A balanced scorecard is a performance monitoring tool, consisting of design methods (financial and non-financial measures) that keep track of the organization’s strategy and observe the consequences of an action in relation to the company’s vision. The scorecard is not to be used as a strategic tool on its own, rather is co-existent with already established strategic planning systems. The Balanced Scorecard framework creates an equilibrium between external and internal measures, financial and non-financial measures and performance outcomes and subsequent tools for future outcomes by clearly defining perspectives that govern its success (Noreklit 2000). The interdependence of these factors creates a detailed overview of strategic objectives of a firm, thus informed decisions can be made regarding the institution’s financial future.
During the industrial age, financial goals such as profit and assets were the sole driver of organizations without much regard to non-financial measures. Cutting down on expenses without consideration of the implications on their asset values and profit margins was a norm (Rohm et al. 2013). Incorporation of the two factors by Robert Kaplan and David Norton brought a different perspective on an organization’s management strategy. The Balanced Scorecard comprises of four main perspectives, namely:
Financial Perspective: Contains the organization’s financial measures such as cash flow, return on investments and financial returns.
Business Process Perspective: Refers to the organization’s daily business aspects such as automation in processes, production, fulfillment of orders and business procurement.
Customer Perspective: Entails customer service management, customer satisfaction and retention of customers.
Growth and Learning Perspective: Determines employee satisfaction, training, skills, flexibility and ease of communication of workers.
An airline company can benefit from a Balance Scorecard by employing the above perspectives, relevant to their field. Having clearly defined objectives that clarify strategy, communication of the strategy, setting targets that are achievable and analyzing strategic feedback (Kaplan & Norton 2008) is the methodology that the airline needs to incorporate to avoid sacrificing any of the perspectives.
Financial Perspective
The airline company can set an objective of growing its revenue, without affecting productivity and customer satisfaction. The company will employ plane ticket revenue as the performance measure, and by setting its target as increasing the ticket sales price by a given percentage, it will, in turn, lead to it flying to new destinations, or having more flights in a given time, to a certain destination that has a high demand.
The company can also have expense reduction as its goal. The parameter that can let it achieve this is long term leasing of aircraft to other airlines. The achievable target is leasing out aircraft 75% of aircraft that have a low-income generating bracket. The company can initiate contract-based leasing advertisements to get in touch with potential clients.
Customer Perspective
The airline company can guarantee lower ticket prices, for the same comfort and performance and by setting market survey as the control measure, this can be achieved. The target should be based on approval rating of approximately 95%. A basic initiative that this can be implemented is setting up customer reward and promotion schemes that target loyal and new customers.
Using customer ranking as a performance measure, the company can set out to improve its brand perception. The objective is to be ranked as the best airline company that gives value for money, and thus initiatives such as aggressive marketing techniques can be put in place.
Internal Business Perspective
The corporation set its objective to improve on management process and boosting its restructuring of administration systems. Accountable administrative systems are the performance measurement, thus setting a target of a performance review every week may help achieve this. Detailed reports on transactions and general administrative liability are good ways of achieving this.
The firm may set its plan as efficient on-ground operations. By setting on-ground times as the performance factor, and the goal is 30 minutes execution of this plan can be achieved. Measures put in place may include tweaking after flight operations and ground staff training.
Growth and Learning Perspective
Aiming to improve on employee production and loyalty is the desired strategic objective Employee feedback and content is a performance measure set to achieve a target of improved worker efficiency. Taking action by rewarding exemplary employees, maintain a good human resource network and improving working standards are measures that can be taken by the corporation to make sure this goal is achieved.
The firm can also set an objective to monitor and regulate demand necessary for accounting new destinations travel. The control measure is data collected from ratio passengers visiting, to planes available plying the route. The target is to add one new route every 3 months and by taking an initiative such as leasing planes, the corporation can achieve its intended targets.
For an airline corporation to succeed, it needs to take into account the Balanced Scorecard perspectives and adoption of common goal management systems, defined by results and its ability to adapt to the changes necessary to ensure profitability (Lawrie et al. 2005). Skimping on one aspect can deter the company, both financially and non-financially.
References
Kaplan, R.S. and Norton, D.P 2008. The execution premium: Linking strategy to operations for competitive advantage. Harvard Business Press.
Lawrie, Gavin JG, Kalff, D & Andersen, H 2005. "Balanced Scorecard and Results- Based Management - Convergent Performance Management Systems".
Rohm, H, Wilsey, D, Perry, G & Montgomery, D 2013. The Institute Way, The Institute Press.
Norreklit, H 2000. The balance on the balanced scorecard a critical analysis of some of its assumptions. Management accounting research, 11(1), pp.65-88.
