ECONOMY

Strategy focused ‘Balanced Scorecard’ plan for firms to weather rough times

In the past, big tankers would sometimes break in two in rough seas. After years of intensive study, shipbuilders discovered the problem: Big tankers were designed in the same way as smaller ones. Apparently no one had thought that in rough weather they could come to rest on two big waves, leaving the middle in the air and vulnerable to breaking up. Drawing a parallel with the current state of modern business, however uneven, the handicap of big tankers in rough weather can be didactic. The world of business can be likened to the rough sea: Most firms in recent years have faced problems, mainly originating in the protracted economic downturn, weak demand for goods and services and a bear market for stocks. Particular symptoms include low profitability, loss-making activities, excessive borrowing and a poor workplace environment. The majority of most current Greek enterprises can be compared with the old big tankers; essentially, they grew rather fast, particularly during periods of stock market euphoria, but have maintained the same organizational structure. As long as market conditions were good, sailing was smooth and the course to the final destination clear. But when conditions deteriorated, some firms broke up and others are continuing to find the sailing rough. The solution to the problem is neither a super-human effort for survival until conditions improve, nor the cancellation of investments that would improve infrastructure. In order to sail through such familiar conditions, firms need good strategic planning and the accompanying organization to implement it – in other words, a transition from the «classic» to the «strategic» form of management. The first step in this direction is the adoption of a vision and a strategy to conquer it. However, strategy alone will not suffice, particularly when it focuses on economic indicators. In order to distinguish themselves in difficult modern economic conditions, firms must strive to continuously develop and strengthen their intangible assets, such as client relations, human resources, how they utilize information and the cultivation of a corporate culture that encourages the solution of problems, creativity and the promotion of the organization in general. In order to effectively monitor the development of such intangible assets, a modern firm needs a methodology such as that of the «Balanced Scorecard.» Based on the premise that what is measured becomes a tool to motivate all actors involved and can therefore influence results, Drs Robert S. Kaplan and David P. Norton introduced this methodology in their book «The Balanced Scorecard: Translating Strategy into Action.» It helps firms create indices which describe their vision and commitment to serving clients, the knowledge, abilities and skills of its human resources, and their business processes. The scorecards thus developed complement the classic measurements of economic indices and business plans, enabling all staff members to realize that each individual’s work contributes to the general good while monitoring the progress of their efforts. The method can also locate areas of potential improvement in the organization, such as training programs or an automation system that will make reliable information available and lead to a speedier response to clients’ requirements; it also allows firms to better assess the benefits accruing from such investments and their contribution to the firm’s growth. The concept of «strategic business administration» is based on complex notions that describe the performance indicators; without these, there can be neither measurement nor progress. The collection and analysis of data is the most difficult part of the process, as it involves selection and processing from a huge volume, as well as presentation of the results in a lucid way. Indeed, it can prove a particularly arduous process, as statistical analysis has shown that most organizations have only 50 percent of the data required for the filling of their scorecard in processed form. The solution is the installation of an internal business organization system, offering (among other things) an integrated view of processes from one end to the other, linking employees, departments, functions and information in a unified work environment. Moreover, the structural elements comprising an internal business organization system can be connected at installation, so as to save money and time in creating links later. A successful system also includes applications for strategic business administration, certified for the implementation of the Balanced Scorecard methodology by its authors.