Building and Implementing a Balanced Scorecard Model at Cihan University Requirements and Steps

Transcription

1 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat A. Madah Dr. Imad Shihab Ahmad Khurram Sutan Head of Business Administration Business Administration Assistant Lecturer Department Department Nasrat_a_rawi@yahoo.com imadsa1986@yahoo.com K.sutan@msn.com Cihan University Erbi Kurdistan Region, Iraq Cihan University Erbi Kurdistan Region, Iraq Cihan University Erbi Kurdistan Region, Iraq Abstract The aim of this research is to buid a baanced scorecard mode for the Cihan University through identifying requirements as we as the steps necessary for successfu impementation in this university that is ocated in Erbi / Iraq. This requires using a specific mode that incudes pre-identified steps designed to achieve the research objectives. The probem of this research is to identify the sets of requirements and steps needed to buid and impement a viabe baanced scorecard as a too to be used to evauate strategic performance at Cihan University and how this university can use this proposed mode of a Baance Scorecard ( BSC ) efficienty and effectivey to achieve its strategic objectives. The main concusion of this research is that; there are different methods that can be used by any organization to buid and impement a baanced scorecard, based on the organization's vision, strategies and vaues. Key word: Baance Score card, Mode, Cihan University Introduction To manage and depoy organizationa resources in such a way as to deiver and fufi organizationa objectives many toos, techniques and frameworks have deveoped to aid managers in verifying and evauating business and resource performance. This research focuses on one important technique: the baanced scorecard. This research suggests that the successfu mode of BSC may depend on designing and impementing the mode that suits the business specia strategic objectives thus to improve corporate performance. The baanced scorecard may probaby be considered the most popuar technique in this respect. Originay deveoped as a performance measurement too, the scorecard is now associated increasingy with strategy impementation. It acts as a management framework with the potentia to identify and expoit organizations key vaue drivers to their best strategic advantage. This research is divided into four chapters. The first chapter, focused on the research methodoogy by showing the research probem, importance, objectives and mode. The second chapter highights the theoretica aspects of the researched issues. Chapter three entirey invoves the empirica section by stating data required and anaysis in order to estabish and impement a baanced scorecard mode especiay designed for Cihan University. Research concusions are provided in the concuding chapter. Chapter 1: Research Methodoogy This chapter wi provide a genera background of this research by keying out the basic ideas reated to its probem, importance, objectives, and mode. 1.1 Research Probem and Importance Research Probem In today's rapidy growing economy, organizations are constanty ooking for means to improve their business processes and increase output to achieve their goas and objectives. There is eventuay a certain need to monitor pans as we as achievements to avoid any kind of faiures or deviations that may ead to more difficuties and compications. In other words, it is necessary to measure performance and take precautions to prevent any probems that may cause a gap between panned strategies and what happens in the rea word. Different frameworks and reference modes for measuring business performance deveoped and offered from a variety of origins, such as Financia Statement Anaysis, Economic Vaue Added, Activity-based costing and Quaity Management modes etc. However, these modes may not be sufficient enough to aign strategy with actions and may prove different imitations incuding the faiure in controing the constructed or panned vaues, the focus on resuts rather than on procedures and the imited measurement that is centraized on the tangibe assets ony. In genera, we can say that organizations in the past The current issue and fu text archive of this journa is avaiabe at hhttp://aocrj.org/archive/ Academy of Contemporary Research Journa V II (III), , ISSN: X Resource Mentors (Pvt) td (Pubisher) Received: May 2013 Revised: June 2013 Accepted: Juy

2 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, focused their attention on measuring performance depending on their operationa and financia resuts. Nevertheess, this does not contribute to the measurement of the actua success of the organization as these financia resuts may refect a beneficia situation for it, athough they may be toward more of a decine stage because other important factors are not evauated. In a cases, it's necessary to point out that the performance evauation process was revised and evoved over time. We may see the current resut of this deveopment may be the innovation of the baanced scorecard. Nevertheess, this new technoogy is not effortess to be adopted, it needs a huge amount of data and information which are hard to assembe, and it aso entais steps and procedures that need to be appied correcty. Buiding and impementing a baanced scorecard mode is the key to reducing osses and initiating innovation and growth. Athough it's not an easy task, many organizations were abe to successfuy buid and impement a baanced scorecard. Then, we need to wonder if it wi be the case for Cihan University, wi it be abe to acquire a the necessary information to estabish a database for impementation of such mode?. From the above discussion, we can summarize the probem of this research through the foowing questions: What are the requirements and steps needed to buid and impement a baanced scorecard mode especiay designed as a too to evauate strategic performance at Cihan University? And how can this organization carry out the mode identified requirements, steps and procedures efficienty and effectivey to achieve their strategic objectives? Research Importance The importance of this research can be easiy iustrated through the foowing stages: 1. This research discusses a very important and modern issue that is buiding and impementing a viabe baanced scorecard mode. 2. As this research extends the possibiities of adopting and use of baanced scorecard mode in one of Iraqi private sector organizations to achieve a high degree of strategic contro. 3. The research provides a better understanding of the subject studied through presenting theoretica coverage of issues reated aspects of the fied. 4. The outcomes and resuts which can be hed at the concusion of this research. 5. The opportunities offered by this research for more possibe future studies at the eve of reated points of the baanced scorecard and strategic performance evauation. 1.2 Research Objectives We can summarize the objectives of this research according to the foowing points: 1. Presenting the theoretica aspects of the subject studied (Baance scorecard). 2. Soving the research probem by proposing a suggested baanced scorecard mode for a seected Iraqi private organization (Cihan University-Erbi) identifying the requirements, steps and procedures for successfu impementation. 3. Attaining acceptabe resuts and concusions. 1.3 Research Mode In order to achieve the objectives of this research, the foowing steps may represent road map to achieve the research objectives: 1. Introducing a theoretica component to highight Baanced Score Card issues. 2. Describing the rea word of the Cihan University as basic requirement to use the methodoogy of this research. 3. Attempting to organize a baanced scorecard for the organization studied and assessing the potentia difficuties and consequences of impementation. 4. Identifying the possibe steps taken to get rid of the probems incuded within the construction phase of a baanced scorecard mode, which are inherent in the rea word of the organization studied. 5. Demonstrating and suggesting the needs and requirement to enhance the chances for successfu impementation and utiization of a baanced scorecard by the organization studied and accompishing a reated benefits effectivey. 6. Offering a BSC mode, anayzing the outcomes, and major concusions. Chapter 2: Overview of the Baanced Scorecard (BSC) The baanced scorecard was deveoped in the 1990s by Robert S. Kapan and David P. Norton, and was pubished in the Harvard Business Review in 1992 (Rigby, 2001, 104). It s a strategic panning and management system that is used extensivey in business and industry, government, and non-profit organizations wordwide to aign business activities to organization vision and strategy, improve interna and externa communications, and monitor organization performance against strategic goas ( The baanced scorecard is a management practice that seeks to compement drivers of past performance (financia measures) with the drivers of future performances, such as customer satisfaction, deveopment of human and inteectua capita, and earning ( Thus, we can say that the baanced scorecard is a Strategic methodoogy used in evauating performance and tying its resuts with the organization's strategy. Then, the baanced scorecard is more distinctive from other performance approaches which do not offer this sort of aignment (Lawrie and Cobbod, 2004, 615). Figure (1) iustrates the history and evoution of the baanced scorecard. 107

3 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, The Baanced Scorecard 20 th Century Tota quaity management Stock Reengineering Six Sigma Efficiency & capabiity Customer satisfaction 19 th Century Accounting Productivity Standardized comparison Competitive advantage 15 th Century Ledger Financiay Operationay Strategicay Figure (1): Evoution of the Baanced Scorecard. Source: Created by researcher according to references used in this research. 2.1 Perspectives of Baance Scorecard There are four perspectives reated to the baance scorecard technique by combining them, Kapan and Norton attempt to estabish the BSC as a representation of an organization s shared vision. Then, the BSC becomes not just a too for measurement, but aso a too for strategic management. These are vauabe perspectives. 1. The financia perspective. 2. The Customer Perspective. 3. The Interna Business Process Perspective. 4. The Learning and Growth Perspective (Simth; 2007; 169). Now, we wi cover each of baance scorecard technique perspectives according to (Kapan and Norton; 1996; 47-49, Lawrie and Cobbod, 2004, , and Muraidharan, 1997, 64-70): The Financia Perspective The financia intention typicay reates to profit, return on investment and paying dividends to investors etc.. These criteria are important for maintaining financia stabiity and avoiding organizationa faiure. Kapan and Norton do not ignore the traditiona demand for financia data. Timey and accurate funding data wi aways be a priority, and managers wi do whatever necessary to provide it. In fact, often there are more than enough handing and processing of financia data. With the impementation of a corporate database, it is hoped that more of the processing can be centraized and automated. But the point is that the current emphasis on Financias eads to the "unbaanced" situation with regard to other perspectives. There is perhaps a need to incude additiona financia-reated data, such as risk assessment and cost-benefit data, in this category. The Customer Perspective Managers identify the customer and market segments in which the business unit wi compete and business unit's performance measured. The core outcome measures incude customer satisfaction, customer retention, new customer acquisition, customer profitabiity, and market and account share in targeted segments. Aso, the customer perspective shoud incude specific measures of the core customer outcomes of the vaue propositions that the business wi deiver to customers. These segmentsspecific drivers of core customer outcomes represent those factors that are critica for customers to switch to or remain oya to their suppiers. For exampe, customers coud vaue short ead times and on-time deivery or a constant stream of innovative products and services. On the other hand, suppier shoud be abe to anticipate their customer's emerging needs and capabiities to deveop new products and approaches to satisfy those demands. As a summary, recent management phiosophy has shown an increasing reaization of the importance of customer focus and customer satisfaction in any ine of work. These are eading indicators: if customers are not satisfied, they wi eventuay find other suppiers that wi meet their needs. Poor performance from this perspective is thus a eading indicator of future decine, even though the current financia picture may ook good. The customer perspective enabes business unit managers to articuate the customer and market-based strategy that wi deiver superior future financia returns. 108

4 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, The Interna Business Process Perspective The interna business process measures focus on the inner processes that wi have the greatest impact on customer satisfaction and achieving an organization's financia objectives. It reveas two fundamenta differences between the traditiona and the BSC approaches to performance measurements. Traditiona approaches attempt to monitor and improve existing business processes and they may extend beyond financia measures of performance by incorporating character and time-based metrics. But they sti focus on improvements of existing processes Whie, the scorecard approach usuay identifies entirey new processes at which an organization must work in order to meet cient and financia objectives. For exampe, a company may reaize that it must deveop a process to anticipate customer needs or one to deiver new services that target customer's vaue. The BSC interna business process objectives highight the processes which are most critica for an organization's strategy to succeed and it may not be currenty performing at a. As iustrated in Figure (2), the BSC approach incorporate innovation processes into the interna business process perspective. Innovation Operation Customer need identified Design Deveop Make Market Service Customer need satisfied Time to market Suppy chain Figure (2): Innovation Processes within Interna-Business-Process Perspective. Source: Kapan and Norton; 1996; 36. Learning and Growth Perspective The fourth perspective of the Baanced Scorecard, earning and growth, identifies the infrastructure that the organization must buid to create ong-term growth and improvement. Organizationa earning and growth come from three principa sources: peope, systems, and organizationa processes. The financia, customer, and interna-business-process objectives of the Baanced Scorecard typicay wi revea arge gaps between the existing capabiities of peope, systems, and procedures and what wi be needed to achieve breakthrough performance. To cose these gaps, businesses wi have to invest in re-skiing empoyees, enhancing information technoogy systems, and aigning organizationa procedures and routines. Lasty, in order to compete the covering required for this section we wi ask the foowing important questions and provide an answer for them: Are the four perspectives sufficient? Is it necessary for companies to use a? The four perspectives of the Baanced Scorecard have been found to be robust across a broad variety of companies and industries. But the no mathematica theorem exists to prove that the four perspectives are both necessary and sufficient. We have yet to see companies using ess than these four perspectives depending on industry circumstances and a business unit's strategy. Simiary, if strong suppier reationships are part of the strategy, eading to breakthrough customer and/or financia performance, the outcome and performance drivers to measure suppier reationships shoud be contained within the organization's internabusiness-process perspective. But we don't beieve that a stakehoders are automaticay entited to a position on a business unit's scorecard. Then, the scorecard outcomes and performance drivers shoud measure those factors that create competitive advantage and breakthroughs for an organization ( Put differenty, the Baanced Scorecard transates vision and strategy into objectives and measures across a baanced set of views. The scorecard incudes measures of desired outcomes as we as processes that wi drive these outcomes for the future (Fabozzi and Peterson; 2003; 906). To provide a better understanding Figure (3) presents an exampe of a baance scorecard for Eectric Utiity Inc. For more than 20 years, Eectric Utiity Inc. ed the way in deveoping the highest-quaity conferences, seminars, workshops, and courses designed excusivey for the energy industry. They offer soutions, not just vacuous information, and seek to assist industry professionas make informed, sound decisions to strategicay improve their position in today's chaenging business environment ( Like most baanced scorecards, Eectric Utiity's BSC consists of four main perspectives (Financia, customer, interna, earning & growth) and each perspective is vaued by its target, measure, target and initiatives. 109

5 Financia Customer Interna Learning Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, Strategic Priorities Objectives Measures Targets Initiatives Financiay strong 1. Deight the customer 2. Win-win deaer reations 1. Buid the franchise 2. Increase customer vaue 3. Operationa exceence F1.ROCE F2.Asset utiization F3.Profitabiity F4.Cost eader C1. Deight the targeted customer C2. buid win-win reations with deaer I1. Innovative products and services I2. Cost eader I3. Improved output 1.ROCE 2.Cash fows 3.Net margin 4.Voume growth 5.premuim ratio 1.Share per segment 2.Deaer gross profit growth 1. New product ROI 2. Deaer quaity score 3. Yied gap 4. Inventory eves 5. Run out rate 6. Perfect orders 1. (18%) 2. (11%) 3. (5%/yr) 4. (45%) 5. ($2b) 1. (45%) 2. (25%) 1.(20%+) 2.(4.5+) 3.(15%)saes 4. (<90%) 5.(99%+) 1. Asset disposition program. 2.Store aiances Deaer committee 1.Review program 2.Saftey training 1. Motivated and prepared workforce L1.Cimate for change L2.Competencies 1.Empoyee survey 2.Persona BSC% 3.Strategic competencies 1.(>4.8) 2. (80%) 3. (85%) 1.Skis program 2.Competency Figure (3): Eectric Utiity's Baance Scorecard. ROCE: Return on Capita Empoyed. Cacuate as profit before interest and tax divided by the differences between tota assets and current iabiities. Source: Reations between Strategy and Baance Scorecard Strategy is the direction and scope of a company over the ong-term, which achieves advantages for the organization through its configuration of resources within a chaenging environment, to meet the needs of markets and to fufi stakehoder expectations. The singe most important ski in any business is the abiity to transate strategy into action. This is increasingy difficut in arger or more compex organizations, where the distance between those who formuate the strategy and those who carry it out is significant. With size and compexity comes the necessity for communicating strategic intent and for providing a management framework that aigns the capabiities of the business with the demands of the competitive marketpace (Neey and others, 1994, 140). A Fortune magazine artice reported, based on a survey of management consutants, that ess than 10% of strategies are successfuy impemented. Tom Peters referred to that figure as widy infated, because suggesting that formuating strategy is not a vauabe activity if it can t be transformed into action. This is the reason behind the wordwide fa of strategic panning over the past two decades. What s needed is not more panning, but a way to transate strategy directy into action ( As the economy moves rapidy away from the Industria Age to the Information Age, which is characterized by goba and knowedge-based competition, every organization must rethink the underying premises on which it competes. As the goba economy becomes more tighty connected, each business must estabish its own feedback systems to effectivey monitor its own activity and to achieve its own strategic objectives (Muraidharan, 1997, 66). The management approach that enabes businesses to effectivey harness their capabiities and achieve their strategic objectives represented by the use of a Baanced Scorecard to transating strategy into action. Figure (4) expains how the baance scorecard is an important part of deveoping a strategy Baance Scorecard Vision and Mission Strategic Strategy Map Execution Monitor and Adjust Strategic Initiatives Figure (4): Reations between Strategic Process and the Baance Scorecard. Source: Smith; 2007; Buiding a Baanced Scorecard There are five essentia requirements for making an efficient and effective Baanced Scorecard: 1. Financia backing and commitment of the top executive management: managers in high positions need to demonstrate a high eve of dedication and cooperation with their subordinates. They aso need to provide a degree of support not ony to their empoyees but aso to the whoe constitution and what it stands for. 2. Estabishing appicabe strategies: athough impementation of the BSC approach is the 110

6 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, most chaenging, seecting and formuating strategies is aso difficut. Strategies need to be feasibe, understandabe by empoyees, sensibe and reated to the vision and objectives of the company in a way that they provide the best possibe benefits. 3. Setting up strategies connected to the cause and effect reationship. 4. Estabishing we baanced measures. 5. Ensuring empoyee participation: top management is not the ony part of reaching the strategic objectives required. On the contrary, empoyees constitute the most essentia component in any society. For this reason, their participation and contribution to the panning and execution process must be guaranteed through motivation, rewards and promotions, heathy and safe working environment and we deserved saaries ( Figure (5) iustrates the basic steps of the generaized mode for buiding and estabishing a baance scorecard, which are discussed beow. Identify Potentia Stakehoder Segments 9. Reassess Strategy 1. Seect Stakehoder Segments 8. Improve Critica Processes 5. Link to Interna Processes 2. Identify Target Segments' Requirements 7. Estabish Metrics and Set Goas 6. Estabish Process Improvement Priorities 3. Determine Performance Gaps Figure (5): Basic Steps of the Generaized Mode for Buiding a Baance Scorecard. Source: 1. Seecting stakehoder strategies: invoves recognition of the concept that companies cannot satisfy a needs to a potentia customers and therefore they must focus their imited organizationa resources on those chosen market segments. 2. Identifying target segments requirements: expains how each customer segment is characterized by its own unique set of requirements. These customers examine potentia suppiers against these requirements and make a decision based on what meets their aggregate needs. 3. Determining performance gaps: by inquiring targeted customers how companies are doing in meeting their diverse demands. The aim is to cose these gaps in order to maintain or improve reative competitive position. 4. Setting stakehoder improvement priorities: Improving requirements that are unimportant to a targeted customer segment is often a waste of precious organizationa resources that coud better be used esewhere. It s therefore essentia that companies focus their improvement efforts on major gaps in important customer requirements. The combination of high importance and ow performance is the ogica basis for ranking opportunities for improvement. 5. Linking stakehoder requirements to interna processes: is coection of interacting processes whose coective output is essentia for creating stakehoder vaue and identifies the reationship of each process within the organization to the key stakehoder requirements identified in step Estabishing process improvement priorities: invoves knowing which interna processes drive the various targeted stakehoder requirements and which of those requirements are most in need of strategic improvement, 4. Set Improvement Priorities companies are in a position to set interna process improvement priorities. Once competed, they can identify the main points for changes in the way those invoved shoud do their day-to-day jobs. 7. Estabishing metrics and goas for the process improvement priorities: companies face severa questions incudes identifying the interna process metrics that are the drivers of the desired improvement in outcomes. Once companies have successfuy identified them, they need to set time-based goas which are hard but not impossibe to attain. Companies have a imited improvement capacity, asking them to do everything wi guarantee that the easy jobs are done first, not necessariy the most significant ones wi get done first. Companies need to fiter the priorities so they achieve maximum stakehoder vaue in other words, making the baance scorecard. 8. Improve critica processes: entais how Individuas invoved in mutipe processes shoud focus first on those that ie aong this critica strategic path. When teams or individuas do not have a cear roe in strategic improvement priorities, they shoud sti spend a portion of their time improving the way that they manage their day-to-day chorespub 9. Reassess strategy: Companies need to re-evauate the seected strategies and behaviours to ensure efficiency and maintain effectiveness to accompish their strategic objectives according to the chosen operation pans (Smith; 2007; ). However, Kapan and Norton defined the foowing fourstep process, iustrated in Figure (6), that has been used across a broad range of organizations: 111

7 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, Define the measurement architecture- When a company initiay introduces the Baanced Scorecard, it is more manageabe to appy it on the strategic business unit eve rather than the corporate eve. However, interactions must be considered in order to avoid optimizing the resuts of one business unit at the expense of others. 2. Specify strategic objectives- The top three or four objectives for each perspective are agreed upon. Potentia measures are identified for each objective. 3. Choose strategic measures- Measures that are cosey reated to the actua performance drivers are seected for evauating the progress made toward achieving the objectives. 4. Deveop the impementation pan- Target vaues are assigned to the measures. An information system is deveoped to ink the top eve metrics to owereve operationa measures. The scorecard is integrated into the management scheme ( Deveop the impementation pan Choose strategic measures Define the measurement architecture Specify strategic objectives Figure (6): Kapan and Norton BSC Steps. Source: Created by researcher according to references used in this research. Finay, we can determine the foowing principes for buiding a baanced scorecard: 1. Cause-and-Effect Reationships: A strategy is a set of hypotheses about cause and effect. A propery constructed scorecard shoud te the story of the business unit s strategy through a succession of cause and- effect reationships. The measurement system shoud fix the reationships (hypotheses) among objectives expicit so that they can be managed and vaidated. Every objective seected for a Baanced Scorecard shoud be part of a chain of cause-and-effect reationships that communicates the substance of the business unit s strategy to the governing body. 2. Outcomes and Performance Drivers: A Baanced Scorecards use certain generic measures. These generic measures (such as profitabiity, market share, and customer satisfaction) tend to be outcome measures, which refect goas common across many strategies and industries. The performance drivers, the ead indicators, are the ones that tend to be unique for a particuar scheme. A good Baanced Scorecard shoud have an appropriate mix of outcomes (agging indicators) and performance drivers (eading indicators) that have been customized to the business unit s strategy. 3. Linkage to Financias: With the production of change programs under way in most organizations today, it is easy to become preoccupied with goas (quaity, customer satisfaction, innovation, and the ike) for their own sake. Whie these goas can ead to improved business-unit performance, they may not achieve their purpose if they are chosen as ends in themseves. A Baanced Scorecard must retain a strong emphasis on outcomes, especiay financia ones. Utimatey, causa paths from a the measures on a scorecard shoud be inked to financia objectives (Norton; 1999; 10). 2.4 Advantages and Disadvantages of Baanced Scorecard The foremost advantage of appying the baanced scorecard method is that by ooking at four aspects of a company's performance, you reay do get a baanced view of company performance. Unike traditiona methods of tracking the financia heath of an occupation, the baanced scorecard gives you a fu picture as to whether your company is meeting its objectives. Whie it may seem that a company is doing we financiay, it may be that customer satisfaction is down, empoyee training is inadequate, or that the processes are outdated. The second advantage, by appying a baanced scorecard approach, the immediate future isn't the ony thing being measured. Oftentimes when an accountant sees the financia bottom ine (maybe the company isn't doing we), suggestions are given that are immediate, but do not consider the ong-term. Using baanced scorecards aows for stakehoders to ascertain the heath of short, medium, and ong term objectives at a gance (Fabozzi and Peterson; 2003; 910). Finay, by using a baanced scorecard, a company can be sure that any strategic action impemented matches the desired outcomes. Using a baanced scorecard shoud resut in: 1. Transation of strategy into measurabe parameters. 2. Communication of the strategy for everybody in the house. 3. Aignment of individua goas with the firm's strategic objectives- the BSC recognizes that the seected measures infuence the behavior of empoyees. 4. Feedback of impementation resuts to the strategic panning process. 5. Improved processes, Motivated/educated empoyees, Enhanced information systems, Monitored progress, Greater customer satisfaction, and increased financia usage. On the other side, the basic disadvantages reated to the use of baanced scorecard incude the foowing: 1. The baanced scorecard takes a ot of time and thinking. It is not a too you can just think up one night to sove a probem. Instead, it is recommended that you hod a meeting to pan out what goas you woud ike to see your company reach in each of the four above areas. Once you have ceary stated objectives, you can then begin to break down these objectives to bring them to reaity. 2. Whie the baanced scorecard gives you an overa view of the four areas for concern in business growth and deveopment, these four areas do not paint the whoe picture. The financia information incuded on the scorecard is defined. Instead, to be successfuy impemented, the baanced scorecard must be part of a arger strategy for company growth that incudes accounting methods. Third, a gap may resut from misunderstanding of empoyee participation. 112

8 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, A ot of companies use metrics which is not suitabe for their own circumstances It is fundamentay important that when they have to use BSC to make the information being foowed pertinent to your needs.otherwise there is no benefit to use metrics. ( In the end, the foowing are potentia pitfas that shoud be avoided when impementing the Baanced Scorecard: 1. Lack of a we-defined strategy: The Baanced Scorecard reies on a cear strategy and an understanding of the inkages between strategic objectives and the metrics. Without this foundation, the impementation of the Baanced Scorecard is unikey to be successfu. 2. Using ony agging measures: Many managers beieve that they wi reap the benefits of the Baanced Scorecard by using a wide range of non-financia measures. However, care shoud be taken to identify not ony agging measures that describe past performance, but aso eading measures that can be used to pan for future performance. 3. Use of generic metrics: Usuay it is not sufficient merey to adopt the metrics empoyed by other successfu firms. Each firm shoud put forth the effort to identify the steps that are appropriate for its own strategy and competitive position ( 113 Chapter 3: Empirica Section In this part of the research we wi attempt to estabish a baanced scorecard for Cihan University based on the theoretica section discussed in chapter 2. We wi begin by giving an overview of Cihan University. Then, we wi start by estabishing the suggested steps for creating Cihan University's baanced scorecard. After that, we wi hande the essentias needed for effective and efficient impementation. Furthermore, we wi introduce the expected benefits and potentia pitfas of the created baanced scorecard. Lasty, we wi present a proposed form of Cihan University's baanced scorecard based on the information gathered. 3.1 An overview of Cihan University It has been cear from the previous discussion that the sampe of this research represented by the Cihan University- Erbi. The seection of Cihan University as the organization studied depended on the foowing points: 1. Cihan University is the researchers current university. 2. The avaiabiity and abiity to assume the necessary data and information needed for the appication part of this inquiry. Cihan University is a private university, ocated in Erbi- Iraq. It represents one of the most important Iraqi private academic educationa institutions, which was estabished in (2007). Recenty Cihan University contains five main Coeges, each with various science departments (see Tabe 1). Tabe (1): Cihan University Coeges and Scientific Departments. No. Coeges Scientific Departments 1 Coege of Law and Dipomatic Reations 2 Coege of Sciences 3 Coege of Administrative and Financia Sciences 4 Coege of Engineering Law Department Dipomatic Reations Department Bioogy Department Computer Sciences Department Business Administration Department Accounting Department Banking and Financia Sciences Department Architecture Engineering Department Communications Engineering Department 5 Coege of Engish Engish Department The basic teaching anguage at Cihan University is Engish, giving the students the chance to foow internationa deveopments easiy and to act wordwide. In order to enabe a students to study in Engish, it offers, an intensive Engish anguage program during the first year of study. Furthermore, it is important since it focuses on the capacities and skis of graduates and is thus initiating more active contributions by schoars during their studies. The aim of Cihan University is to guarantee speciaized education in university subjects which wi be essentia for the job market in Iraq and the region in the future, resuting in the creation of Cihan University's vision "Your Gateway to Success". Athough it's a generic statement which coud be appied to any company in any market, Cihan University supports this assertion with a cear description of what this vision entais. In other word: Cihan University strives to provide a successfu path of high eve earning and educationa experiences through which students can achieve their ife dreams. Cihan University's mission is to be among the eading private Iraqi universities and to be internationay recognized, its objective is to provide exceence in education, to participate in the advancement of knowedge through research, and to serve its peope. Khan University strongy beieves that university education benefits directy from high quaity research that wi be carried out within the university itsef, and that new basic knowedge is new inteectua capita. Thus, the estabishment of centers of exceence in teaching and research joining forces across the boundaries of departmenta discipines, coeges and the university itsef is one of its principa strategies.

9 Financia Customers Interna process Learning & growth Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, Suggested Steps for Buiding Cihan University's Baanced Scorecard Steps for estabishing a baanced scorecard differ between systems depending on organizationa structure, vision, mission, and target market. Therefore, the foowing steps summarize our perspective for constructing a BSC for Cihan University: 1. Identifying the vision and strategic objectives of Cihan University. 2. Determining the needed strategies and the missions required to reach the chosen goas. 3. Constructing a strategic map. 4. Specifying the distinctive activity taken within the four perspectives (financia, customer, interna process, earning and growth). 5. Defining measures and performance eve. 6. Estabishing targets and initiatives. Now, wi discuss the previous steps in more detais: After identifying Cihan University's vision "Your Gateway to Success", we define its strategic objectives which are to guarantee speciaized education in university subjects which wi be essentia for the job market in Iraq and the region in future and to be among the eading private Iraqi universities. In addition, becoming internationay recognized, providing exceence in education, and to participate in the advancement of knowedge through research. Therefore, we can break down Cihan University's vision into four different views in reation to the four perspectives of the baanced scorecard: 1. Focusing our business on high quaity services for which we can estabish and sustain financia profitabe positions. 2. Being responsive to the demands of customers and intermediaries. 3. Being reiabe, dependabe and trustworthy. 4. Insuring superior knowedge, expertise and innovation. The strategic map is a diagram that describes how an organization creates vaue by inking strategic objectives in cause and effect reationships with each other in the four BSC perspectives (financia, customer, interna process, earning and growth). Hence, the strategic map is considered the foundation for effective impementation of the baanced scorecard. By connecting the strategic map's measures with one another in one graphica representation, strategic mapping can greaty assist in describing the strategy and to communicate the strategy among executives and their empoyees. This way aignment can be created around the strategy, which makes successfu impementation easier. Figure (8) represents Cihan University's strategic map and the reations between the measures of the four perspectives Expoitation of resources Preserve profitabe status Provide superior services Improve Customer Service Improve accounting systems Improve marketing & advertising systems Deveop interna processes through technoogy Effective & motivated empoyees Safe working environment Enhance cooperation & teamwork Boost creativity & innovation Figure (8): Cihan University's Strategic Map. Source: Created by Researchers 114

10 Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, Before constructing Cihan University's baanced scorecard we shoud identify its four perspectives: 1. Sharehoder vaue (financia perspective). 2. Customer satisfaction (customer perspective). 3. Operating effectiveness (interna process perspective). 4. Cihan University's workforce (earning and growth perspective). After presenting the four perspectives we can start buiding Cihan University s baanced scorecard. Each perspective consists of: 1. Objectives: what the strategy is to achieve in that perspective. 2. Measures: how progress for that particuar objective wi be measured. 3. Targets: the target vaue required for each step. 4. Initiatives: what wi be done to faciitate the reaching of the target? Today, we begin constructing Cihan University's baanced scorecard starting with the financia perspective in our case the sharehoder vaue: Objectives We wi deiver consistenty superior ong term vaue to Cihan University sharehoders and sustain profitabe positions. Measures Sharehoder vaues wi be evauated in terms of tota return in dividends pus share price appreciation. Targets Achieving a tota yeary return, that puts Cihan University financiay among the top 10 universities in the region thus, earning a steady increase in the vaue of shares 10% annuay. Initiatives Constructing state of the art faciities (educationa and eisure). In addition, upgrading existing faciities, this woud ead to an annua increase of student numbers, resuting in higher sharehoder vaue. Next the customer perspective (customer satisfaction) as a service provider, Cihan University must insure customer satisfaction: Objectives Cihan University wi provide the best vaue to customers through offering educationa exceence and meeting their ever changing needs and demands. Measures Each Cihan University coege or department wi deveop a statistica measure too. That wi be aimed at imiting our customer assessment of the overa vaue of our educationa services. Targets Cihan University wi continue to improve customer perception of the vaue of what it has to offer in terms of services and increasing the number of students by 15% annuay. Initiatives Cihan University wi fufi its objective through buiding reationships with customers, deivering the quaity education that it promises to students and coaborating with them and earning from their experience the strengths and weaknesses of Cihan University s educationa system, by conducting surveys and anayzing the resuts. And so, we move to operating effectiveness (interna process perspective) which is important since it serves as the foundation for any organization: Objectives Cihan University wi improve educationa standards by rethinking, correcting and improving business processes. Measures Making sure that the operating cost woud not exceed haf of the annua returns. Targets Cihan University aims to reduce its operating cost by 30% in the next 5 years. Initiatives Anayzing Cihan University interna processes on an annua basis to maintain and improve processes when needed. Making sure Cihan University possesses the exact number of empoyees, (hiring when needed and reeasing when excessive empoyees exist). Actions ike these can increase operating effectiveness and efficiency. Finay, Cihan University's workforce (earning and growth perspective) is responsibe for achieving growth and short-ong term goas. Without this perspective, the previous three woud be irreevant: Objectives Working with high integrity and ethica standards, and constanty striving to improve individua performance to aid Cihan University's growth and deveopment. Measures Performance standards for each individua that wi transform Cihan University s empoyees into a too for creating progress. Targets The target is to insure that 90% of empoyees achieve of the required performance standards. In addition, Cihan University wi monitor their progress toward growth on a reguar basis through forma and informa gathering of information and opinions from empoyees. In order to become a successfu empoyee at Cihan University the foowing requirements shoud be satisfied: 1. Working in an ethica and honest way. 2. Setting and meeting individua goas which are consistent with business goas. 3. Being motivated and excited about working at Cihan University. 4. Empoyees shoud fuy beieve in what they are doing. 5. Constanty striving to improve performance. 6. Deivering optimum resuts. Initiatives Conducting interna surveys targeting Cihan University s empoyees and comparing it to a benchmark survey, to monitor empoyee success eves. 3.3 The Requirements for Buiding Cihan University s Baanced Scorecard Buiding a baanced scorecard entais severa requirements, as discussed in the theoretica section, to guarantee successfu impementation and maintain aignment between the seected strategies and chosen activities. Each organization can vary from one another in this area. Thus, for Cihan University we found the foowing important requirements to ensure the effectiveness and efficiency of its baanced scorecard depending on its strategic objectives, mission and vision: 1. It is essentia for a members of top management to demonstrate tota commitment and devotion to the university and to the entire organization and for what it stands for. 2. Another important condition is to aim for reasonabe in hand strategies instead of being 115

11 Financiay secure Sharehoder vaue Make customer happy Customer satisfaction Operationa exceence Operating effectivene ss Motivated and Cihan University workforce Buiding and Impementing a Baanced Scorecard Mode at Cihan Dr. Nasrat Abdaraheem Madah, Dr.Imad Shihab Ahmad Khurram Sutan Academy of Contemporary Research Journa Voume II, Issue III, 2013, over ambitious and aim for unreaistic strategies, in order to avoid wasting of vauabe time and money. In other words remain within Cihan University s capabiities. 3. The measuring instruments used within the scorecard shoud be we baanced and we synchronized with the university s objectives. 4. Keeping Cihan University s workforce motivated through a successfu program of rewards, incentives, deserved promotions, earning what you deserve poicy and creating a safe working environment. Instead of being excusive to top management, these actions wi encourage empoyees to take part and contribute to the panning and execution of the university s strategic objectives. 3.4 The Expected Benefits & Pitfas of Cihan University s Baanced Scorecard Many eading organizations, corporations and even universities have impemented and used the baanced scorecard in some shape or another. Therefore, impementing such technique at Cihan University wi may attain and achieve various benefits: 1. Giving a cear view of whether Cihan University as an organization is propery achieving its objectives. Not ony financiay, but in a aspects such as empoyee performance and customer satisfaction. 2. Through Cihan University s scorecard the stakehoders and top management can measure the short, medium, and ong term success. 3. Cihan University can make sure that a impemented actions resut into desired outcomes, Strategic Priorities by comparing the strategic objectives with the desired targets stated on the scorecard. 4. One significant benefit is that corporate strategies can be communicated and distributed to everyone working at Cihan University. 5. Noticeabe improvement in interna processes because of the improved information systems, the constant monitoring of progress and instant detection of mistakes upon accruing. 6. Cihan University s scorecard wi greaty participate in creating a motivated and innovative workforce, which represents the core of the university s success. Using a baanced scorecard at Cihan University might aso resut in some potentia pitfas: 1. Creating a successfu scorecard requires a ot of thinking, dedication and expensive time. 2. Constructing and buiding a baanced scorecard invoves gathering and coecting a vast amount of data and information that entais the use of a ot of resources, peope and time. 3. It does not aways fuy compensate the financia aspect of conducting an occupation. 4. Cihan University s scorecard factors must be based and formed around the university itsef rather than adopting known successfu factors used by other organizations. Otherwise, the scorecard woud be meaningess and a waste of time and money. 3.4 Suggested Form of Cihan University's Baanced Scorecard Nowadays, we can estabish a proposed form of Cihan University's baanced scorecard according to Figure (9): Objective Measures Target Initiative Long term vaue to Cihan University sharehoders Sustain profitabe positions Provide the best vaue to customers Educationa exceence Identifying changing demands Improving educationa standards Improving interna processes Striving to improve individua performance deveopment Maintaining ethics Return on dividends Vaue of shares. Deveoping a statistica measure too Measuring customer feedback in vauing Cihan University s educationa experience Operating cost woud not exceed more than haf of yeary returns. Performance standards for each individua Achieving a high financia status Constant increase in share vaues 10% annuay Improve customer perception of the vaue of services Reducing negative feedback by our customers An annua increase of student numbers by 15% A 30% reduction in the operating cost in the next 5 years 90% of Empoyees meeting performance standards Figure (9): Cihan University s Proposed Baanced Scorecard. Source: Created by researcher. Improving university infrastructure Attracting more students Deivering the quaity education that Cihan University promise Coaborating with students to hep identify strengths and weaknesses and take improvement action Anayzing Cihan University interna processes on annua basis to maintain and improve processes Insta required standards Monitor empoyee success eves 116