Case Study on "Chadwick Inc. & Balanced Scorecard"

Case Study 4 pages (1156 words) Sources: 0

[EXCERPT] . . . .

Chadwick Inc. Case Study & Balanced Scorecard

Greenfield, to begin my presentation on the proposed implementation of the Balanced Scorecard process of performance evaluation, please allow me to outline the various advantages offered by this innovative strategic management tool. Due to the decentralized nature of Chadwick Inc.'s divisional structure, and the diversification of the conglomerate's various holdings, the traditional system of financial measurement currently in place has become convoluted and ineffective. By applying the typically short-term objectives necessitated by Return on Capital Employed (ROCE) to the relatively long-term strategic planning utilized by divisions such as Norwalk Pharmaceutical, Chadwick's upper management has severely limited the ability of divisional managers like yourself to measure performance and present operational results. While purely financial measures like ROCE are indeed useful in determining a division's relative level of success, it fails to account for the increasing importance of intangible assets such as customer loyalty, organizational culture, and productive relationships with distributors, manufacturers, and other essential components of the product delivery process. By implementing the systematic approach to performance assessment advocated by the Balanced Scorecard method, Norwalk Pharmaceutical can translate the divisional Business Strategy you have provided in Exhibit 1 of the case study into a clearly delineated set of objectives, measures, and targets.

The traditional managerial emphasis placed on financial measures has allowed managers to consider the concept of organizational achievement as the combination of various inputs and outputs, but while measures like ROCE are useful in orienting Norwalk's short-term priorities, this approach has proven to be incompatible with the long-term nature of Norwalk's processes. As a purveyor of ethical drugs for human and animal consumption, Norwalk Pharmaceutical is reliant on an intensive process of research, identification, testing, and governmental approval, a development cycle which typically takes 12 years to transform a promising compound into a viable drug ready for market. By shifting to the Balanced Scorecard approach to performance management, Norwalk's management can ensure strategic alignment with your recently devised Business Strategy, while enabling division managers to submit monthly reports to Chadwick's executive committee that more accurately reflect the pursuit of long-term organizational objectives.

As you can see below, in the sample Balanced Scorecard created for Norwalk Pharmaceutical, there are four distinct perspectives that this performance management tool informs: the Financial Perspective, the Customer Perspective, the Internal Perspective, and the Innovation and Learning Perspective. These four core components of the Balanced Scorecard are designed to reflect the Business Strategy you have provided in Exhibit 1 of the case study, which advised the Norwalk Pharmaceutical division to manage its portfolio of investments, satisfy customer needs, drive responsibility to the lowest level, and emphasize the development of personnel resources. Each of the four perspectives which form the basis of the Balanced Scorecard are then supported by the establishment of three goals, and three corresponding measures which can be used to assess the division's relative progress in accomplishing those goals. For example, the first goal of Norwalk's Customer Perspective is to develop brand loyalty and build a loyal consumer base, and the measurement technique used to gauge progress in this regard is the rate of customer retention associated with the division's brand name drugs.

The following review of the Balanced Scorecard's various goals and measures is intended to provide you with a firm grasp of this performance measurement system's construction and implementation. In addition, the rationale and justification for including each of these goals and measures will be provided, so that a more complete understanding… READ MORE

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