Balanced Scorecard-Based Management System forPerformance Evaluation of Organizations

Yan Peng"2, Suozhu Wang', Like Zhuang2'College ofInformation Engineering, Capital Normal University, Beijing 10003 7, China

pengyanpy@l 63. com, wywh_5]8@sina. com2 Ahead Software post-Doctor Scientific Workstation, Beijing 100041, China

zhuanglk@mail. tsinghua. edu. cn

Abstract

Performance management is facing dramatic changesdue to a variety of factors such as economic pressure,limited resources, shrinking budgets, as well as newgovernmental regulations. In order to cope with thechanging nature of this environment, it is important tointroduce professional management and performance toolsinto strategylperformance management system. In order tobalance many indicators in a performance measurementsystem, we have developed a Balanced Scorecardinformation system prototype -- BSCMS for organizationstrategy evaluation. Balanced Scorecard is defined as beinga 'frame that helps the organizations to transpose thestrategy into operational objectives, in order to direct boththe organization performance and behavior ". In this paper,the basic concepts of the Balanced Scorecard method arepresented atfirst, then the strategic object ofan enterprise /department are analyzed, with strategy decompose transmitBSC into measurement object and activities. BSCMSchoose BSC approach as the template, and focus onorganizations' performance evaluation, enterpriseperformance monitoring, performance management andstrategy improvement. System developed with .NET andrunning on Windows, the system can be used to developBusiness Intelligence strategy solutions for theorganizations that use Balanced Scorecard management.

Keywords: Balanced Scorecard, KPI, PerformanceEvaluation.

1. Introduction

Recently business decision-making under uncertainenvironment of target markets becomes more difficultthan before [1]. To achieve competitiveness and toreduce market reaction times, business process

management has become a significant element of day-to-day operations [2]. The automation of business processesexecution and the integrated measurement of the resultshas been ongoing with this development. Performancemanagement has risen to a popular management system[3]. The organizations need a type of managementsystem to be explicitly designed to manage the strategy,not the tactic [4]. With the quick changes in technologyand competition, the formulation and application of thestrategy should be a continuous and participativeprocess. The current organizations need a language thatallows them to communicate the strategy and systemsthat help them to implement it and to obtain informationor feedback on it [5]. A new approach to strategicmanagement was developed in the early 1990's by Drs.Robert Kaplan (Harvard Business School) and DavidNorton. They named this system as the BSC (Balancedscorecard). The Balanced Scorecard (BSC) methodproposes to reach the final goal of the organization, thebusiness profitability is assessed from many aspects thatcan be measured throughout financial and non-financialindicators, grouped in the following categories: financialperspective, client perspective, internal perspective, andlearning and growth perspective [6].

In order to support decision-making in strategymanagement, this paper use the Balanced Scorecardapproach in establishing the right performance measuressoftware system-- BSCMS for organizationsperformance evaluation. Organizations have struggled toachieve a balanced approach to performancemanagement. Complied with the requirements of the"Balanced Scorecard Collaborative FunctionalStandards", we concerning the key functions that mustbe performed by a software system in order to supportthe BSC management process. The architectural designand detailed technical specification of BSC-BasedManagement System are provided.

978-1-4244-2020-9/08/$25.00 02008 IEEE

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2. General Overview

2.1 Balanced Scorecard

In order to support decision-making in strategymanagement, Robert Kaplan and David Norton'sBalanced Scorecard (BSC) concept may be used [7,8].The Balanced Scorecards are a measurement-supportedstrategic management method. Figure 1 illustrates thefour perspectives addressed by the BSC.

Four factors are equally important in the short andlong-term. They may be described as follows [9-12]:Financial perspective- the financial perspective showshow research and development initiative achieve thefinancial goal of the shareholders.

Customer perspective-The customer perspectiveshows how research and development initiatives satisfythe customers with their changing needs in a changingenvironment.

Strategi c Suppl yI nt ent ons - -

Figure 1. The Four Perspectives of BSC

Internal perspective- the internal perspectives show,which are the processes, the research and developmentinitiative must excel to meet the changing customerneeds.

Learning and growth perspective-To satisfy thecustomer needs and to achieve the financial goal of theshareholders, this perspective shows how a research anddevelopment initiative must continuously learn andgrow.Due to the nature of the Balanced Scorecard, based on

perspectives and assigned multidimensional measures,an effective and powerful software system support isnecessary in order to exploit the entire concept.

2.2 KPIs

KPIs (Key Performance Indicators) were a tool or anindex for assessment business process in all levels [13].Moreover, KPIs of BSC were developed to evaluate oforganization effort in four perspectives. Researchers

determined of each objectives to align with fourperspectives. Determination of KPIs aimed to knowabout the KPIs at both inputs and output level of theproject [14].

2.3 SWOT Analysis

SWOT(Strengths, Weaknesses, Opportunities andThreats) analysis is a tool for auditing an organizationand its environment. It is the first stage of planning andhelps marketers to focus on key issues. Strengths andweaknesses are internal factors. Opportunities andthreats are external factors. The SWOT analysis providesinformation that is helpful in matching the firm'sresources and capabilities to the competitiveenvironment in which it operates. It is instrumental instrategy formulation and selection. Such an analysis ofthe strategic environment is referred to as a SWOTanalysis.

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3. System Architecture

Performance measurement systems succeed when theyprovide relevant facts and data about currentperformance and show what needs to be improved, eitherimmediately or in the future. Measures should be alignedwith strategic objectives to ensure that employees'behavior is consistent with corporate goals [15].

BSCMS consider the China enterprise's actualcondition, with qualitative analysis and quantitativeassess method, based on scientific program analysis andstatistics tools, and put out performance evaluationgeneral software for organizations to meet thefundamental realities of China. The architecture of thesystem is shown in figure 2.A brief description of thearchitecture as follow:

Personal Perf or ranceObject Sal ary System * Track

Anal yse

Figure 2. The Architecture of System BSC ComponentAnalysis the strategic object of an enterprise / Post-Department-Higher

department, with strategy decompose transmit it into Organization.measurement object and activities.

Visual result charts and forms make the firm's crews 3.2. Definition of Balanceunderstand the strategy object of the group. The systemmakes it clear for employee, what you should do and The application shouwhich standard should be followed. accommodate the basic ele

Overall performance management: System provides Scorecard design. In thisthe functions such as: "performance assess plan", that may implement SWOT"performance data collecting", "performance data out the key factors, which rautomatic handling" and "Multi-dimension assess". successfully. Graphic measiMake full use of performance assess result, system decision-makers, to ana

may check and reflect the enterprise condition, diagnosis organization developmententerprise problem, and put forward a resolution in time. managers to link strategicImproving the communication between organizations relationships. BSCMS mand employee. department or employee inc

own activities. When a l3.1. KPI Definition. perspectives (financial, cus

will be built automatically.In this module, the basic as well as the aggregate KPIs

are defined. For the basic KPIs, we take tree structure todefine KPI per perspective. Each perspective classifiedby dimension and object. Performance indicatorstransmit between BSC according to following sequence:

Lever Department-

ed Scorecard.

Lld be able to flexiblyements of a proper Balancedmodule, graphic design toolanalysis is provided to checkmake an organization develop,ure result can be provided foralysis and diagnosis thestrategy. The system allowsobjectives in cause and effectlay also design BSC fordividually, as the aim of theirnew BSC created, the four,tomer, internal, and learning)

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4. BSCMS System Development

4.1 Running Environment

"BSCMS" is an information system de-

software tool dedicated to implemen

BSC Edit Frane.

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Scorecard method. The running environment is: IIS 6.0,IE6.0, .NET Framework 2.0; Database is SQL Server2000 and upper version or Oracle 9 and upper version;Operating System: Windows 2000 and upper version.BSCMS allowing strategic global performance analysisfor goals set or even for every unique indicator based onthe information stored in database. Figure 3 shows themain .NET program structure of BSC.

BSC ivai n Frane

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frmAddEitBS4-iIV

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I \ /I____---frmBSCFact \ mSF trivIDV e

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frmBSCOP KPI Edit e

PefrcenB ctoBS 5#actoar rViII r di vi dual

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Layout

Figure 3. BSC Program Structure

4.2 Defining Strategic ObjectivesFigure 4 shows the interface design of BSC. Because

the BSCMS is used for China enterprises, the interfaceLanguage is Chinese.

Block A is the main menu and shortcut key.Block B is the BSC strategy relation drawing area.

The operation in this block is: First, click left key in a

performance target area (e.g. choosing profit increase inFinancial perspective), then click "Object Property"menu, Block C will display the indicators and theirrelation in the process perspective, Shown as Figure 5.

Each object of the plan is associated to a relevantorganization's department [6]. Each department willhave assigned some performance targets according to its

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ability to contribute to the general goal. BSCMS allowsto edit the measurements and to link them to the keyindicators and objectives. External systems can supplydata in order to automate the reports and the budgetaryprocesses.

Figure 4. DefiningPropertiesforStrategic.Obj

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Figure 5. Illustration of an exemplaryProcess Perspective

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5.Conclusion

The study looked at the design and implementation ofa BSC-based performance measurement system.BSCMS information system is dedicated toorganizations that wish to apply new managementmethods for organizations' performance evaluation. Thesoftware developed by .NET and running on Windows2000 (or Upper).

In conclusion, BSCMS choose BSC approach as thetemplate, focus on organizations' performanceevaluation, enterprise performance monitoring,performance management and strategy improvement.The system is the management and monitoring tool forassessment strategy of enterprise. It may evaluate theprogress in enterprise, and establish the connection of"strategy daily work ".BSC is a critical component of the organization's

information system. BSCMS system can be used todevelop Business Intelligence solutions for theorganizations that use Balanced Scorecard to evaluatestrategy and performance.

Acknowledgements

This work was supported in part by Natural ScienceFoundation of China, under contract NO.60773130,Research Program Foundation of Humanities and SocialScience by the State Education Commission, undercontract No.07JC630034, and Foundation forUniversity Key Teacher by the Beijing EducationCommission.

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