Organisational Behaviour Essay

The concept of the balanced scorecard (BSC) was first introduced by Robert S. Kaplan and David P. Norton (1992) in their now widely cited Harvard Business Review article, â€Å"The Balanced Scorecard—Measures that Drive Performance.† The widespread adoption and use of the BSC is well documented. For example, Kaplan and Norton (2001) reported that by 2001 about 50% of the Fortune 1000 companies in North America and 40% to 45% of companies in Europe were using the BSC. The basic premise of the BSC is that financial results alone cannot capture value-creating activities (Kaplan & Norton, 2001). In other words, financial measures are lagging indicators and, as such, are not effective in identifying the drivers or activities that affect financial results. Kaplan and Norton (1992) suggested that organizations, while using financial measures, should develop a comprehensive set of additional measures to use as leading indicators, or predictors, of financial performance. They su ggested that measures should be developed that address four perspectives: 1. The financial perspective. Measures in this perspective should answer the question, â€Å"How should we appear to our shareholders?† 2. The customer perspective. These measures should answer the question, ABSTRACT. Although the application of the balanced scorecard (BSC) in the business sector is well documented, very little research has been reported regarding the adaptation or application of the BSC in the education sector. In this article, the authors (a) describe how the Baldrige Education Criteria for Performance Excellence has adapted the concept of the BSC to education and (b) discuss significant differences as well as similarities between the BSC for business and the BSC for education. The authors also present examples of the BSCs of three Baldrige Education Award recipients. financial performance (Kaplan & Norton, 1996). Thus, the BSC enables managers to monitor and adjust the implementation of their strategies and to make fundamental changes in them. The Baldrige National Quality Program: An Overview The Baldrige National Quality Program is the vehicle of implementation of The Malcolm Baldrige National Quality Improvement Act of 1987–Public Law 100–107. This law was enacted on the basis of a set of â€Å"Findings,† one of which was that [T]he leadership of the United States in product and process quality has been challenged strongly (and sometimes successfully) by foreign competition, and our Nation’s productivity growth has improved less than our competitors’ over the last two decades. (Baldrige National Quality Program, 2003a, p. 61) â€Å"How should we appear to our customers?† 3. Internal business processes perspective. Measures in this perspective should answer the question, â€Å"What processes must we excel at?† 4. Learning and growth perspective. These measures should answer the question, â€Å"How can we sustain our ability to change and improve?† A critical factor for an effective BSC is the alignment of all the measures in the four perspectives with the company’s vision and strategic objectives. The BSC allows managers to track short-term financial results while simultaneously monitoring their progress in building the capabilities and acquiring the intangible assets that generate growth for future The primary objective of the Baldrige Program is to help American businesses improve their competitiveness in the global market. Businesses can improve their competitiveness by identifying role-model organizations, recognizing them, and disseminating their best practices throughout the United States. The Baldrige Program is widely recognized as a very significant factor in strengthening U.S. competitiveness in the global market. In its 1995 report Building on Baldrige: American Quality for the 21st Century, the Council on Competitiveness made the following statements: â€Å"The Baldrige National Quality Award and its state and local offshoots have been key to the effort to strengthen U.S. competitiveness† and â€Å"The Baldrige Award Program, having galvanized U.S. quality efforts, is now positioned to become the vehicle to stimulate and coordinate efforts to expand quality as a national priority† (Council, p. v). The Council (p. 22) also stated that it â€Å"is a nonprofit, nonpartisan organization of chief executives from business, higher education and organized labor who have joined together to pursue a single overriding goal: to improve the ability of American companies and workers to compete more effectively in world markets, while building a rising standard of living at home.† In 1995, The Council was chaired by Paul Allaire, CEO, Xerox, with Thomas E. Everhart, President, California Institute of Technology, and Jack Sheinkman, President, Amalgamated Clothing and Textile Workers Union, AFL-CIO, CLC, as vice-chairmen. Recipients of the Baldrige Award are obligated to present their â€Å"best practices† at one national and two regional conferences. In addition to these obligatory presentations, there is a great demand for additional presentations. Through 1998, past Baldrige Award recipients made approximately 30,000 presentations. The centerpiece of the Baldrige Program is the Criteria for Performance Excellence. These criteria define a stateof-the-art management model that integrates the following seven areas into a comprehensive system: leadership; strategic planning; customer and market focus; measurement, analysis, and knowledge management; human resource focus; process management; and business results. In Figure 1, we show the framework of the criteria in a systems perspective. The criteria maintain currency through annual revisions and improvements that incorporate emerging issues and best practices (Baldrige National Quality Program, 2003a). The criteria place heavy emphasis on the development of a comprehensive measurement system that is aligned with the company’s strategic objectives. The measurement system yields results in the following areas (Baldrige National Quality Program, 2003a): 1. Customer-focused results 2. Product and service results 3. Financial and market results 4. Human resource results 5. Organizational effectiveness results, including key internal operations performance measures 6. Governance and social responsibility results Clearly, this set of results is consistent with the basic concept of the BSC. The financial and market results are the only lagging indicator and cover the BSC’s financial perspective. The customerfocused results obviously cover the BSC’s customer perspective. The product and service results together with the organizational effectiveness results cover the BSC’s internal business perspective. The human resource results cover the BSC’s learning and growth perspective. The governance and social responsibility results were added in 2003 and represent a new perspective in view of the recent, well known collapses that giant corporations experienced owing to unethical practices. The Baldrige Education Criteria for Performance Excellence In 1995, the Baldrige National Quality Program began the process of converting the business criteria for use in the education sector. This process culminated in the development of the Education Criteria for Performance Excellence and with Congressional approval of the Malcolm Baldrige National Quality Award for Education in 1999. In Figure 2, we show the framework of the education criteria in a systems perspective. Clearly, this framework is very similar to that of the business criteria shown in Figure 1. In 2001, three educational institutions became the first recipients of the Baldrige Award. The BSC in the Education Criteria for Performance Excellence Although the concept of the BSC has been widely adopted and used in the business sector, the education sector apparently has not embraced the BSC concept widely, as indicated by the dearth of published research on this topic. A thorough review of the literature yielded few significant publications. For example, Cullen, Joyce, Hassall, and Broadbent (2003) proposed that a balanced scorecard be used in educational institutions for reinforcement of the importance of managing rather than just monitoring performance. Sutherland (2000) reported that the Rossier School of Education at the University of Southern California adopted the balanced scorecard approach to assess its academic program and planning process. Also, Chang and Chow (1999) reported that responses in a survey of 69 accounting department heads were generally supportive of the balanced scorecard’s applicability and benefits to accounting programs. The importance of measurement permeates the Baldrige Criteria for Performance Excellence. The focus on measurement in the criteria first appears in the set of â€Å"Core Values and Concepts.† These factors comprise the philosophical foundations of performance excellence and are as follows (Baldrige National Quality Program, 2003b): 1. Visionary leadership 2. Learning-centered education 3. Organizational and personal learning In the â€Å"focus on the future† core value, the criteria state that â€Å"a major longer-term investment associated with your organization’s improvement is the investment in creating and sustaining a mission-oriented assessment system focused on learning† (Baldrige National Quality Program, 2003b, p. 3). The criteria recommend that organizations use both (a) formative assessment to measure learning early in the learning process to allow for timely intervention, if needed, and (b) summative assessment to measure progress against key relevant external standards and norms regarding the knowledge and skills that students have (Baldrige National Quality Program, 2003b). In the â€Å"management by fact† core value, the criteria make the following statement: â€Å"A major consideration in per-formance improvement and change management involves the selection and use of performance measures and indicators. The measures or indicators you select should best repres ent the factors that lead to improved student, operational, and financial performance. A comprehensive set of measures or indicators tied to student, stakeholder, and/or organizational performance requirements represents a clear basis for aligning all processes with your organization’s goals† (Baldrige National Quality Program, 2003b, p. 4). The congruence of the portion in italics with the basic premise and the perspectives of the BSC is clear. In the â€Å"focus on results and creating value† core value, the criteria state that â€Å"the use of a balanced composite of leading and lagging performance measures offers an effective means to communicate short and longer term priorities, monitor actual performance, and provide a clear basis for improving results† (Baldrige National Quality Program, 2003b, p. 4). The criteria make the following statement in the â€Å"systems perspective† core value: â€Å"Alignment means using key linkages among requirements given in the Baldrige Categories to ensure consistency of plans, processes, measur es, and actions† (Baldrige National Quality Program, 2003b, p. 5). The 11 core values and concepts are embodied in the following seven categories: 1. Leadership 2. Strategic planning 3. Student, stakeholder, and market focus 4. Measurement, analysis, and knowledge management 5. Faculty and staff focus 6. Process management 7. Organizational performance results In Figure 2, we show the framework connecting and integrating these seven categories into a comprehensive system. In describing Figure 2, the criteria state, in part, that â€Å"Measurement, Analysis, and Knowledge Management (Category 4) are critical to the effective management of your organization and to a fact-based system for improving performance.