If you are a business owner considering utilizing a framework for strategic management, you have definitely heard of BSC and KPIs. Although these acronyms may strike fear into novices’ hearts, these are globally used to assess the performance of various institutions, starting from schools and government agencies, and finishing with military units and small online businesses. Ever since its introduction in the early 1990’s, this tool has gained tremendous popularity because of its integral approach to business assessment: in addition to traditional financial and timing perspectives, developers of the Scorecard has offered three non-financial areas: Education and Learning, Customer, and Internal Processes Perspectives. Due to these aspects this performance evaluation system can give a broad view to what is happening inside your company. However, there are both cons and pros of this approach. Below we will try to point out both positive and negative sides of this tool on example of a hotel business.
It is crucial to find a reliable officer who can adequately design and identify the most essential constituents of your hotel business. Individual managers belonging to different departments may try to show their divisions as the most important elements of the company (the room service managers may focus on their job, while hotel restaurant managers may consider meals as the keystone of the whole enterprise). This is why it is a great idea to hire an unbiased specialist or independent manager to design the BSC and make up a list of the key performance indicators.
Advantages: an experienced, unbiased manager can create a perfect Scorecard template for your particular hotel unit or whole network. In this case the BSC will be a great tool in analyzing the hotel’s success and seeing the cause-and-consequences relations between financial and non-financial perspectives.
Disadvantages: a manager with personal preferences and inclinations can create a wrong template with irrelevant KPIs (usually, too narrow to provide the holistic view of the company’s state of affairs). Wrong KPIs make the whole system hardly comprehensible and useless. Moreover, wrong indicators can lead to wrong conclusions and decisions which can dramatically affect a good business structure.
It is impossible to get any assessment without gathering data. In fact, the whole Balanced Scorecard is about collecting and analyzing data. But how precise is information you get from your managers and customers?
Advantages: in case you get information from unprejudiced source, it serves as a great tool in evaluating your customers satisfaction and other aspects. For instance, you can use the service of ‘mystery shoppers’ for your hotel unit: send them to the restaurant, to the reception hall, or wherever to get the evaluation of service quality from the third party. Mystery shoppers can be found in numerous marketing research agencies.
Disadvantages: ongoing reports can be very distracting and can decrease the overall productivity. Personnel may also take the BSC idea without enthusiasm and fill out the forms in haste. Moreover, sometimes KPIs may imply getting of a very obscure information which simply cannot be measured in figures.