Description of the Balanced Scorecard and the four perspectives

A balanced scorecard is a strategy performance tool and a semi-standard structured report that is used by the managers of the company to keep the record of the execution of activities by the staff within their control and to monitor the consequences that might arise from these actions. BSC is one of the effective tools with the help of which the company can easily align their day-to-day work that is done by their staff every day (Smith, 2010). The report is prepared by the Trainee management accountant for a large well-known hotel chain that is Hilton Hotel. The area manager has decided to make use of balanced scorecard with the objective to for the plan and control operations within the hotel.

Hilton Hotel is highly recognized hotel and resorts which came into existence in the year 1919. The hotel was established by Conrad Hilton with the objective to provide accommodation facilities in the country. Since its establishment, the company is successfully able to manage its operations due to which currently the company is operating in 92 countries. These successful operations were possible because company adopted the balanced scorecard tool for the strategic management of the hotel (Hilton Hotel, 2018).

Vision and mission

Mission- The mission of the hotel is to spread the light and warmth of the hospitality in the market.

Vision- The vision of Hilton hotel is to become the preeminent global hospitality company and to become the first choice of their guest, team members and others (Hilton Hotel, 2018).

A balanced scorecard is the performance metric that used in strategic management to identify and improve the different internal functions of a form and their resulting external outcome (Coe and Letza, 2014). Hilton hotel makes use of this tool to measure working of internal functions and can learn from the feedbacks. The BSC consists of four perspective that is financial, customer, internal process and learning & growth.

Financial perspective

This perspective is used by the company to view the organizational financial performance and the use of the financial resources in the company (Perkins, Grey and Remmers, 2014).

Customer perspective

This perspective reflects the organizational performance from the customer point of view considering the services that are offered by the company.

Internal process perspective

This perspective reflects the performance of the firm considering the lenses of the quality and the efficiency related to the products and services (Wu and Liao, 2014).

Sample Balanced Scorecard for Hilton Hotel

This perspective shows the performance of the firm on the basis of human capital, infrastructure, culture and other capacities.

Each of the perspectives includes: –

• Objective
• Measurement
• Target
• Initiatives

The image reflects the four perspectives of the balance score along with the four major points that are Objectives, measure, targets, and initiatives.

Hilton Hotel makes use of the BSC tool so that they can effectively measure the performance of the company. This tool has contributed to the growth and expansion of the business across the world (Northcott and Taulapapa, 2012). Below given is the explanation of each perspective of BSC from the hotel point of view.

The overall aim of this perspective of BSC is to improve the value of the shareholders and maximizing the revenue which can be achieved by the Hilton when they will be able to attain their customers by providing them value-added services (Sainaghi, Phillips and Corti, 2013). The hotel has brought changes in their cost structure many times so that they can offer the better prices to their customers. Along with this, the company improved assets through Mergers and Acquisitions across the world and mainly in the USA. This helps the hotel in performing the activities in an effective and productive way. Below given are general objective, measurement, target and initiative of Hilton Hotel for the financial perspective.

• Objective: – The primary objective of the Hilton hotel is to achieve the productivity and revenue growth. The hotel will be able to achieve the objective by capacity utilization and by forming the best brand image in the market. Another objective of the company is to maximize the hotel assets and to find the new investors (Savkin, 2017).
• Measurement: – The hotel can easily measure the objective by analyzing the percentage booking of Hilton in comparison to its competitors. Moreover, they can the new investors who are willing to invest the amount in the company.
• Target: – Hilton hotel target is to add on new hotels in their chain and getting certifies as the best hotel in the city.
• Initiative: – Effective monitoring in the hotel

Hilton hotel is well-known in the market because of its premium services and high quality which they offer to its customers. Though, for these services the company charges high amount from their customers. The focus of Hilton hotel is always on the services that they are offering to their customers (Kaplan, Norton and Rugelsjoen, 2010). They ensure that they are offering high-quality services which cannot be compromised. Moreover, the hotel forms strategies so that they can maintain and develop the long-lasting relationship with their customers which help them in making a customer loyal towards the brand. Below given are general objective, measurement, target and initiative of Hilton Hotel for the customer perspective.

• Objective: – The objective is to meet the customer satisfaction level by offering them delight services, adding loyal customers and enhancing delight experience for customers.
• Measurement: – Hotel can measure the involvement of new loyal customers and positive feedback from the customers regarding the services offered by them.
• Target: – Analysing the actual data of the old and new customers in their record.
• Initiative: – The hotel can monitor its monthly sales and services which helps them in making the strategy towards the investment in the lifestyle segment (Grigoroudis, Orfanoudaki and Zopounidis, 2012).

Hilton hotel wants to be strong like a Goliath from internally due to which the company adopted advanced technology which helped them in updating their services and improving the customer management process (Tayler, 2010). The hotel has achieved the position in providing the excellent level of service which made them socially responsible brand name in the world. Below given are general objective, measurement, target and initiative of Hilton Hotel for the internal process perspective

• Objective: – Hotel objective is to bring the improvement in the human resource management and in its team by retaining the skillful and experienced employees.  
• Measurement: – The measurement of the number of employees according to their tenure, performance appraisal and measure of the data of a number of employees who took the advantage of the new policies taken by the employees.
• Target: – The aim of the hotel is to reduce the difference in the number of new employees in each of the office branches every year. In addition, the hotel should retain the top quality and experienced staff in the office.
• Initiative: – Hilton can make strategy such as cross audits. Facility readiness, weekly follow-up and many others to check either company are able to fulfill the objective or not.

Strengths and weaknesses of the Balanced Scorecard

Hilton knows the value of learning and growth for an organization as this is the only way through which the brand can reach the new heights to achieve the objective (Tseng, 2010). The motivated team and trained employees can help the company in maintaining the quality that the company is offering to their customers. Hilton has invested millions of dollars in training and development program considering the importance of training for their employees. The employees are the one who interacts with the customers on regular basis due to which they should know the way to treat the clients. Below given are general objective, measurement, target and initiative of Hilton Hotel for the learning & growth perspective.

• Objective: – Hilton believes in maintaining the sustainable human resource and the relationship with the customers and investors.
• Measurement: – Hilton hotel can measure the objective through the eligibility for certifications, performance evaluation and through license and technical standards.
• Target: – The target of the company is to provide the best training and development programs and ensure their participation in it. Implementation of the advanced technology that supports the training that the company is offering to their customers (Balances Scorecard Institute, 2017).
• Initiative: – Strategy that the company is implementing is effective communication, set up of new technology to provide the support to human capital. Along with this Hilton hotel is focused towards the training and skills programs.

The below diagram includes two KPI of the company with its measures considering the perspective of the shareholders. Shareholders of the company play a vital role in the company and they consider each and every perspective before making the investment in the business (Sivaraman, Al Balushi and Rao, 2014).

Balanced scorecard including KPI with Measurement 

Objective – 1 Productivity growth

Productivity shows the various measures of the efficiency of the production. The productivity growth reflects that more value is added in the production which means the company can generate more income which will be distributed among the shareholders. Hilton Hotel is leading company so the shareholders of the company will invest only when they find the productivity growth.

Measures

• Decrease cost and optimization- Hilton hotel should try to reduce the cost of the production and should make the maximum use of the resources through which they can measure the productivity.
• Comparison- The hotel can measure it by comparing the previous year productivity with the current year which reflects the change.

Objective – 2 Increase in Revenue

Increase in revenue is the objective which is kept by every stakeholder similarly Hilton hotel stakeholders want to see a rise in the revenue of the company. The hotel needs to develop new sources from which they can generate revenue.

Measure

• This objective can be measured with the help of the dividend received by the shareholders of the company. Over here, high dividend reflects high revenue of Hotel.
• Hilton hotel can compare the revenue of the company with the last year revenue which helps them in analyzing the favorable and adverse impact on revenue.  

Customer perspective Objective and measures

Objective – 1 Attain and retain high-value customers

The objective of the Hilton hotel is to attain and retain the high-value customers which include loyal customers who are valuable to the company. As one loyal customer can lead to 10 new customers and these loyal customer leads to the profit of the company.

Measure

• This objective can be measured by the company by analyzing the increase in the number of loyal customers of Hilton hotel.

Objective – 2 Achieve and Retain Partner Relations

The objective of the hotel is to achieve and retain the partner relations as this is the effective way through which the company will be able to achieve the growth and success. This is the fact that forming partnership is easy for the company but retain that partners are difficult.

Measure

• Hilton hotel can measure this objective by analyzing and evaluating the rise in the number of partners of the company from previous years.

Objective – 1 Technology capabilities

Suggestions for effective implementation of the Balanced Scorecard

The shareholders who are investing in the hotel would like to know the capabilities that the company can adopt the advanced technology in their working or not. The objective over here is to improve the technical capabilities of the company.

Measure

• The technological capabilities of the hotel can be measured by the number of advanced technology adopted by the hotel for the improvement.

Objective – 2 Sustainable human resources

Stakeholders of the company want that the company in which they are investing should be able to manage the sustainable human resources. The objective of the company is to retain the experienced and skilled employees that contribute to the growth and development.

Measure

• The company can measure an accurate number of employees who are tenure which includes the employees working in the company for last 1 year. If the company will be having high retention then they won’t be able to retain employees for 1 year.

Learning & growth perspective Objective and measures

Objective – 1 Training and development programs

The objective of the company is to offer effective training and development programs to the employees because this is the only way to improve the performance.

Measure 

• Performance Evaluation is one of the effective ways through which the company can analyze that they are able to meet the objective or not. Training and development will definitely improve the performance of employees in the company.

Objective – 2 Awareness in Society for welfare

Stakeholders check that the company is a concern for the welfare of the society or not. The objective is to generate the awareness in the society through different programs which contribute to the welfare.

Measure

• The hotel can evaluate this objective with the help of the customer relationship management. The more interaction of the customers with the company will help them in generating good brand value.

• Balanced scorecard presents the goals of the organization in a single page chart broken with the related areas that include 4 perspectives (Bowen, 2011).
• This tool is effective in analyzing the organization objective and measures in the single goal and it also reflects the how the goals of the company are interrelated.
• BSC tool can be used by the many managers easily once they get familiar with the concept. This shows that there will be no need for the training to use this tool (Wilhite, 2018).

• It doesn’t include the straightforward financial analysis of economic value or risk management.
• BSC tool is easy to reach but on the other hand, it is hard to quantify.
• In case the company is not able to meet the BSC goals then they may be re-interpreted to the current state of affairs to avoid the failure.
• The causality relationships among the areas of measurement in the BSC are unidirectional and are too simplistic (Salem, Hasnan, and Osman, 2012).

The Balanced scorecard tool can be improved at certain places such as there is a very casual interpretation which needs to be improved. Sometimes the companies might be looking for the depth analysis which is not possible with the tool. If the objectives are not achieved then those objects need to rephrase considering the current affairs.

Conclusion 

The report is based on the Performance Management of the hotel Hilton. The effective tool that is mainly used by the company to evaluate the performance is balanced scorecard with the help of which they can evaluate the objective formed by the company and the measure that is used by the company to check the achievement of the objective. The company targets and form strategies to achieve the objective of every perspective. Moreover, the report reflects the use of this tool by Hilton hotel with particular objectives and its measures.  In the end, it shows the strength and weakness of the tool.

References 

Balanced Scorecard Institute (2017) Balanced Scorecard Basics [online]. Available from: https://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard [Accessed on 29^th March 2018]

Bowen, R. (2011) Weighing the Pros and Cons of Balanced [online]. Available from: https://www.brighthub.com/office/finance/articles/70687.aspx [Accessed on 29^th March 2018]

Coe, N. and Letza, S. (2014) Two decades of the balanced scorecard: A review of developments. The Poznan University of Economics Review, 14(1), p.63.

Cooper, D.J., Ezzamel, M. and Qu, S.Q. (2017) Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research.

Grigoroudis, E., Orfanoudaki, E. and Zopounidis, C. (2012) Strategic performance measurement in a healthcare organisation: A multiple criteria approach based on balanced scorecard. Omega, 40(1), pp.104-119.

Hilton Hotel (2018) History [online]. Available from:  https://www.hilton.com/en/corporate/#history [Accessed on 29^th March 2018]

Hilton Hotel (2018) Values [online]. Available from:  https://www.hilton.com/en/corporate/#values [Accessed on 29^th March 2018]

Kaplan, R.S., Norton, D.P. and Rugelsjoen, B. (2010) Managing alliances with the balanced scorecard. Harvard business review, 88(1), pp.114-120.

Northcott, D. and Taulapapa, T. (2012) Using the balanced scorecard to manage performance in public sector organizations: Issues and challenges. International Journal of Public Sector Management, 25(3), pp.166-191.

Perkins, M., Grey, A. and Remmers, H. (2014) What do we really mean by “Balanced Scorecard”?. International Journal of Productivity and Performance Management, 63(2), pp.148-169.

Sainaghi, R., Phillips, P. and Corti, V. (2013) Measuring hotel performance: Using a balanced scorecard perspectives’ approach. International Journal of Hospitality Management, 34, pp.150-159.

Salem, M.A., Hasnan, N. and Osman, N.H. (2012) Balanced scorecard: Weaknesses, strengths, and its ability as performance management system versus other performance management systems. Journal of Environment and Earth Science, 2(9), pp.1-9.

Savkin, A. (2017) Balanced Scorecard Example for Hotel Top Management [online]. Available from: https://bscdesigner.com/bsc-for-hotel-top-management.htm [Accessed on 29^th March 2018]

Sivaraman, I., Al Balushi, A. and Rao, D.H. (2014) Application of Balanced Score Card (BSC), Strategy Map and Key Performance Indicators (KPI)-for an Engineering college in Oman. Asian Journal of Education and e-Learning (ISSN: 2321–2454), 2(01).

Smith, R.F. (2010) Business process management and the balanced scorecard: using processes as strategic drivers. John Wiley & Sons.

Tayler, W.B. (2010) The balanced scorecard as a strategy-evaluation tool: The effects of implementation involvement and a causal-chain focus. The Accounting Review, 85(3), pp.1095-1117.

Tseng, M.L. (2010) Implementation and performance evaluation using the fuzzy network balanced scorecard. Computers & Education, 55(1), pp.188-201.

Wilhite, T. (2018) Balanced Scorecard – the Pros and the Cons of BSC [online]. Available from: https://toughnickel.com/business/Balanced-Scorecard-Pros-and-Cons [Accessed on 29^th March 2018]

Wu, W.Y. and Liao, Y.K. (2014) A balanced scorecard envelopment approach to assess airlines’ performance. Industrial Management & Data Systems, 114(1), pp.123-143.