It threatens to make the company more efficient and transparent. Here is an account of how The Taj group implemented the scorecard, how it has helped them and how far they still have to go to completely benefit from it.
In 1995, STEM designed the Taj Executive Information System, which looked at various aspects of the organization through 30 performance indicators like occupancy figures, average room revenue, employee turnover, customer information, market segmentation and the like, based on the data available.
After spending a lot of time and money on it, the Taj finally didn't use the system because the measures were standalone performance indicators without link to a strategy. There were a lot of reports but when the managing director asked a more detailed question, no information was available.
The software had 500 data elements, you could tie and slice any piece of information, but how much of that was relevant to decision making?
The balanced scorecard has changed the decision making process at the Taj. Currently, Taj organizes its monthly meetings based on the Management Information System but in the next six or seven months, they will be able to change to a scorecarding system, which reports right down to the data element level. When you look at a bsc report, you can also go down to the sub sub sub sub elements.
The management, whether at the corporate level, middle level or the hotel unit level, had to sit down and define their measure elements. For example, the vice president sales and marketing, had to define that when he is tracks a certain kind of customer, what makes up that customer.
When that formulation was done, he gave it to the MIS department to collate the information. They realized that they had to go down to the bottommost layer of data in the system to pick out what he wanted.
This allows the management to see the scorecard and report on a monthly basis. It also drives the reporting right down from the general manager to the hotel unit level and changes the way they report critical information.
Traditionally, this was done by either the MIS or finance department, who would collect information, put it together, formulate it and send it as a report. The Cedar BSES (Balanced Scorecard Enterprise System) allows automation of the process because the data source is available and it can be integrated with the data warehouse.
We explain here some of the unique features of the bsc.
Data collection has always been a problem and especially so now with the scorecard. One of the main aspects of the Cedar BSES is that it can integrate into a variety of databases.
We plan to integrate it into the data warehouse of the Taj group, which links into the customer information system and the central reservation system. We have all the data interfaces but only 40 per cent of data is available because none of the databases were designed from strategic thinking.
The organization has now identified 25 objectives at the corporate office. Those become 60-70 measures, with sub-layers which means there are a total of almost 200 different measure elements. That integrates into a data ware-house and will drive it as well.
Data integration begins in the post purchase implementation phase when a company has evolved its scorecard. In one of the templates, the objective owners have to mention the source of the data and how the measure was formulated.
The measure can be a series of data elements, which could have a second drilled down layer, with another 40 elements.
The Taj group has about fifteen distributed databases at each hotel unit and a central data warehouse, which is an Oracle database. They are now in the process of integrating these varied databases at the corporate level. We are going to integrate our system on top of that data warehouse.
Wherever the measure elements don't match, they will expand the warehouse to collate the required information. For example all the hotel units of the Taj group collect information on guest satisfaction and guest feedback. The data warehouse doesn't store that information at present but because the bsc calls for it, they will expand it to provide that data.
We have data integration tools to link into Oracle, SQL, Access, flat files and various other data types and can openly pick up that information, once formulated.
In fact, there is one more feature - once you define the measure, it can also be linked directly to where it is coming from within the system itself.
Ease of implementation
Normally, implementation involves scorecard formulation to scorecard automation, a cycle completed in eight to ten weeks. First Cedar comes in as the consulting team, holds work-shops using the automated tool.
Simultaneously, STEM does the integration so that by the time the company gets used to using the bsc, the integration is done. Using the scorecard requires no technical expertise. All one needs to know is how to use the Internet and e-mail.
The Cedar BSES software has a very complex set of analytical tools. You can look at your report, click on a measure, compare the performance of actuals versus targets and drill down to see what the measure is composed of, and track it over time.
That is simple analysis, which you can see as tables and graphs, and also view percentages, variances, and previous records online.
If you look further, there are another set of analytical tools available. You can develop something called 'My Themes' to create your own series of reports using select criteria to narrow down on comparisons between perspectives, objectives, measures and projects.
For example each of the 25 objective owners at the Taj can sit in their office and analyze their own reports separately. But honestly out of these 25, may be only 2 or 3 are actually doing in-depth analysis. Cedar BSES also has modules for forecasting, business modeling, cause-effect and impact analysis.
Though the Taj group has been able to analyze only about six of the 25 objectives, they have been able to create a fresh budget based on the bsc.
Now they need another six months' data to be able to monitor their new strategy and then will they be able to do cause effect analysis; like, is customer satisfaction improving because of focussed employee training in a certain area. They will also be able to forecast trends.
I would say that another one and half years and at least ten other companies will have to use it and go through the process of maturity.
Most of the companies are stuck at the stage where they are implementing the process itself, they are busy collating the data and we are trying to help them with that.
The product is completely web based and has a three-tier architecture facility. A person who has access to the information can use it from any location using a web browser. The implementation process is also simplified because the entire software resides completely on a web server.
A manager could be traveling while an apex body meeting is going on and be able to access the bsc and even do a review online. Or use e-mail. They could find a measure not performing right and e-mail the apex body about it.
Though it uses web enabled technology it can sit on the LAN in the office or can be loaded on a singular PC.
The reason we are able to bring down the cost of implementation is that once we install the application on the web server its 25 users don't have to buy licenses separately nor do they have to load any additional software in their PC.
They are given an account and an encrypted password to enter through the firewall and access it from anywhere.
In the future, we could also provide ISP services and lease out the software usage. When people are very mature in using the system, they'd rather implement a revenue model.
The true benefit of the web-based scorecard is when access to the bsc is spread across the group at various levels like at the corporate, the strategic business units and the hotel units as well.
Some other features that we will bring in will include video conferencing when it is available and online chats.
Honestly, I don't see any company in this country making use of those features for at least another year, because in India, though we have all the tools, we don't have the maturity to use them.
The basic purpose of a bsc is to communicate and deploy the strategy down the line. The biggest barrier in any management situation is the communication of the strategy, its monitoring and results. Because of the web enabled facility, internal communication is the strongest element in our bsc system.
What it really does is to remove the chaos and confusion, which exist in Indian companies, by forcing objective owners to be clear, articulate and transparent in their processes.
The Taj Group had almost 150 projects running simultaneously and they began to question which one they should focus on, what does the organization really have resources for, which of these link into the strategy of the company.
They narrowed down to 25 objectives and 60 key projects, which are currently running. It helped them differentiate the elements, from those that are critical to deploy strategy.
With the scorecarding system & more so with automation people know they are being monitored and also realize that if they don't achieve their set objectives it will impact some other objective. This makes them better focused and able to manage with honesty. That is where transparency helps.
At the Taj, customer satisfaction was a key objective, which was being measured, but there was no consolidated effort. Each hotel unit was doing it separately. The formulae were different- each manager had her own way of defining customer satisfaction.
The scorecard owners sat together and defined what is `customer satisfaction' and what are its elements. It actually initiated a system and process of collating and creating customer satisfaction templates.
They then went out and got consultants to do the work. It got focus and attention and that's where communication and sharing comes about.
Now that it is automated, each customer satisfaction report, which has about fifteen subjective elements in it, is available in a system where trends can be compared and previous year's results analyzed. This was not available in a consolidated fashion earlier.
Strategy related information being very sensitive, it cannot be shared with a lot of people so transparency has to exist among the owners themselves.
Though it uses web server technology, the system has been designed to, as in the Taj group, reside on the intranet with a firewall around so that no outsider can access it.
There are five levels of security access defined which can be configured on the system. For instance, an objective owner is not going to feed in all the data, the secretary might do that so the secretary only has data entry facility while the objective owner has information access.
We haven't gone into the elaborate security features at the Taj because it is still in a very closed environment where only the apex body members have access, so it is very tight.
Once they have defined the new scorecard, they will decide what levels of security they want.
The Taj group wanted certain features that we had to include. We incorporated the cross matrix measure where one measure is made up of a series of sub elements which can be viewed on x and y or a multi dimensional axis. Certain reporting layouts can be customized, like some scorecards are reported in a cockpit fashion or dashboard, where they have colors identifying levels of performance.
Some people want to have weightage factors where some elements have more weightage than others.
There are some measures that are totally subjective and not numeric in nature like customer satisfaction. Now, how do you convert that to a numeric value? If in our system we had a standard method, it wouldn't be right. The entire scoring mechanism is customized.
Once the scorecard is done, the measures made and the entire system is working, there is an SQL or Oracle database server where all this data resides. One can write special reports or support it with customization, which is an on-going process and some organizations, may do it themselves if they have an IT department. Because it is designed here in India, it is designed for customization.
Some organizations use project management tools to monitor their TQM processes and want to pick up information from there. That is customizable. Some companies may want further analysis and that too can be customized.
Cedar has helped formulate almost 100 scorecards for a variety of industries in India and abroad. Which is why, the product has in it, some 300 measures for these industries.
During the implementation phase, especially when a conglomerate is looking at it, they might work with us to develop say, three scorecards and may then want to implement it in-house and only buy the application. The Taj bought the consulting part from Cedar to develop eight scorecards. The rest were developed internally.
If a company that has various businesses buys the rights from us, they will have 300 measures in-built. Not only that, the organization can build its own knowledge base into it, for example, a trouble shooting guide can be built in by the score-carding coordinator including the TQM and other experiences.
This is customization done by the organization itself. In-built is the understanding of the score-card in power point, the company's balance sheets, the vision and mission statement, all the learnings can be documented. The bsc has about 40-50 frequently asked questions but there could be 500 questions the organization has already answered which can be fed in. There is a search engine built in that will locate the answers.
Easy to monitor
People tend to believe that because it is automated, the results are all accurate. They are not, but what happens is that errors tend to show up easily because they jumps out from the rest of the data.
But in any system, garbage in, garbage out still stands. The scorecarding system is more efficient because the measure is defined clearly.
There is discipline and rigidity in data collation. Earlier when a measure was not available people could fudge it but now that measure can be drilled down, you can focus on specific problem area.
It also drives the database administrator to collate data in the way it is required leading to structural change in the database level. Information that was not available is now being tracked.
Published with the kind permission of The Smart Manager, India's first world class management magazine, available bi-monthly.