A Balanced Scorecard Case Study on the Aviation BSC
In such disparate fields as education and aviation, BSC or the balanced scorecard approach is a strategic management tool that has been gaining popularity in recent years. The Balanced Scorecard is the title of a book released in 1996 by Robert S. Kaplan and David P.
Norton who formulated this strategic management system. You might be surprised to know that the balanced scorecard is indeed an effective strategic management tool in the aviation industry, and this is clear in the formulation and implementation of the aviation BSC itself.
In the balanced scorecard system, organizations are encouraged to measure not only their financial outputs, but also the many other factors that lead to these financial outputs. The term “balanced scorecard” itself refers to a tool, usually in the form of a table or matrix, which aims to help managers incorporate these various measures, both quantitative and abstract. For example, in an aviation company, it is not only the profits from flights or the costs of airplane upkeep that are important to keep track of. Other factors, such as stewardess satisfaction and customer perceptions, may also play important roles.
The earliest or so-called first generation approach involved only a simple matrix with the headings Financial, Customer, Internal Business Processes, and Learning and Growth. Under these headings, managers were then to pick out five or six good measures. For instance, under Financial could be net income or ticket sales. Under Customer could be retention rates, customer growth rates, and so on.
This approach was eventually improved as managers found out how abstract the process could be, picking out measures just based on these four headings. The second generation balanced scorecard incorporated new design tools such as a strategic map, on which are plotted selected strategic objectives. In this improved approach, managers do not decide on measures right away, but instead come up with objectives that they would like the organization to accomplish. By plotting the cause and effect relationships between these objectives, it then becomes easier to determine what particular measures need to be included in the balanced scorecard. In the aviation example, strategic objectives could range from growth of the passenger airplane fleet to a hundred units, to the setting of a profit quota for a particular period.
The latest improvement in the balanced scorecard approach consists of taking this strategic map or linkage paradigm even further. Before even beginning to define any particular strategic objective, managers are encouraged to first visualize and articulate a Vision for the organization. This vision is basically a generalized objective, a picture of where they want the organization to go. Based on this vision, the strategic objectives then follow, and based on the individual objectives, the measures to be included in the scorecard.
In aviation, BSC approaches can certainly prove to be useful, as in many other fields. The balanced scorecard approach provides a structured yet adaptive and flexible way to visualize goals and objectives, and also to monitor performance towards their achievement. Proper use of the aviation BSC can work wonders with your organization’s cohesion, focus, and performance.