Introduction
The balanced scorecard is a top management and planning tool that combines the four
business perspectives, to assist organizations in understanding and achieving their goals and
objectives. It is used to communicate the company’s objectives, strategically allocate work,
prioritize resources and projects, and measure progress based on the set objectives (Kaplan &
Norton, 2001). This paper seeks to give a view of the BMW Balanced Scorecard while looking at
the performance measures of the four perspectives, finance, customers, internal business
processes, and innovation.
Determine and discuss two performance measures that should be tracked for each
of the balanced scorecard areas of:
finance
The first point of perspective in the Balanced Scorecard is Finance. This perspective
focuses on how its stakeholders perceive the company (Kaplan & Norton, 2001). The
performance measures used to evaluate the successful accomplishment of the financial
perspective are the return on the capital employed and the operating expenses of BMW.
The return on the capital employed is calculated by giving the ratio between the
organization’s profitability and the efficient use of money. The higher the return, the higher the
profit assigned to the stakeholders, and the better the efficient use of the company's capital.
BMW posted an 8.34% rate, which is a relatively weak return on capital (Trading Economics).
This translates to lower profits offered to the stakeholders of the company.
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The second performance measure in the financial perspective is the operating expenses
ratio. The operating expenses refer to the expenditure incurred in the day to day running of the
organization that is not directly linked to the production. These include commissions, rent, taxes,
travel, employee benefits, and pension contributions. It is the ratio between the operating
expenses and the revenues for the organization, expressed as a percentage. A standard operating
cost ranges between 60% to 80%, but the lower it is, the better for the stakeholders. BMW’s
operating expenses ratio is 96.85% in the last year, which is exceptionally high (Trading
Economics).
Customers
The second perspective on the balanced scorecard is the customers (Kaplan & Norton,
2001). This perspective focuses on how to achieve the set goal by appealing to their customer
base. The performance measures are customer satisfaction and customer retention.
Customer satisfaction is measured by how much the clients like the product and the
service given by the staff. BMW uses Qualtrics to assess its customer's levels of comfort to their
cars. After each service visit and vehicle purchase, the client is asked to complete a four-question
survey. This allows the organization to understand its customers and offer improved after-sale
services, enhancing customer satisfaction.
The retention of customers is another performance measure for the second perspective.
The ability of an organization to retain its current client base is vital to its success (Figge et. al,
2002). BMW has managed to keep most of its clientele by providing a variety of vehicles for the
customers to choose from at each stage of their lives. The staff values the views and input of
their customers, making the clients feel like part of the family.
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Internal Business Processes
The third perspective is the Internal Business process, which focusses on the procedures
the company need to excel at to achieve the set goals (Kaplan & Norton, 2001). The performance
measures for this perspective are reworking and the process cycle efficiency.
Reworking refers to the costs and efforts required to disassemble, repair, replace, and
reassemble the defective item, which in BMW’s case are the cars. Hence, BMW has adopted the
use of robots in different stages of its production process to reduce possible human error, thereby
reducing any reworking instances.
Process cycle efficiency focuses on the output based on a unit of input. Since processes
are repeated aspects of an organization, it is possible to optimize for better results. The process is
more efficient when the ratio is higher (Figge, et.al, 2002). BMW applies the principles of lean
production, which aims to cut costs and make the business processes efficient. Lean production
can be employed in all aspects of the business, form the production of the cars to the selling and
handling of customers.
Innovation/learning.
The final perspective is innovation and learning, which focuses on the company's ability
to change and improve as needed (Kaplan & Norton, 2001). This is measured by the employees’
morale and their willingness to give suggestions.
An organization's success and efficiency are based on the employee's morale, which is
the attitude, confidence, and satisfaction they have towards their work. BMW boosts its
employees' morale by letting them know that their company cares for them and hiring people
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who work well together (Figge, et.al, 2002). This creates a family-like environment where
employees are motivated to give their best to their jobs.
Besides, listening to employee suggestions has made the Innovation perspective
successful for BMW. The managers and dealers consider interacting and learning from their staff
an integral part of the success of the company (Figge et.al, 2002). It encourages their staff to
voice their views, concerns, and suggestions on how to better the company and their service
delivery
Conclusion
The balanced scorecard provides a holistic view of how an organization can accomplish
its objectives. It enables the leaders to realize that for the financial aspect to flourish, the other
three perspectives have to be taken care of as well.
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References
Figge, F., Hahn, T., Schaltegger, S., & Wagner, M. (2002). The sustainability balanced
scorecard–linking sustainability management to business strategy. Business strategy and the
Environment, 11(5), 269-284.
Kaplan, R. S., & Norton, D. P. (2001). Transforming the balanced scorecard from performance
measurement to strategic management: Part I. Accounting horizons, 15(1), 87-104.
TRADING ECONOMICS. "BMW | Operating Expenses." TRADING ECONOMICS | 20 Million
INDICATORS FROM 196 COUNTRIES, Oct. 2019, tradingeconomics.com/bmw:gr:operating-
expenses. Accessed 30 Oct. 2019.