Kaplan and Norton's Balanced Scorecard and the EFQM Excellence Model (Essay Sample)

Perfomance Models and Application to DEWA
Name:
Institution:
Affiliation:
Kaplan and Norton’s Balanced Scorecard and the EFQM Excellence Model
The Balanced Scorecard is also known as BSC. Together with the EFQM Business Excellence Model (BEM), they are used in the measurement or organizational perfomance. This leads to highlighting of any shortfalls that the organization can then improve so that overall perfomance is also improved. The shortfalls are highlighted in performance of management teams and other organizational parameters (Mathews, 2015). The two models have been adopted widely over the years and they mostly address similar issues. They have both been supported by various organizations as excellent models and some have adopted a combination of both.
Comparison of the Two Models
The excellence model was developed by the European Foundation for Quality Management and its purpose is to help management to adopt and apply the principles of Total Quality Management and to bring improvement to the competitiveness of European Industries. The foundation also came up with the European Quality Award which is a framework used in evaluating performance of the excellence model. The excellence model has been designed to help an organization achieve business excellence with continous improvement strategy in management and processes within the organization. The aim is to adopt best practice as the organization continues to improve gradually (Andjelkovic & Dahlgaard, 2013). It enables an organization to calculate scores against certain criteria, which are then used for internal and external benchmarking activities. The results that the organization gets from benchmarking are meant to lead to more focus on improving performance in processes so that business excellence is achieved.
The Balanced Scorecard came about in the 1990s when a research study that was measuring perfomance in future organizations was done. This study had been put in place due to dissatisfaction by many organizations on the use of only financial factors as a measure of organizational perfomance. There was therefore an identification of the need for an improved system that would lead to an understanding of actual organizational performance against the strategic goals that had been set. This led to the development of The Balanced Scorecard. It is a framework which displays the strategy of an organization as a set of goals which can be measured from the view of investors, external stakeholders and from within the organization. The organization therefore sets perfomance targets (Mathews, 2015). This helps management to focus on how goals will be achieved to ensure that targets are either met or surpassed. When this is done, the organization is able to achieve its overall strategic goals as all departments work towards meeting the set targets.
The two performance models have different sets of application in a company. The excellence model is used to assist in ensuring that there is continous improvement in the processes that occur within the organization. It seeks to ensure that in every department, the organization does not stick to one way of doing things but continuously seeks to improve so that they can be more efficient. The excellence model also ensures that the organisation does external benchmarking. This ensures that the organization looks at the performance levels of other organizations and learns from them. They then draw from best practice and apply this to improve processes within the company (Perramon et al, 2016). Business planning and other review practices are done as per best practice derived from benchmarking processes. Internal benchmarking is also done whereby departments learn from one another. This helps the company to improve its overall processes.
The balanced scorecard on the other hand is mostly applied when seeking to ensure that the organization’s management is focused on achieving strategic objectives. The management has to align the whole organization into focusing on the main strategy of the company. It also ensures that there is proper communication regarding strategic priorities and the performance of the organization. All employees have to align performance to overall organizational strategy. Investment activities that lead to achievement of the strategic goals are highly prioritized. There is also continous learning on strategy and how cause and effect relationships can affect the organization (Mathews, 2015). The main aim of the scorecard is therefore to ensure that all organizational processes and employees perform activities that will eventually lead to the organization achieving the set objectives.
The two perfomance documents have different outputs once performance has been measured. The excellence model comes up with an assessment of the quality of a company’s processes in comparison with previous assessments and the competition. This assists in continous quality improvement processes for the organization (Andjelkovic & Dahlgaard, 2013). Another output is the identification of areas that have performed poorly as compared to previous years and also when compared to competitors. The organization will be able to look at the underlying factors that lead to this poor performance and come up with the appropriate mitigating factors.
The balanced scorecard helps the organization come up with a clearly defined vision and strategy statement. Based on this, it is able to come up with the appropriate perfomance goals for each of its departments. Another output is the set of measurable objectives, which are spread over financials, internal business processes, customer service plus learning and growth. Targets are set for each of these areas and each employee is expected to perform on the same. A set of priorities, which are linked to the strategic objectives, are also put in place and this highly depends on previous performance (Perramon et al, 2016). The organization looks at the areas where performance was poor and sets these as a priority.
The two perfomance models work in different ways. The excellence model looks at the relative organizational perfomance in areas of enabled activities and results, which can be observed. It uses the five enabling criteria, which are leadership, people, policy & strategy, partnerships and resources and processes. It also applies the four results criteria, which are performance, customers, people and society. The organization’s present perfomance is evaluated using these nine criteria and a score is given. A total of 32 standard statements are used to evaluate the perfomance of the organization. Scores are then attached to these statements depending on whether it is an internal assessment or outside assessors are used. A universal scoring and weighting system is used such that all types of companies are treated the same despite their size or industry (Mathews, 2015). Due to this, an organization is able to benchmark its scores against that of other companies or against its previous scores. If an organization introduces other quality management systems, the scores tend to improve. The model however does not exactly specify how low scores can be made better. The results are given out in the form of a report and circulated annually.
The balanced scorecard looks at building the key concepts of activities done by management. The four main concepts looked at are causality, learning, communication and team work. Causality is the belief that the organization’s leaders will be able to identify processes that will lead to the strategic outcomes being achieved. Learning is a belief that when the managers are given the relevant feedback they ways constantly identify ways of improving perfomance. Team working is the belief that the organization relies on activities done by both teams and individuals. Communication is the final concept and it is a belief that to achieve the high levels of performance, there have to be clear communication goals and priorities set by the organization. A balanced scorecard sets measures of performance across four perspectives, which are internal business, financials, customer service and learning and development. The internal business process sets measures against an organization’s internal business processes. Customer service looks at customer satisfaction and sets measures to areas that ...