The Balanced Scorecard as a strategic management tool in technology organizations

Balanced Scorecard

Integration - Causal Chains and Strategy-case

The Balanced Scorecard in Technology Organizations

The Balanced Scorecard (BSC) is a tactical performance management approach, which allows organizations to manage and determine the delivery of their strategy. The objective of the BSC was to show that the assessment of the organization should not be restricted to traditional evaluation methods, but supplement the organization with measures about customer satisfaction, internal process, innovation, and overall strategic management. In addition, the BSC is central to four perspectives, which include the financial perspective, the customer perspective, the internal process perspective, and the learning and growth perspective. Studies state that organizations that employ the Balanced Scorecard approach perform better compared to organizations without formal approaches to strategic performance management (Grembergen, Saull and De Haes, 2006).

Currently, the information technology industry has achieved the privilege to apply broad sophisticated management tools. Most of these industries had a big payroll, worked with small margins, and utilized substantial capital. In addition, the role of IT has evolved from the concept of providing hardware and software to consumers (Grembergen et. al., 2006). This has changed to activities into a function that supports strategic merits by analyzing, manipulating, and supplying crucial information, which results to enhanced organizational performance. Owing to this evolution, there is a need for adoption of new attitudes towards IT industries and their roles towards the successful implementation and support of management decisions, which focus on performance improvements and realization of efficiencies.

On the other hand, technology-based organizations experience challenges because of the shrinking product cycles, recruiting, retaining, and rewarding technology talents, communicating critical product development decisions, and tracking customer demands. The challenges result to disagreements and misalignment, but by adopting strategies, it is possible that the technology firms can eliminate the challenges. This paper will provide an analysis concerning the balanced scorecard, and the subsequent application in the organization.

Financial Perspective

Product development in technological companies is important and should be central to the returns based on product development expenses. Therefore, the decisions made by the firm on product development should be consistent to enhance prosperity. In addition, the organization should conduct evaluations on Return on Investment (ROI) and application on decision-making should occur throughout the organization. This is important because it will help when the firm wants to communicate the product investment decisions. The BSC provides a scalable financial metric, which can guide the company's decision-making on what to invest, and consistent use of the metric is a strategic tool that will help technological companies to maximize profits, owing to successful innovation and product development (Rohm and Malinowski, 2010).

Customer Perspective

Technological organizations should aim at strengthening the customer interactions. This is because customers tend to rate suppliers based on the interactions with the organizations. It is of strategic significance that organizations should prioritize customer interaction. This should be evident and reflected in the personnel who face customers, and those in support roles. In addition, the organizations should note that customers serve as the guide to establish the demands, and it is important to meet their expectations. Customers expect continuous progress on technological products and services. Therefore, providers who improve and refresh their product offerings will manage to be leaders in the technological industry. The BSC provides for a client engagement that will result to a line of discussion, which will work well for the organization.

Internal Business Process Perspective

The technological sector is dynamic; therefore, it is important for assessing, and re-assessing of the market demand. In addition, the technology companies cannot rely on a single market evaluation and this assessment should be continuous. Most importantly, when the organization launches a new product, the sales forecast play a role in establishing whether the objectives of the product are achievable, or if the organization should come up with corrective measures (Rohm and Malinowski, 2010). In addition, for technological organization to remain the leader in the technological industry, the organization can maintain its strength in technologies that provide for new capabilities. Therefore, the organizations can improve the management of the phases of their products, and the results from each phase can drive the decision as to whether the project should progress or not. Nevertheless, un-established opportunities should not take from innovation and product development resources vital for the product development success.

Organizational Capacity Perspective

Technological organizations that identify enabling technologies have the capacity to make a company lead in the technology sector. Moreover, it is of strategic essence to identify and apply technologies that will enable approaches and workflows that will work in the market setting. However, organizations manage costs and risks of venturing and enabling the new technologies. The BSC provides for recruitment and retaining, which is strategic in the identification of employees who will help in moving the organization forward. The scorecard offers a strategic objective, which can improve the management of projects, and improve cross-discipline teamwork. Increasing the project-management skill levels will help the organization to define goals, priorities, and breakdown steps and activities to achieve the objectives. In addition, the management approach has the capacity to become the organization's standard practice for collaboration and communication. Nevertheless, developing collaborative teams throughout the organization and management layers gives the organization a strategic advantage (Rohm and Malinowski, 2010).

Possible Concerns of the IT Organization

Stakeholder

Key Question

IT organization

Are we developing the professional competencies required for successful service delivery?

Are we creating a positive workplace environment?

Do we effectively measure, reward the individual, and team performance?

Do we capture organizational knowledge to provide a continuous improvement on performance?

Can we attract or retain the talent required to support the business?

Applying BSC in Technology Organization

The objectives after applying the BSC in the technological organization will be to align IT plans with business objectives, align employee efforts toward IT objectives, develop measures for assessing the effectiveness of the organization, sustain improved IT performance, and achieve balanced outcomes across stakeholder groups. Most importantly, developing an IT BSC requires a business strategy and the new information services. Nevertheless, when applying the BSC in the technology organization, the organization transforms into a strategic one. The activities that occur in the organization are central to some strategic force (Grembergen et. al., 2006).

Initially, the Balanced Scorecard functioned on an operational level, but this was not permanent, and the BSC had the capacity to go beyond the operational IT BSC to measure the value of IT on a business level. Most importantly, the Balanced Scorecard provides a balanced view of the value of IT in relation to the IT business. It helps the organization to determine its position in the market at a given time. Notably, the organization can create a cascade of the BSC to develop a connection between the scorecards at different levels of the organization.

The scorecards can measure the operational services (service desk), governance services (career center), and developmental services (application development). The measures from these levels are aggregated in the strategic balanced scorecard. The results are evaluated against the various business objectives, which will help to measure the value delivered by IT against the business objectives (Grembergen et. al., 2006). In addition, it is possible to measure the performance annually. The strategic BSC is reviewed by management and results fed to into the next annual planning cycle. Notably, this planning cycle defines the business needs and what the IT should do to achieve the needs.

Maturity levels for the IT Balanced Scorecard

Level 1

In this level, the organization recognizes the need for a measurement system for its information technology department.

Level 2

The management recognizes the concept of IT Balanced Scorecard and communicates its goal to define proper measures.

Level 3

The management communicates the IT BSC via an official training, and the scorecard linked to the organizational structure

Level 4

The management integrates the BSC into the strategic and operational planning and review systems of the business and IT

Level 5

The BSC is operating and aligned with the business strategic management framework, there is constant reviewing, updating and improved of the scorecard