Application of Balanced Scorecard Technique in AT & T Incorporation

Abstract
The balanced scorecard is a contemporary management technique that helps
management teams to utilize both financial and non-financial measures in
evaluating performance of their organizations. The paper addressed the
application of the balanced scorecard in AT & T Incorporation, which is
a multinational company. The balanced scorecard was selected on the
basis of its capacity to translate strategic plans and strategic
objectives into meaningful strategic initiatives. Users of this
technique utilize four perspectives, which include financial, internal
processes, customer, and learning and growth perspectives, but with a
major focus on financial metrics. The implementation process involves
formulation of corporate vision, strategic objectives, SWOT analysis,
building the strategic map, and identification of strategic objectives.
The Apple Incorporation and Microsoft Incorporation are the major
examples of the established organizations that have successfully
implemented this strategy. The implementation plan has four major steps,
but they may vary depending on the needs of the organization.
Key words: Strategic objectives, balanced scorecard, management team,
perspectives, implementation process, strategic map.
Application of Balanced Scorecard Technique in AT & T Incorporation
Aligning organizational activities with strategic plans is a major
challenge to the management teams especially in the dynamic business
environment. Technology and telecommunication are faced with numerous
challenges that demand the use of relevant management techniques to
avoid the risk of being forced out of business by competitive and
innovative organizations. This means that management teams that aspire
to remain in business should enhance their internal and external
communications and monitor their performance against the strategic plan.
The balanced scorecard is one of the most effective contemporary
management techniques that are gaining relevance in technology and
telecommunication industries. The balanced scorecard is a strategic
planning as well as a management system that is used by organizations to
align their business activities with their strategic plan and
organizational vision (Sinha, 2006). This paper will address the
application of balanced scorecard technique in AT & T Incorporation with
the main focus on its applicability, implementation process, and
implementation plan.
Outline
The structure of this paper consist of three eight parts. First, the
paper will provide a description of AT & T Incorporation with a focus on
the importance of the balanced scorecard for the company. The second
part will address the rationale for selection of the balanced scorecard
as the suitable contemporary management technique. The third part will
describe the balanced scorecard technique and different components or
perspectives used in this technique. Fourth, the paper will outline the
balanced scorecard implementation process, which will be followed by
application of this technique in other organizations. In the sixth part
the paper will address the applicability of the balanced scorecard
technique in AT & T Incorporation and various aspects needed for
successful implementation in the technology industry. The seventh part
will outline and briefly describe the plan for implementation of the
balances scorecard technique in AT & T Incorporation. Finally, the paper
will discuss the potential benefits that AT & T will get after
implementing the balanced scorecard before concluding.
Description of the company
AT & T Incorporation is a multinational company based in Texas, United
States. It is a publicly traded company that operates in
telecommunication industry. AT & T Incorporation provides a wide range
of telecommunication services, which include provision of fixed
telephony, mobile telephony, and broadband subscription television.
Despite the high competition from established mobile and
telecommunication operators, the company has managed to expand its
business in different geographical regions to target a diverse market
segment. This has enabled the company to reach its current position as
one of the largest non-oil companies based in Texas (Chuck, 2013). AT &
T Incorporation originated from Bell Telephone Company, but has grown to
its current status where it operates in different segments including
wireless, advertising solutions, and wire line telecommunications among
others. The company engaged in modern technology by providing high speed
broadband, data communication services, U-verse, and network management
services through its Wireline subsidiaries (Chuck, 2013).
Rationale for selection of balanced scorecard
The high rate of technological advancement and rapid changes in business
dynamics presents special challenges for companies operating in the
technology and telecommunication industries. According to (Rohm &
Malinoski, 2010). Technology companies experience shrinking product
cycles, problem of retaining and rewarding talented experts, formulating
and communication decisions for product development, studying the
evolution of demands and product usage models, and presence of
disrupting and enabling technologies that invalidate technology products
and services. Implementation of the balanced scorecard provides a viable
solution by enhancing the capacity of the translating strategic plans
and objectives to meaningful strategic initiatives. In addition, the
balanced scorecard is an effective contemporary technique that enhances
the capacity of technology companies to monitor the success of their
strategic initiatives through a set of financial and non-financial
measures (Spider Strategy Incorporation, 2006). Moreover, the balanced
scorecard technology enables these companies to overcome the challenge
of communicating product development strategies by providing a framework
that cascades the strategies to the lowest level of staff. This helps in
alignment objectives and goals of organizational departments, employees
and service groups with corporate focus.
Description of the balanced scorecard technique
The balanced scorecard is a technique that is used by many organizations
to measure their performance. This technique employs financial metrics
as the primary outcome measures of organizational success, but
supplements them with three non-financial metrics including customer
perspective, learning and growth perspective, and internal perspective
(Kaplan, 2010). The balanced scorecard technique helps the management
teams to coordinate these perspectives to create a long-term value for
their organization. The term balanced scorecard was derived from
utilization of both financial and non-financial perspectives to measure
organizational performance. The balanced scorecard diversified the
common practice of the management teams from focusing solely on
financial metrics and to include the impact of strategic plans on
customer, employee, and organizational functions. The four perspectives
used in the balanced scorecard technique contain units of measure that
directs organizations towards the achievement of some integrated
organizational strategy. The measure selected establishes a cause and
effect relationship between long-term targets and short-term performance
drivers that focuses on financial objective as the key determinant of
the organization’s capacity to grow (Rohm & Malinoski, 2010).
The balanced scorecard implementation process
The successful adoption of the balanced scorecard technique begins with
the design of shared corporate vision that should be pursued by all
levels of management (Ronchetti, 2006). The vision statement integrates
the strategic dimensions and the key performance indicators. Technology
organization begins the implementation process by determining strategic
initiatives with a major focus on programs that create the capacity for
continuous improvement (such as improvements in quality of data) and
transformation programs that help them in introducing new packages. The
establishment of cause and effect relationship between various
measurement metrics is important because it helps the management in
laying down a feedback mechanism. This helps the management in tracking
the implementation process and determining the success of strategic
initiatives. In addition, the feedback mechanism supports the process of
determining emerging challenges that may necessitate adjustment of the
balanced scorecard functions to adapt it in the prevailing business
environment.
Implementation steps
There are six steps that are commonly followed by organizations when
implementing the balanced scorecard technology. First, the management
team formulates the purpose for the balanced scorecard in their
organization. The purpose or mission statement contains the details of
how the organization will operate the balanced scorecard to maximize the
value for the stakeholders (Ronchetti, 2006). Secondly, the management
team formulates the vision statement that creates a concrete picture of
the desired future of the organization in order to facilitate the
development of strategies. Third, a SWOT analysis is conducted to
determine the stakeholders’ input, operating advantages, and barriers.
This helps the management in identifying internal threats as well as
external opportunities that can be exploited with ease. Fourth, the
management builds a strategy map that captures strategic themes. These
strategic themes are developed within customer, financial, learning and
growth, internal processes perspectives. The fifth step involves the
definition of categorized strategic themes. Finally, the management
identifies the strategic objectives and performance indicators that
describe specific actions that the management should take to realize
provisions of its mission statement (Ronchetti, 2006).
Application of the balanced scorecard in other organizations
Since the invention of the balanced scorecard, different organizations
have tested its effectiveness where most of them have reported success.
Apple Incorporation is one of the multinational companies that have
successfully implemented the balanced scorecard. According to Kaplan &
Norton (1993) the balanced scorecard adopted by the Apple Incorporation
aimed at diversifying the senior management’s focus on financial
metrics such as return on equity, gross margin, and market share to
other non-financial measures. Apple management selected several
measurements within each of the measurement categories. For example, the
management team selected shareholders value for financial perspective
market share and customer satisfaction for customer perspective
employee attitude for improvement perspective, and core competencies for
internal process (Kaplan & Norton, 1993). Since its implementation, the
top executive management of the Apple Incorporation has been using the
balanced scorecard as a planning devise and adjusting corporate
performance in the long-run. This has made Apple Incorporation a
competitive edge and sustained performance despite the high competition
in the technology industry.
Microsoft Incorporation is the second example of an organization that
has successfully implemented the balanced scorecard to monitor its
systems. As an established organization, the company has developed its
own balanced scorecard framework known as the Microsoft BSCF
(Bloomfield, 2002). The framework was designed to empower the entire
organization in the process of determining its returns on customers,
information, technology, and process and systems. In addition, the BSCF
framework was specially designed to facilitate early detection and
reduce attendants risk in all levels of the organization. The Microsoft
management based the scorecard framework on three concepts, which have
facilitated the successful management of the company witnessed to-date.
First, technology and business requirements facilitated the
implementation of the scorecard in all levels of the company. Secondly,
the existing technologies and capabilities were leveraged to increase
adoption while reducing cultural shock. Third, the necessity of
developing an open framework, which resulted in the creation of a
framework that can be used by other people without the need for IT
expertise used by Microsoft Corporation (Blokdijk, 2008).
Applicability of the balanced scorecard to AT & T Incorporation
Strategy balanced scorecard can be applied in organizations that vary in
size and industries in which they operate (Sinha, 2006). This implies
that all companies can adopt and implement the balanced scorecard
technology irrespective of the nature of their business environment. The
tool can be implemented by domestic, multinational, and companies
operating at the national level. To this end, AT & T is not an
exception, meaning that it can employ this management tool in strategic
planning by the concepts of cause-and –effect relationships and the
four perspectives. However, AT & T Incorporation should meet five basic
criteria in order to implement the tool successfully. First, the
management should establish the link between different measures of
organizational performance and strategic implementation. Secondly, the
management should come up with a detailed outline of strategies, which
should then be disseminated to all levels of the organization to enhance
the staff’s understanding. This should be followed by the
establishment of the proper measure of performance before implementing
the system. Lastly, the management should formulate the system reporting
framework track the operation process of the balanced scorecard (Sinha,
2006).
Technology companies develop strategies that can help them survive a
dynamic business environment that is characterized by frequent
disruptions of innovation, use models, and capabilities (Rohm &
Malinoski, 2010). AT & T, which operates in telecommunication industry,
should formulate their perspectives in a way that complies with the
theme of marketplace disruption. This can be achieved by designing
strategic objectives that can enhance competitiveness of the
organization for all the four perspectives. For financial perspective,
the management should use alternative measures (apart from ROI, which is
a generic formula), including operating income, Earnings before interest
and tax, and EBITDA. The management should design a strategic objective
that allows systematic tracking of customer demand. This is because
technology industry does not create room for the flawless introduction
of new products. In addition, AT & T should validate its internal
processes (including margin projections and market share) continually to
avoid disruption of its market by other players in the industry.
Plan for implementation
The implementation plan of the balanced scorecard for AT & T should
consist of four phases. Model synthesis is the first phase and should
involve two major tasks strategy synthesis and measure synthesis. The
strategy synthesis involves reaching a consensus view for both
organizations strategy and vision. The measurement phase should involve
quantification of strategy into key performance indicators. The measures
will be derived from organizational strategy using the strategy maps
approach. The two processes should be done with the help of a
consultant where strategy synthesis should take 1-3 months and
measurement synthesis 3-36 moths (Virtanen, 2009).
Phase two is the technical implementation phase, which will involve
entering of visions, critical success factors, strategies, and measures
into the system interactivity. Specific activities include the
installation of software, training of staff, building the scorecard,
setting targets, setting calculation formulas, and definition of
graphical properties. This process should be done by a technical team
from the company with the help of a consultant and should take 1-6
months.
Third phase is the organizational integration, which involves definition
of persons who will be responsible for data measurement and empowerment,
explaining to employees the objectives of implementing the balanced
scorecard, re-engineering the strategy and management process and
reengineering of the reporting process (Virtanen, 2009). The process
should be done with the help of a consultant and should take 1-12
months.
The fourth phase is the technical integration, which will involve the
integration of the balanced scorecard with an IT system, data warehouse,
and databases. Specific activities of the technical integration phase
include identifying imported source systems and measures, analyzing the
exported capabilities and data base structure of the operating system,
determination of procedure of getting measure data sources, and
implementing the link between the operative system and Scorecard system.
This process should be done with the help of a consultant within a
period of six months.
The Operation of the balanced scorecard system is the last phase and
involves updating of measure values, analyzing the balanced scorecard
system results, reporting the results, and refining the balance
scorecard model. This should be done by the project management team and
should be completed within a month (Virtanen, 2009).
The benefits of implementing the balanced scorecard
Implementation of the balanced scorecard improves efficiency and speed
of the decision making process. This is because the balanced scorecard
will information and data overload by compressing the crucial
information that is needed for decision making by the AT & T management.
In addition, the balanced scorecard will meet some managerial needs of
the company by distilling unrelated measures from into a single report.
This will ensure that the corporate managers look at all measures across
the organization’s operations and safeguards against the tendency to
improve one measure at the expense the others (Kaplan, 2010). The
process of developing corporate strategy with the help of the balanced
scorecard reduces subjectivity of participants by giving them an
opportunity to take part in the process of formulating the strategy.
Strategic objectives will help the management in moving the company
towards the achievement of its mission. This is because strategic
objectives align and leverage work resources on tasks, which increases
value to the targeted customer.
Conclusion
The balanced scorecard is one of the most effective contemporary
management techniques that have the capacity of enhancing corporate
competence in a dynamic business environment. This technique helps the
management teams in aligning business activities with the strategic
plan. In addition, the balanced scorecard technique improves efficiency
of cascading the corporate strategy to the lowest level of management.
Although the perspectives used by different organizations are similar,
the management teams should design measures in a way that fits their own
business environment in order to enhance competence with other players
in the industry. The success of the balanced scorecard has been proven
in other established organized (such as the Apple Incorporation and
Microsoft Incorporation), which are successful multinational
corporations. The balanced scorecard is applicable to all organizations
irrespective of their size and geographical spread, which implies that
AT & T is not an exception. However, the design and implementation
process may vary and should be formulated to fit the needs and strategic
objectives of individual organizations.
References
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asked questions on approach, development, management, measures,
performance and strategy. Raleigh: Lulu Publishers.
Bloomfield, C. (2002). Bringing the balanced scorecard to life: The
Microsoft balanced scorecard framework. Minneapolis: Insightformation
Incorporation.
Chuck, J. 2013. AT & T Incorporation: Profile. New York: Forbes LLC.
Kaplan, S. (2010). Conceptual foundation of the balanced scorecard.
Allston: Harvard Business School.
Kaplan, S. & Norton, P. (1993). Putting the balanced scorecard to work.
Watertown: Harvard Business Review.
Rohm, H. & Malinoski, M. (2010). Strategy-based scorecards for
technology. Cary: Strategy Management Group.
Ronchetti, L. (2006). an integrated balanced scorecard strategic
planning model for nonprofit organizations. Journal of Practical
Consulting, 1 (1), 25-34.
Sinha, A. (2006). Balanced scorecard: A strategic management tool.
Vidyasagar University Journal of Commerce, 11, 71-80.
Spider Strategy Incorporation (2006). Balanced scorecard technology.
Washington DC: Spider Strategy Incorporation.
Virtanen, T. (2009). Guideline for implementing balanced scorecard.
Huopalahdentie: QPR Software PLC.
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