Balanced Score Card
The contemporary business environment is becoming more complex and competitive as business organizations advance in their operation strategies making it difficult for the firms that are internally weak or resource incapacitated to be at risk. To achieve a competitive advantage in the industry and market, a firm should have elaborate corporate strategies that are built around a comprehensive and sound balanced score card. A balanced scorer card should be able to unite and address all pillars in the organization including financial, learning and growth, customers and business processes. The balance score card may be defined in simple terms as system normally used in strategic planning and management to ensure high performance in the organization. It is built around the vision, mission and strategies of the organization, internal and external communication as well as performance evaluation and monitoring an organization. According to Rohm (2008) a balance score card is a management system made up of people, processes, strategies and technology designed to enhance focus on the achievement of vision The balanced score card is an effective performance measurement tool that enhances effectiveness of strategic management and offers a platform for strategic planning. Since the success of an organization depends on the results of a balanced score card, this paper will discuss the development of a balanced score card in a hair Parlor and how it can be effectively utilized.
An effectively designed balanced score card should focus on all four perspectives namely financial, customer, business processes and learning and growth. A hair parlor is a small scale business enterprise in the service industry that needs utilization of a balanced score card to be successful amid the intense competition in the industry. The vision of the hair parlor is to be the preferred hair service provider within and beyond the territory of origin while the mission is provision of quality and customer focused hair care services with efficiency in processes and innovative strategies. In pursuit of this vision and mission, the hair parlor has strength in financials, well trained staff, sound internal control systems and modern technology in processes. However, it lacks depth in human resource policies as evidenced by a relatively high turn over. Moreover, the future of the firm looks bright with the rapid growth of the industry and ever increasing demand in this sector. Technological advancement has influenced the rapid growth of the market while globalization has provided opportunity for diversification. However, there is threat of increased competition as new firms continue entering the market due to the attractive profits that can be generated. This is despite the other external factors such as economic, social and regulation (taxation is ten ding to backtrack the business).
The financial perspective is one of the important elements of the balanced score card. The shareholders have invested in the business expecting good returns or value for their investment. In this regard, the hair parlor’s one key strategic objective will be to increase profits. Given the capital strength, and competent staff, the profits are expected to grow and will be measured by a percentage of the return on assets. These profits are expected to grow at a rate of at least 10% in the current financial year while on acquisition of new more advanced equipments next year there will be more efficiency and therefore profits will be expected to grow at a rate of between 15-20%. Another strategy will be to increase revenues and reduce costs. The firm intends to address the human resource problems in order to increase productivity which, coupled with expected new advanced and efficient equipments, will increase revenues by at least 20% and reduce the costs at a rate of about 10% for the next three years. Lastly, the firm intends to increase market share to about 40% in the region and 10% outside the region (by opening new units outside the region). Despite the high competition, investment in new technology will enhance the firm to be more prices competitive in the future.
Customer perspective component in a balanced score card helps to develop a corporate image that the firm wishes to portray to the customers (Rohm and Halbach, 2005). Hair parlor should increase customer satisfaction after realization that customer loyalty will only be realized when they derive value on the products offered by the firm in terms of quality, accessibility, price and other product specifications. The achievement of this will be enhanced when the measure is based on advocacy level and feedback from the customers themselves. Customer survey and statistical analysis tools will be effective in understanding the response of the customers on the services provided. Satisfaction of customers will attract new customers on board as per the firm’s target of about 10% rise in customer base in the next lone year. Customer retention will also be influenced by quality of service and good customer relationship as well as customer friendly price that beats other prices in the market. The target will be to have 0% customer exit. A customer database will be established to monitor the trend of customer behavior towards the firm’s services.
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