:
- Pressure to act
- Engage the future
- Strong element of implementation: Porters = weak element
Solutions:
- No universal solution
(.) Describe the case-examples of BSC usage
Cross-functional integration:
General:
- Measures to link organizational entities
- Attempt to develop measures between processes
Problems:
- Corridor thinking
- Suboptimization
Scorecard characteristics:
- Functional processes
- Synchronization
- Success factors defined by functional units
___________
Planning:
General:
- Make individuals share ambitions to create coherence between them to develop visibility into goals & objectives
Problems:
- Creative culture
- Slack
Scorecard characteristics:
- Individual labour processes
- Mini scorecards
- Many measures
___________
Internal benchmarking:
General:
- Measures used for comparing processes
Problems:
- Growth
- Heterogeneity
Scorecard characteristics:
- Key processes
- Standardization
- Divisional comparisons
___________
Reengineering:
General
- Measures used to show effect of new, transformed process
Problems:
- Poor performance
- Decoupled processes
Scorecard characteristics:
- Lean processes
- Communication
(!) Describe the translation of the BSC
Outside-in perspective:
- Traditionally
- Pre-made BSC
Inside-out perspective:
- Translated
- Strong internal focus: Organizational problems
- Not prescriptive: How it IS used > How to use
- Still see value in the robust, pre-made part
Benefits:
- Problems in firm often more important than market objects
- Make BSC always usable: Kaplan & Norton. Yet discussable
(.) Categorize reviewed work
Reliance on accounting performance measures (RAPM):
- Priority if accounting performance measures
- Budgets reduced in use
- Later more non-financial measures
- (How accounting info supply to process)
Environmental uncertainty & hostility:
- Difficult dealing with multiple contingencies with conflicting recommendations
- Uncertainty as subjective measure: Perceived by individuals
- Uncertainty handled by flexibility
- Hostility handled by accounting controls
- (Hostility related to intense competition)
Strategy:
- Prospector/defender
- Generic strategies
- Build, hold, harvest
- Research on the impact of strategy on MCS is fragmented: Difficult to find guidance & measuring
Culture:
- Important control mechanism despite difficult to generalize
- Mostly national culture that is investigated
- PMS may work less well in Japan
- Hofstede
Effectiveness:
- Profitability often a measure, but have more factors than MCS design & use
- Often profit or ROI
MCS
- Systems or packages
