Balanced Scorecard Using Balanced Scorecards Thesis

Excerpt from Thesis :

CMBS overcomes resistance to change by concentrating on quantifying customer satisfaction by asking for ratings of each aspect of a system installation after it has been installed. This gives each member of the team a high level of ownership in the metrics being measured, and over time they improve as CMBS system integration teams become more attuned to the unmet needs of their customers purchasing systems. In this regard BSC strategies with accountability for performance lead to continual efforts to improve scores on each metric defined as part of both the customers' expectations and the motivation CMBS integration teams have to improve their performance and gain greater financial results as well. In this way CMBS alleviates resistance to change by focusing on how to motivate employees to become active change agents for the good of the metrics measured on behalf of clients.

Defining BSC Perspectives for CMBS

The four perspectives of a BSC including customer, financial, internal business processes and learning and growth (Liedtka, Church, Ray, 2008), their objectives, and a quantified metric are discussed in this section. CMBS is heavily involved in Business Process Management (BPM) on behalf of its customers in conjunction with streamlining customer-facing processes. This latter aspect of their strategy necessitates that the company also integrate to Customer Relationship Management (CRM) systems as well, many of which are 3rd party, legacy or designed and built by the companies using them. As a result, CRM system integration is a critical aspect of the BSC perspectives for CMBS.

Objectives for the Customer Perspective of CMBS' BSC Model

The first objective of CMBS is to provide reliable and scalable integration between Cincom ERP systems and their customers' many CRM systems. To the extent a CRM system can become an integral part of an enterprise workflow is the extent to which customer-facing strategies can be measured and improved over time (Chang, 2007). The second objective is to significantly improve the performance of channel management, quote-to-order and configure-to-order workflows that are embedded in customers' CRM systems yet rely on tight integration to their ERP systems. Empirical studies have shown the greater the level of integration between quote-to-order, configure-to-order and mass customization systems in CRM systems to ERP systems, the higher the level of organizational performance over time (Kim, Suh, Hwang, 2003). This objective seeks to unify the supply chain centric processes the company has on the customer facing side, specifically their quoting systems, with the ERP systems which will need to fulfill the orders taken. The third objective is to define pricing and revenue management benchmarks and KPIs that will give CMBS the ability to measure he profitability by customer and by engagement or installation over time. When these three objectives are taken into account, the one quantified metric that matters most is increasing customers' percentage of orders that are fulfillment with no modifications -- which are in essence the percentage of orders that attain perfect order levels of performance.

Objectives for the Financial Perspective of CMBS' BSC Model

The three objectives for the financial planning perspective of the BSC Model include the development of revenue management guidelines and KPIs for CMBS to measure profitability by engagement, defining lifetime customer value and measuring how annual license revenues of ERP systems quantify this aspect of the CMBS customer base, and measuring the long-term impacts of indexing employee compensation to long-term customer value over time. In terms of quantifying one metric in this area, measuring lifetime profitability by customer is used. This metric includes lifetime customer revenue net of cost, so that a true measure of profitability by customer over their total time of engagement with Cincom is measured.

Objectives for the Internal Business Process Perspective of CMBS' BSC Model

The three critical objectives for Internal Business Process perspective as part of the BSC model include defining best practices for integrating customer-facing processes including quote-to-order, inquiry-to-order and configure-to-order workflows with ERP systems' components most dependent on these workflows for demand signals. This first process objective aims to interlink the customer-facing processes of advanced product configuration and quoting with ERP back-end systems including supply chain management to measure total process efficiency. The second objective is to define the cumulative effects of attaining best practices in perfect order performance relative to the ROI attained with an ERP system over time. Empirical studies suggest that the greater the level of integration at the process level between demand management and customer facing systems to ERP systems, the higher the potential level of ROI which an be attained (Velcu, 2007). The third internal business process objective is to define an empirically sound body of research that quantifies the impact of best practices in distributed order management and channel management, two critically important areas in any ERP system, to long-term financial performance of a firm. These empirically-derived metrics will provide a foundation for analyzing system performance over time and effectively managing SLAs with customers over the long-term. In this area the one most critical quantifiable metric is measuring the percentage of SLAs that are attaining or beating their performance targets as originally committed to customers over time. In conjunction with the best practices analysis of channel management and distributed order management systems, measuring the percentage of SLAs that attain or exceed their committed to levels of performance will also provide project managers at CMBS with critical insights into how best to structure SLAs so they are effective in the future as well.

Objectives for the Learning and Growth Perspective of CMBS' BSC Model

In terms of learning and growth, CMBS thrives on knowledge as it is critical to their overall business model, including staying current with the latest software development techniques and the development of Web Services. The three objectives from a learning and growth perspective as part of the BSC for CMBS center on educating customers about how to get more value of their investments in Cincom enterprise software. The first objective is to create an enterprise-wide knowledge management system that will provide customers with a knowledgebase they can draw from on specific questions regarding how to get CMBS software to manage a given task. This is partially a customer service objective, yet it is critical from a learning standpoint as well. The second objective is to create a more interactive, vide-based set of tutorials on how best to use CMBS' ERP software for managing channel strategies including partner relationship management-based (PRM) strategies over time. PRM strategies are focused on the indirect channels companies use to attain their selling objectives. A third learning and growth objective is the development of a CMBS University which can guide customers on how best to create their own unique applications and tools using the software toolkits provided. The quantifiable measure that is associated with this perspective of the BSC is the development of a measure of the percentage of customers who attain certification of the Socrates Development Environment and create a specific Web Service to automate their ERP processes more efficiently and cost-effectively as a result.

Defining Methodologies for CMBS BSC Metrics

Approaches and methodologies for each of the four BSC metrics are provided below. The use of CMBS analytics typically sold to customers is also used internally to derive these measures of performance as well.

Percentage of Perfect Orders Delivered

Using the project schedules by customer, CMBS can determine the percentage of modules that were initially installed correctly and integrated to the customers' requirements. This methodology also can index in their levels of customer satisfaction as well and provide a moving average of perfect order performance relative to customer satisfaction over time.

Lifetime customer profitability as a percentage of total revenue

Too often companies only measure lifetime revenue of their customers, not profitability. Using a series of financial reporting applications the lifetime customer profitability of each CMBS customer will be defined and then analyzed relative to perfect order performance and customer satisfaction. If causality exists across these factors then a model will be created that quantifies the contribution of each of these factors. The use of this methodology, if successful, will also lead to the development of an entirely new generation of financial analytics applications for CMBS as well. It has been shown that when companies create applications to better manage themselves they also lead to innovations for the company as well (Lee, Chen, Tong, 2008).

Percentage of Service Level Agreements (SLAs) that meet or exceed performance commitments

The SLAs that CMBS has with its customers is even more important than a contract in that it provides for remedies of a lack of performance on an ongoing basis. This translates into legal liabilities in ways unforeseen when an SLA is initially created. For CMBS to mitigate the level of financial and legal risk it is critical to know which SLAs they are…

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