Balanced Scorecard is concept that is used in performance management as a tool to automatically manage performance and keeps track of the appropriateness of the execution of the tasks and activities by the workforce depending on their capacities and also helps in monitoring the consequences that arise from these activities and decisions made (Hubbard, 2007). As a human performance dynamic tool of managing performance, balanced scorecard is universally acclaimed through its use in annual surveys and has quickly gained popularity in English speaking nations of the West as well as some Scandinavian countries where it began being used from the early 1990s (Papalexandris, Ioannou, & Prastacos, 2004).
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This paper is a study of the various perspectives that are presented in a balanced scorecard for companies and determine the effectiveness in their capacity to help organizations improve and better their performances. To realize this, Wal-Mart Company will be used as a case study company to see how balanced scorecard can be used for this purpose mentioned afore.
The main characteristic of a balanced scorecard is the way it presents a mixture of non-financial and also financial measures that are individually compared to some set target value that is entrenched within a concise report. “This report by any standard does not replace the traditional operational or financial reports that are issued by companies periodically but it is meant to be a succinct summary of what is only relevant for the group that it is written for” (Papalexandris, Ioannou, & Prastacos, 2004, p.28).
Wal-Mart Stores Inc.
For a better discussion of the balanced scorecard and how it works, the case of Wal-Mart is used being a successful company that has been in operation for long. Wal-Mart Stores Inc., is perhaps the greatest and most influential single retailer in the world. What makes it more bizarre and overt is the innumerable controversies it has found itself entangled in as regards lawsuits filed against it, media frenzy against some of its policies, government agencies questioning some of its polices among other controversies (Vance & Scott, 1994).
A company that began out of the novelty of two brothers (Sam Walton and his brother) in 1945 when they opened Franchise Ben Franklin variety stores, the company shot to fame and business prominence almost instantly. Its records speak volumes for the company’s dominance and business acumen (Sandra & Scott, 1994).
The company currently operates over 4 150 retail facilities globally being the dominant retailer in Canada, the UK and Mexico (Sandra & Scott, 1994). The following are the things that the company deals in:
- Family apparel
- Beauty and health aids
- Household needs
- Lawn and garden
- Shoes and jewelry
It also operates successful pharmaceutical business, photo processing centers and tire and lube express business. The founders of the company detailed three strategy goals on which the company operates till today and these are; “ provide excellent service to the consumer, respect individual working within the company and its customers and always strive for excellence” (Sandra & Scott, 1994, p. 67). Its corporate management strategy is to sell the highest quality product and brand names at the lowest cost possible. It is this strategy to maintain the lowest cost of brand names and products that has suscepted the company to unending criticism and lawsuits as it employs measures to realize the strategies that are at times controversial (Vance & Scott, 1994).
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Financial Perspective of Wal-Mart Stores Inc
With its over 4 150 retail outlets globally, Wal-Mart Stores Inc is an enormous economic hub attracting millions of dollars as revenues annually. For instance in the year ending 2009, Wal-Mart Stores Inc recorded revenues of $ 3 158.2 million which was a 32 percent decrease in comparison to its 2008 revenue collections. It registered a net profit of $ 297.8 million in the financial year ending 2008 as compared to a $356 million net profit in the preceding financial year.
The decline in revenues and operational losses recorded were due to higher write-offs, higher charges in inventory impairments and joint revenue impairment (Vance & Scott, 1994). This shows that the company has a strong financial basis which is a strength that enables it to marshal command in its niche market. This strength financially is reflected in the way the company pays its employees which is relatively higher than its competitors offer their employees (Hubbard, 2007).
To help the company expand and assert itself in the market, Wal-Mart Stores Inc. initiated an acquisition and franchising strategy soon after it established itself in the market in and till now it has become a family business that has diversified its business to include many other business partnerships and subsidiaries making it have a formidable corporate governance structure (Niven, 2006). This corporate governance helps to maintain the relationship among stakeholders (who are so many) at its best.
These stakeholders include the company’s shareholders, board of directors, the management, employees, creditors, customers, regulators, suppliers and the society in which the firm operates (Papalexandris, Ioannou, & Prastacos, 2004). The purpose that these subsidiaries serve is to institute for legal liabilities and as conveniences for Wal-Mart Stores Inc. The firm being a family and friends dominated business; it is at a big risk and therefore requires protection that is got through the subsidiaries. Due of Toll Bros’ corporate governance system that strongly emphasizes on shareholders’ welfare and economic efficiency, these subsidiaries were instituted (even though the company could be self-sufficient and protected) to make it realize greater market prominence and economic sustainability of its business.
The business model that is used by Wal-Mart Stores Inc. makes it predominantly advantageous in its market and gives it better integration in its niche market. The model that is in operation is Purchasing/cost effectiveness with subsidiaries which is designed in a way that incorporates concepts from other models such as building commences with contracts in place.
The company purchases corporations of interest to it and franchises with those whose business strategies and models conform to its own strategies and ones that are thought to be of economic importance. The subsidiaries indicated above are incorporated in the firm’s corporate governance to help the company remain afloat in the market and have comparative advantage over its principal competitors (Niven, 2006).
This culture is well captured in the mission, vision and strategy of the company that informs all its operations.
“To maintain our concise dedication to the manufacturing and technology where we continue to refine the quality of our products and expand our capabilities to increase our efficiency thereby elevating higher level of customer service provision we offer to heighten the standard of excellence that forms our corporate culture” (Niven, 2006, p. 43).
To be a world-wide corporation offering the best services and products for our customers at the least cost with the most worth for their money
The strategy statement is informed by the slogan ‘Provide excellent service to the consumer, Respect individual working within the company and its customers and always strive for excellence’.
As a summary of the balanced scorecard used for gauging the performance of the company, the following table giving suggestive objectives that can be used to further improve financial perspectives of the company is given.
|Use extensive distribution channels to ease the congestion that is seen in some of its stores||Increase the number of distributors and retail stores around the world||Have at least 100 stores being developed annually within the US market and at least 50 globally||Invest more in expansion|
|Increase profitability by investing in proper human resource management perspectives that encourage better performance.||Invest in human resource management processes that encourage good performance by employees||Make the HR department in all stores authentic and able to address employee issues effectively to make them feel appreciated||Employ more human resource managers which will expand the HR departments to make access to them easier by all employees.|
|Initiate A Vibrant CSR Initiative That Addresses Issues Of The Society In Which The Company Thrives In. The effect of this will be the customers will be more loyal to the company thereby bringing profitability.||Improve accessibility of the resources from the company to the community where it thrives||Have an annual celebration that does community-based projects that are helpful to the community||Conduct at least 1000 major scholarship programs for less fortunate students annually|
From the foregoing discussion, it can be seen that balanced scorecard is a very convenient way of gauging performance of institutions and organizations as it captures all the key areas of the company’s management and performance. It also gives an opportunity for recommendations that can be used to improve the overall performance.
Hubbard, D. (2007). How to Measure Anything: Finding the Value of Intangibles in Business. NY: John Wiley & Sons.
Niven, P. (2006). Balanced Scorecard: Step-by-step. Maximizing Performance and Maintaining Results. Long Range Planning, 37(5), 47-62.
Papalexandris, A. Ioannou, G. & Prastacos, G. (2004). Implementing the Balanced Scorecard in Greece: A Software Firm’s Experience. Long Range Planning, 37(4), 347-362.
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Vance, S, & Scott, R. (1994). Wal-Mart: A History of Sam Walton’s Retail Phenomenon. New York. Twayne Publishing.
Appendix: Balanced Scorecard for Wal-Mart