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Making Balanced Scorecard work, The Worldclass Lighting Experience Case Solution

Solution Id Length Case Author Case Publisher
827 648 Words (2 Pages) Ka Wai Shiu, Neale O'Connor University of Hong Kong : HKU941
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World class manufactured carbon filament bulbs. It became the industry leader by developing and producing new innovative products. When the company implemented the balanced scorecard (BS), it divided the company into four perspectives; financial, customer, process and learning and growth. There were three to five key performance indicators (KPI) for each perspective. Each KPI was used to measure the performance. The main aim of implementing this process was to use financial and nonfinancial indicators to review management practice. What cannot be measured, it cannot be improved. Therefore, in order to improve the performance of the management, it was critical to measure their performance from the perspectives that are relevant to the firm. Thus, the benefits obtainable from implementing BS are the measurement of firms’ performance from different perspectives and evaluation of the improvement made over the past year. Once the performance is measured, the problem areas can be pin pointed easily, and steps could be taken to resolve the problems in these areas. Hence, the value proposition of continuing with BS is the increased financial productivity. Additionally, BS system helps the top management to define strategy for improvement once the problem areas are identified. It then helps in communicating these strategies with the lower level staff. Also, once the strategy is made it is easier to allocate resources and monitor performance of the business units. 

Following questions are answered in this case study solution:

  1. What was the value proposition for World-class to continue the balanced scorecard, i.e., what benefits were obtainable?

  2. Assess and evaluate the scorecard measures in terms of economics of information properties, i.e., reliability, verifiability, and sensitivity. Relate any deficiencies noted to the problems World-class experienced with the scorecard.

Making Balanced Scorecard work The Worldclass Lighting Experience Case Analysis

Assess and evaluate the scorecard measures in terms of economics of information properties, i.e., reliability, verifiability, and sensitivity. Relate any deficiencies noted to the problems World-class experienced with the scorecard.

One serious Problem with Worldclass structure is that for each business line, it was divided into a commercial and industrial department. While the industrial department was responsible for manufacturing the product, the commercial department was responsible for the selling products and interacting with the customer. This meant that all the perspectives of the BS cannot be used for each department.

Another Problem with the implementation BS in case of Worldclass was that the non-financial perspective had qualitative measures of performance that may not be measured reliably. Moreover, the KPIs of most perspectives were mostly quantitative which means that the unquantifiable objectives were ignored.

The targets were also set using the BS. This created undue pressure on the managers. Managers, to avoid missing the target, manipulated the balanced scorecard by hiding information from disclosure of the BS.

Furthermore, Worldclass linked the compensation schemes with the Balanced Scorecard. This might have contributed to the unreliable indicators as the managers will be tempted to manipulate the accounts. With low verifiability of the measure of non-financial indicators, the reliability of the indicators cannot be checked. Secondly, the mid level managers are assessed on the aggregate financial indicators of the managers. 25 percent to 30 percent of their bonuses were thus dependent on the aggregate performance. This is inappropriate because if a worker is working hard while the team is not the bonus will remain low and he would lose his motivation to work.

Worldclass was a global business. It operated in a number of countries with different cultures and traditions. Therefore, the practices of each subsidiary might differ. A general BS target or KPI used for all the subsidiaries will be unproductive. If the company wants to obtain highest result in each domain, separate BS targets and KPIs should be identified for each firm.

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