The implementation of balanced scorecard in a Chinese car insurance company

It was decided that the best tool to gather data about stakeholders thoughts with regard to the Balanced Score railcard system in Tian-an political machine Insurance family would be through interviews. A detailed questionnaire and data on the findings is institute in the Appendix. 4. 3. Findings. The researcher institute out that the carrying out of the Balanced Score railroad card system did non succeed in this comp whatever. The reason for failure was non due to the technical nature of the BSC as a system but rather due to how it was implemented.Of great interest were the comments from four of the Tian-an Car Insurance Comp any(prenominal) fall apart charabancs interviewed. Three of the managers interviewed work with the Shanghai branch and one manager with the We Zhou branch. From the managers responses it became app bent that thither were serious inadequacies in the way the BSC system was implemented. The findings down the stairs are arranged in three parts. First, t he question that was comprise by the researcher, second the answers that the managers gave and fin in ally an interpretation of the findings.The findings follow a certain sequence that is think to reveal the order in which the change agent should baffle implemented the BSC system so as to attain success. It has been found that implementation should have started with a castation of the participations strategy, followed by acceptance by every player, training, motivation and communication. 4. 3. 1. The current status in the company with regard to the BSC The researcher posed the followers question Is the company currently using balanced scorecard as a exploit bar system?A manager answered that Tian-an Car Insurance Company started to wasting disease it in June 2008, but somewhere along the way they started experiencing some problems which forced them to stop to using it. Reasons splitn for stopping were that we found it is not in truth suitable for us, and that the duration for implementation was 8 months. This finding reveals a lack of appreciation of the BSC system. The BSC as research has shown is superior to traditional financial performance measures that worked well for the industrial era. This is a holistic system that complements the financial measures with operational measures on customer satisfaction, indispensable processes, and improvement activities operational measures that are the drivers of future financial performance. (Kaplan and Norton 1992) If the Japanese can successfully transplant their auto plants to America using processes that are superior to the American way of doing things then there is no way that the BSC can be faulted in the Chinese business post-up. (Franchesco & Gold 2005) 4. 3. 2. How the BSC was introduced to the companyThe response to the interview question Why would you choose it (BSC) as the performance measurement system at the beginning? reveals a fundamental flaw that led to the failure of the BSC system in this company. The Car insurance gross sales manager (S) replied that one of their old customers who was employed in an agency that was applying the BSC successfully recommended it to Tian-an Car Insurance Company. S somehow convinced the other branch managers F and H most the likely because the company did not have any performance measurement system.Management had a rosy idea of the BSC that it was successful and famous in the public. They did not take quantify to figure out how to implement the system but rushed to poach the change agent who apparently lacked the professional might to implement much(prenominal) a system in a brand new environment. A successful BSC system implementation requires that the spirit of the system be tuned with the business strategy. Before any action is taken top management must fall in love with the idea, and it has to be in sync with the kick and vision of the company.From the strategic train the change agent has to convince all stakeholders and through actively involving them in the formulation of divisional Key Performance Indicators (KPIs) get up every one to like and own the system. The managers do not even talk about how the employees fare with the system. This shows that information was not being shared from all sides in the company. 4. 3. 3. The BSC as a solution Despite the managements failure to implement the BSC system, when the question Why not to use it? was posed, the We Zhou branch sales manager (O) opined that we believed the balanced scorecard would increase our profit though, he had heard about some negative opinions about balanced scorecard. This positive erudition shows that there is hope that the BSC system can be properly implemented in the company. The fact that he associates the BSC system with increase in our profit shows that they are unless to grasp the basic BSC truth that improved financial performance is a product of a company that has worked on the following key BSC perspectives innovat ion and study, internal business processes, and customer care.(Kaplan and Norton 1992) 4. 3. 4. Training is core to a successful implementation of the BSC system The training aspect of BSC is two pronged. A thorough knowledge and taste of the how the system works is a must. Stake holders have to be train on how to develop individual KPIs, how and individual employees efforts ultimately contributes towards the companys bottom line and how the individual stake holder can benefit from adhering the BSC requirements. Secondly a key perspective of the BSC is innovation and learning.Employees have to be trained on the production processes, about new products and customer care. As some one put it a knowledgeable employee is to a greater extent productive because he has the tools and know-how, he deals better with clients, and he is more likely to come up with new product development ideas which are key to sustaining the profitability of the company. The honest answers three managers give in response to the interview question At the time you started using it did you have any training on this program? shows that lack of training greatly contributed to the failure of the BSC system to take off.The Car insurance sales manager (S) admitted that management did not set a particular training program to modernize all players about the BSC system. The once-a-month-meetings and booklets are insufficient. The responses of the Human resources manager (H) show a common thread. That he has heard some negative tales about the BSC. This manager has secure seen the BSC booklet and thinks its a bright idea. This is not the right attitude And coming from management for that It just shows how the initial introduction was flawed. That employee did not do a proper job as change agent in changing the mindset of the workers.That is why this manager regains that the company does not have enough time to train their ours employee about the tool. 4. 3. 5. A reward system must be embedded in the balanced scorecard system When asked Do you have any reward system related to the balanced scorecard? The Car insurance financial manager (F) replied that Maybe, he thought the reward is about the target to set about each department. The Human resources manager (H) candidly said No, there is no directly reward system about balanced scorecard. Absence of a reward system is yet another serious flaw revealed in this interview.As a best practices rule for BSC, the reward system should be embedded in the BSC. Every player in the system should know the rewards associated with achieving the goals outlined as well as the penalties for underperformance. When brainstorming on performance indicators consensus should be sought for rewards such as bonus, leave days, vacations, promotions, and so on for nigh performance on one side, and penalties such as warnings, fines and termination for poor performance. Added responsibilies and promotions and career paths are honest rewards for go od performers.4. 3. 6. As a performance measurement system, the BSC is rated as better than most others Despite implementation problems, the managers gave very encouraging views when asked to rate the BSC in the following question In your experience, how do you feel about the balanced scorecard as a performance measurement system? Advantages of the BSC system were outlines as follows The Car insurance sales manager (S) correctly responded that it clearly gives detailed information of the companys performance in both financial and non-financial areas. It shows the detailed intensity level and weakness of the overall company. The Car insurance financial manager (F) seconded that with the BSC it is easy to pinpoint what areas we need to focus on. Because of its robustness F also revealed that our shareholders decided to use balanced scorecard to measure the performance instead of only looking at the financial figures. Human resources manager (H) affirmed that he knew that the BSC i s a good tool to measure the performance while O the We Zhou branch manager knows that this too has a lot of advantages. On the flip side the managers do the following comments against the BSC system S said that the target part makes our employees very dissatisfied. They feel it is not fair. F did not see any short-term benefits accruing from applications programme of the BSC system. H observed that a lot of complaints had been raised by employees regularly. O thought that he wouldnt recommend the company to apply BSC because the tools creation is not mature in china. The negativity stems from poor implementation.The reason why employees see the targets as too high to achieve and hence due to frustration feel that it is unfair is because their targets were apparently developed by management. Management wrongly uses the BSC as a control tool instead of applying it as a performance measurement tool. If the users of the system are not allowed to choose the targets they can reasona bly achieve BSC can change from a friendly system that urges employees to higher levels of achievement to a demanding beast that stresses and drains employees power.With so many an(prenominal) multinationals relocating production plants to China and advancement in information technology turning the world into a global village, the opinion that the BSC concept is not mature in China doe not wash. 4. 3. 7. Company specific problems that lead to the failure of the implementation Internal constraints that lead failure in implementing the BSC system in Tian-an Car Insurance Company were brought out when the following research question was posed Why did you stop to use it, is there any disadvantages you can find? Following is a raft of company specific difficulties that the company faced during implementation as per the responses of managers S, H, F and O. An excess of indicators poor heading of the BSC resulted to so many indicators that others were left unaccounted for. Due to inabi lity to synchronize available resources with demand the company could not sufficiently satisfy the requirements of all the four perspectives. That is why one manager said We can not spend too much time on customers and employees investigation. The fear that questionnaire data collected by company employees from clients would be biased and not the true picture of the BSC perspective how our Customers view us. A completed balanced scorecard model for the business took too long. prognosis of Instant results The agent told us that it need spend some time to see the effect, I think BSC can not help in short-term decision making. A manager said. The BSC is a performance measurement system that directs decision makers toward long-term value creating activities. It is not meant be a measure of dealings with emergencies. The problem of size our branch is not large enough, so the advantages were not clearly identified Said F. Comparing benefits against costs (to the agent fee), there w as no good value for money. A unified approach would have given better results. The company has eight branches Resistance I found that there were many complaints from our employees. Someone felt it waste their time to response each indicator said H. A change management process would have sufficed. SBC used as a control tool managements lack of knowledge on how to use the BSC led to strictly following targets, and decreasing staff bonuses.This do others to doubt their ability and increased complaints. This was a case of managing staff instead of managing processes. After applying the BSC manager O could not fins any noticeable good performance in the period 4. 3. 8. Communication is the life blood of a successful BSC system That poor communication contributed to the failure to implement the BSC system in Tian-an Car Insurance Company is revealed by responses obtained from the question Do the managers and employees communicate regularly? The Car insurance sales manager (S) said N ot really, because our employees are really busy. But we have employees meeting in each Wednesday, we could communicate at that time. The Car insurance financial manager (F) said No, unless at employees meeting, but I just report some targets and requires. Comments will not be reflected to me. While the Human resources manager (H) said Yes, I communicate with employees regularly and they will have some complaints and suggestions. This finding suggests that the communications structure in this company is flawed.It could just be that the company has a top-bottom but no bottom up, horizontal and sloping communication. Additionally it is evident that complaints are only directed towards the human resource manager. 4. 3. 9. Tian-an Car Insurance Company management have no regrets and would consider implementing the system if given a second play The whole rounded nature of the BSC serves as an eye opener to any one who gets a chance to experience it. When a manager was asked After yo u quitted using the BSC, have you tried other performance measurement systems? He answered No, I think BSC introduced us to the world of performance measurement systems. Our employees have increased their knowledge about management performance and when our company becomes large enough, we will consider using it again. 4. 3. 10. Lessons Learnt To appreciate the fix of implementing the BSC, Tian-an Car Insurance Company managers gave a raft of lessons learnt that shows the true extend of their new understanding of performance measurement. This was in response to the following question each possible suggestions for using the balanced scorecard in your branch? The Car insurance sales manager (S) said that I think each level of a company should understand their Key Performance Indicators and Targets. The training of balanced scorecard should not be neglected. Company Car insurance financial manager (F) responded Key Performance Indicators and Targets should be set properly The Huma n resources manager (H) advised I think a good training on the balanced scorecard is more important than the other aspects of the system. Companies should let their employees understand the whole BSC process first.They should establish a feedback feature to facilitate communication from all directions so that management and employees can discuss and chastise the targets immediately. A proper appraisal mechanism should also be in place. The above lessons learnt are excellent and are important ingredients for best practices in the implementation of the BSC system in any company. 4. 4. Conclusion What you measure is what you get. (Kaplan and Norton 1992) Effective managers understand that performance measurement systems that focus on only one aspect like finance and production are not good enough.They realize that no single measure can provide a clear performance target or focus attention on the critical areas of the business. The balanced score card allows managers to look at the b usiness from four important perspectives the customer, internal, innovation and learning and financial perspectives. This checks the company from having too many or too few measures. It is a superior system. It is recommended that the Tian-an car insurance company adopts the balanced Score broadside system.