Balanced Scorecard of Manufacturing Enterprises Based on Flexible Strategy
Ying-ban He1, Bo Wang1
1
College of Management and Economics, Tianjin University
(13510896342@139.com)
Abstract - This paper studies the balanced scorecard of
flexible strategy and its related questions. It builds a flexiblestrategy human resources support system and a balanced
scorecard based on flexible strategy in manufacturing
enterprises. The features of balanced scorecard are also
stated. Besides, this paper builds a two-dimension model to
analyze key performance indicators based on flexible
balanced scorecard and value stream. Related examples are
given.
Keywords - Balanced scorecard, Flexible strategy,
Human resources support system, Key performance
indicators, two-dimension model
I. INTRODUCTION
In the turbulent environment of market economy,
present enterprises are facing more pressure and
challenges. They have to adopt more flexible strategies to
adapt the environment and achieve development. Human
resources support system and strategic performance
management are key supporting factors of flexible
strategy[1,2]. Therefore, constructing related system and
performance management frame become important issues
to enterprises developing.
II. FLEXIBLE STRATEGY AND ITS HUMAN
RESOURCES SUPPORT SYSTEM
A. Flexible strategy and its types
The so called flexible strategy means the integrative
action plan that enterprises promote their own continuous
competitiveness when they actively adapt changes, make
use of changes and even create changes in dynamic
environments. Comparing to common strategy, flexible
strategy can be understand as strategy that pay attention to
flexibility of enterprises, whose characteristic is
improving agility and adjusting, reflecting capability of
enterprises. Scholars studying manufacture flexibility
regard that like quality strategy, flexible strategy is a
extension of manufacture strategy[3]. To manufacture
enterprises, flexible strategy can be regarded as strategy
level of manufacture flexibility in enterprises. The
enactment and implement of appropriate flexible strategy
can not only make enterprises adapt changing external
environment quickly, but also obtain competitive
predominance by conforming inner sources in
enterprises[5,6].
Types of flexible strategy start from different points
of view. If considering of flexible influencing factors or
flexible basic dimension, flexible strategy can be divided
into time flexible strategy emphasizing reflecting speed
and range flexible strategy emphasizing reflecting spread.
If considered from the level of organization structure and
operation, organization flexibility can be divided into
three levels: strategy level, tactics level and operation
level. To manufacture enterprises, main types of flexible
strategies in strategy level include flexible strategies of
new product and market. If taken tactics level into
account, which is closely related to strategy level, flexible
strategies of mix of products and product quantity should
also be added in. Flexibility of equipment, material, route
and production schedule in operation level can be
regarded as operational part of the two levels above.
Flexible strategy of new products should be based on
the flexibility in research and development area, which is
involved with the flexibility of new technology and
products design platform. New technology flexibility is
referred to the speed and quality in the process of new
knowledge and technology coming into being and being
brought into the business operations. Flexibility of
products design platform means it's extendable and
adjustable and the design tools can perform various
operations as well. We can take the time from the
development to the launch and the changeability of new
products as the measure of new products' flexibility.
Shorter time in research and launching, more varieties in
new product spic, stronger flexibility the organization will
have.
Market flexible strategy aims to increase the reaction
and adaptation of new products ， which requires the
enterprises have the abilities to cut down the delivery
period and adjust according to the change of delivery time.
Meanwhile, the channels and modes of marketing, the
after sales services and other related activities should also
adjust when the firm's external environment changes.
The product quantity flexible strategy aims to
improve the abilities of expanding the capacity and
operating economically at different levels of output
(different quantity and lot size), which reflects the
enterprises' ability to cope with demand fluctuations.
Product portfolio flexible strategy aims to improve
the system's ability to produce different products. The key
to cope with demand uncertainty is to provide diversified
products rapidly, in low cost and high quality. Then
product portfolio flexible strategy can make the enterprise
to coordinate and produce different products, which can
be measured in three aspects: cope, time and cost. The
scope means that the manufacturing system can change
the scope and range. If there are more kinds of products,
there will be more commodities to circulate in certain
period, and the flexibility will be higher. The shorter the
time took to change the product variety, and the lower of
the cost taken place, the higher of the flexibility.
As the accelerating changes of the competitive
environment, flexible strategy has been widely recognized
and valued[7,8]. There are more and more research on the
analysis and formulation of flexible strategy. However,
any success does not consist in strategy formulation, but
also on effective implementation. Flexible strategy is no
exception. There is scarce research on the implementation
of flexible strategy before, especially the study on how to
implement it by performance management and other
strategy implementation means. Meanwhile, there are few
researches on the combination of performance
management and flexible strategy. So it's necessary to
have in-depth study of the flexible strategy oriented
performance management.
B. The human resources support system of flexible
strategy
Based on system theory, the system target of human
resources support system matching to flexible strategy is
effectively supporting the implementation of flexible
strategy. The output of system is the human resources
strategy and the input of system is the human resources
effectively supporting flexible strategy of organization.
The environment of system includes inner environment
factors and outside macro environment factors. System
structure is mainly constituted by procedure system and
support system of human resources support system.
Human resources support system is established mainly
based on the related management functions in the whole
life cycle of human resources management. Besides the
human resources planning, the input of the system mainly
consist of reasonable position, responsible match between
the personnel selection and configuration, accurate
assessment of individual ability and achievement, various
forms of training aimed to different levels of employees,
and incentive mechanisms corresponding to different
assessment results. Human resources support system
includes institution security system and dynamic
adjustment system, whose whole conceptual model is as
Fig. 1.
System target
Supporting flexible
strategy effectively
System function: human resource function and other management support systems
matching to flexible strategy
System input
Human resource
strategy
Position
setting
Staff
allocating
Performance
management
Incentive
Mechanism
Position setting
matching to
flexible strategy
Staff allocating
matching to
flexible
strategy
Performance
management
matching to
flexible strategy
Incentive
Mechanism
matching to
flexible strategy
Staff training
Systematical procedure system
personnel recruitment
personnel staffing
System
input
Effective
supporting
strategy
Supporting procedures
Institution guarantee system
Dynamic adjustment system
Systematical support system
System structure
System
circumstance
Inner circumstance factors: requests of
strategy planning and flexible strategy to
tactics level, operation level, culture and
other management support system etc.
Outside circumstances factors: market
circumstances, political and legal circumstances,
related policy changing of government, situation of
labor market, situation of industry developing
Fig. 1. Conceptual model of human resources support system based on flexible strategy
III. THE BALANCED SCORECARD BASED ON
FLEXIBLE STARTEGY
The core component of human-resource support
system is the performance management of flexible
strategy [9-11]. In recent years, the Balanced Scorecard
(BSC) has been widely acknowledged as an effective way
of strategic performance management. This management
method, raised by Kaplan and Norton in the early 1990s,
is based on researches on some famous enterprises which
are outstanding in this field. Not only does this method
emphasize on measuring performance, but also taking into
account long-term and short-term effects, financial and
non-financial aspects, internal and external areas as well
as motivation and results[12,13]. It also plays a crucial role
in the classification of strategic themes of four interrelated
levels - the financial level, the customer level, the internal
operating level and the learning and development level.
The performance management of flexible strategies refers
to a management method which is oriented by flexible
strategies and also supportive of it. BSC based on Flexible
Strategy is in common with common Balanced Scorecard
in following aspects— they are both powerful tools of
strategy implementation and crucial frameworks of
strategy classification. Also, their premises are both
established strategies while the premise of BSC of
flexible strategies is flexible strategies. On the contrary,
the differences between BSC based on Flexible Strategy
and common Balanced Scorecard are as follows—BSC
based on Flexible Strategy regards the implementation of
flexible strategies and interests of customers and
shareholders as its premise, the ensurement of flexible
support is the major target of its internal processes and
development dimensions. Also, BSC based on Flexible
Strategy ranges over a certain degree of flexibility in
index decomposition and index value’s credibility in four
dimensions. This paper presents an example of BSC of
flexible strategies in manufacturing industry, as shown in
Fig. 2.
Financial view
How to implement flexible strategy to explode
financial benefit on shareholders’ behalf
Customer view
How to launch new flexible products
and sustain the market flexibility
from the point of customer’s view?
Inner procedure view
Flexible strategy: new
product and market
flexibility
What procedures should be
excellent for keeping the flexibility
of new products and market
Learning and developing
view
How to keep continuous developing
in flexible capability of enterprises
Fig. 2. The Balanced Scorecard of flexible strategy in manufacture enterprises
BSC of flexible strategy based on enterprises can be
used to establish performance objectives of the
department. The flexible expression for different
administrative departments, aiming at ensuring the
strategic flexibility of the whole enterprise, serves as
support of various branches’ functions. It can be measured
by requirements and classification index of BSC of
flexible strategy. For example, flexible embodiment of
Department of Production Management mainly aims at
ensuring flexibility of new products and market. Flexible
embodiment serves as a necessary flexible production
process and the ability to adapt to rapid changes.
Targets of post-performance based on flexible
strategies are the classification of department’s flexible
performance targets. As for the setting of postperformance targets, not only should we consider post’s
environment and duty, but also take internal and external
customers’ needs and expectations into account. Flexible
strategy-oriented performance management requires the
establishment of an effective mechanism to allow rapid
adjustment and modification of the post’s duty and
privilege with the change of enterprise strategy. We
should also take into account inter-departmental processes
and internal and external customers’ requirement to
suppliers in order to relate the post target with corporate
strategic objectives.
IV. KEY PERFORMANCE INDICATORS BASED
ON FLEXIBLE BALANCED SCORECARD
A key performance indicator (KPI) plays a crucial role
in the establishment of performance management target
process based on BSC [14] [15]. KPI, based on BSC, is the
measurement of controlled parts in key business activities.
KPI based on flexible strategies is in common with
common KPI in following aspects—they are both
powerful tools of strategic performance management as
well as the main carrier of BSC’s classification and
realization. Both of their premises are developed
strategies and BSC based on strategy, while KPI based on
flexible strategy’s premise is flexible strategy and BSC
based on flexible strategy. Therefore, compared with
common KPI, the selection of KPI based on flexible
strategy’s targets sets the ensurement of flexible support
for enterprises as its basis. Meanwhile, it has a certain
degree of flexibility in classification of BSC’s index value
(either basic value or challenge value) in four dimensions.
The establishment of classification framework for
KPI based on BSC is a crucial section for performance
management based on flexible strategy. In particular, it is
important for the departmental key performance indicator
system for the reason that post KPI is based on that of its
department. The paper, setting manufacturing enterprises
as background, proposes a KPI classification model based
on BSC and value process (as shown in Fig. 3).
Key Performance targets based on flexible strategies
Flexible Strategy
KPI of each sector and position in financial perspective based on flexible BSC
Finance perspective
KPI of each sector and position in customer perspective based on flexible BSC
Customer perspective
KPI of each sector and position in internal process perspective based on flexible BSC
Internal Process perspective
Learning and development
perspective
KPI of each sector and position in learning and development perspective based on flexible BSC
R&D and design
Supplying &
Purchasing
Manufacturing
……
Marketing
Fig. 3. The two-dimension model of the decomposition of KPI based on flexible balanced scorecard
The longitudinal axis of the model is composed of
four dimensions of BSC. It is the KPI of the corporate
level and can be extended to the strategy map of BSC.
The horizontal axis of the model is the value process of
the enterprise. Each process always corresponds to the
enterprise’s sectors (not necessarily one-to-one
correspondence). It is a KPI framework of BSC. The
specific operation should first be the establishment of
BSC of flexible strategy, and then the classification of
various dimensions, namely the KPI on the corporate
level or the strategy map. We should also make clear the
functions and divisions of labor in each process (or
department). Then we can proceed with departmental KPI
design based on the two-dimensional crossover.
Constructed of the four dimensions of the balanced
scorecard, the vertical axis of the model, as the key
performance indicators at the company level, can be
expanded to be a strategy map based on the balanced
scorecard. The horizon axis is the value stream of the
company, with each process corresponding to some
specific departments (not necessarily to be one-to-one).
This is a framework of building key performance
indicators of each department based on the balanced
scorecard. In specific operations, with the decomposition
of all dimensions, a balanced scorecard based on the
flexible strategy, namely a map of key performance
indicators or a strategy map at the company level, should
be made firstly, while each process (department) clearly
knows its functions and divisions. Thus the design of key
performance indicators of each department based on this
two-dimensional crossover can be carried out.
V. EXAMPLES
CW Mold Company is a full funded branch of the
huge CW Group operating home appliances, owning total
assets of more than 50 million Hong Kong dollars. With a
high starting point, high technology and high investments,
the company engages in research and development,
precision manufacturing and technical services at a suit,
providing the design and manufacture of kinds of molds
from small precisions molds like mobile phone shells and
micro-motors at most to large injection molds such as TV
shells, auto parts and molds weighing up to 50 tons.
While based upon domestic market, the company
positively participates in the international market
competition.
The flexible strategy of CW Group is dominated by
flexibility of new products and supplemented with market
flexibility. As a subsidiary branch of CW Group, CW
Mold Company’s flexible strategy shall comply with CW
Group and be strategy at operation and strategy level
supporting the group strategy under the guidance of it.
As the main purpose of the flexible strategy of new
products is to increase the ability of increasing new
products, that is the ability of manufacturing system to
launch new products timely and modifying the functions
and appearance of the existing product available on the
market to satisfy customer demands rapidly by
introducing and fabricating new parts and products.
While the purpose of the flexible strategy is to enhance
the ability of the enterprise to adapt to or to influent the
market, the enterprise should have the ability of
shortening the delivery time and adjusting to correspond
to the delivery change request, and at the meantime have
the strain capacity of marketing channels, marketing
mode, customer service and the marketing related
activities under the external environment changes.
Therefore, the product flexibility of the CW mold
company should be built to ensure the flexibility of the
manufacturing system, which includes a flexible mold and
manufacturing system, as well as the flexible production
plan, so as to ensure mix flexibility and volume flexibility
of the mold products. The balanced scorecard and key
performance indicators based on the flexible strategy at
the company level is shown in Fig. 4.
Financial performance
Customer market
Key
Performance
Indicators
Average profit per person and its growth rate
New flexible products sales and its growth rate
Market share
Market increase rate of new flexible products
Quality level of the products
Internal operation
Rapid response capability
Study and training rate
Employee satisfaction
Ability of Flexibility innovation
Learning and development
Fig.4 Key Performance indicators of Flexible Strategy in CW Molding Company
The main processes of the company consist of
research and development design, supply purchase,
production quality inspection, marketing and after-sales
service. With the two-dimension model, BSC and key
performance indicators at the company level can be
decomposed to each department. The framework of the
decomposition and the example are shown in Table 1.
TABEL I
DECOMPOSITOIN FRAMEWORK OF DEPARTMENT’S KEY PERFORMANCE INDICATORS AND EXAMPLE
Design of new
Production of
Quality of new
Sales of new
Supply of new
After sales of new
flexible
new flexible
flexible
flexible
finance
flexible production
flexible production
production and
production and
production and
production and
perspective
and costs...
and costs…
costs…
costs…
costs…
costs…
Customer
Customer satisfaction
satisfaction of the
of the after-sales
Customer
design of the new
Market share…
Market share…
Market share…
Market share…
services of the new
perspective
flexible production
flexible production
Market share…
market share…
Process
perspective
Learning and
development
perspective
Capability of rapid
design of new
flexible
production…
Supply capability
of Components
and parts of new
flexible
production…
Productivity of
new flexible
production
…
Quality
assurance
capacity of new
flexible
production…
Quality
assurance
capacity of
new flexible
production…
Quality assurance
capacity of new
flexible production…
Employee
satisfaction…
Employee
satisfaction…
Employee
satisfaction…
Employee
satisfaction…
Employee
satisfaction…
Employee
satisfaction…
Design Department
Purchasing
Department
Production
Department
Quality Control
Department
On this basis, decomposition of key performance
indicators of positions will form an index system of
flexible performance management. After index systems
being built from top to bottom, and a performance
management process being constructed by performance
planning, performance guidance, performance evaluation
and performance rewards, the whole performance
management system will be accomplished, which will be
an effective support of flexible strategy.
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