Using examples, explain what is meant by internal and external drivers for change

If there is anything that is stead fast and unchanging, it is change itself. Change is inevitable, and those organizations who do not keep up with change will become unstable, with long-term survivability in question.

There are things, events, or situations that occur that affect the way a business operates, either in a positive or negative way. These things, situations, or events that occur that affect a business in either a positive or negative way are called "driving forces or environmental factors."

There are two kinds of driving forces; Internal driving forces, and external driving forces. Internal driving forces are those kinds of things, situations, or events that occur inside the business, and are generally under the control of the company. Examples might be as follows

· organization of machinery and equipment,

· technological capacity,

· organizational culture,

· management systems,

· financial management

· employee morale.

External driving forces are those kinds of things, situation, or events that occur outside of the company and are by and large beyond the control of the company. Examples of external driving forces might be, the industry itself, the economy, demographics, competition, political interference, etc.

Whether they are internal or external driving forces, one thing is certain for both. Change will occur! A company must be cognizant of these changes, flexible, and willing to respond to them in an appropriate way.

External driving forces can bury a business if not appropriately dealt with. The question is, how does a business know what changes are occurring so that they can deal with them in a positive way. OK, that's the next issue.

In order for a business to succeed and gain the competitive edge, the business must know what changes are indeed occurring, and what changes might be coming up in the future. I guess you might call this forecasting. Thus, critical to the business is what we call "informational resources." It is the collection and analyzation of data. Some examples of critical information might include the following:

Competition (what are they doing?)

Customer behavior (needs, wants, and desires) Industry out look (local, national, global) Demographics (the change populations, there density, etc.) Economy (are we peaking, or moving negatively) Political movements and/or interference Social environment Technological changes General environmental changes

The above are just some issues organizations must be on top of. Well it's never easy, but businesses that are successful include all of the above (and more), to develop the appropriate tactics, strategies, and best practices, to ensure successful out comes.

Read more: http://wiki.answers.com/Q/What_are_the_internal_and_external_drivers_for_change#ixzz1PtnEsVtO

Introduction

Corus Group plc was formed on 6th October 1999, through the merger of British Steel and Koninklijke Hoogovens. The Group's strategy is to focus on selected areas of carbon steel and to bridge the competitive gap between Corus and its European competitors. Post merger was identified as an issue that the Group needed to focus on, as this would provide to the company, some noticeable aspects:

Ø Improvement of relationship with its customers.

Ø Clear vision and strategy and translate them into action.

Ø Develop feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.

Ø Build a platform for future growth opportunities.

The Group needs to adopt the balanced scorecard technique in order to achieve its objectives and become a world class company. According to Harvard Business School video viewed in a lecture during the semester (week 16-10/11/2004), the balanced scorecard views the organization from four perspectives:

* The Learning and Growth Perspective

* The Business Process Perspective

* The Customer Perspective

* The Financial Perspective

Figure 1

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Figure 1 represents a Balanced Scorecard system with its various strategies

1. Growth, Innovation and Learning Perspective

This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."

The Baldrige Criteria for Performance Excellence is the basis for organizational self-assessments, for making Awards, and for giving feedback to applicants. As the business Criteria booklet states, "the Criteria are designed to help organizations use an integrated approach to organizational performance management that results in:

* bullet

* delivery of ever-improving value to customers, contributing to marketplace success,

* bullet

* improvement of overall organizational effectiveness and

capabilities,

* bullet

* organizational and personal learning."

Thus this perspective focuses on vital areas such as employee satisfaction and retention, information systems effectiveness, subcontractor relationships, corporate citizenship and all the other things that make an organization a good neighbour and preferred employer.

According to this perspective, the following measures are more important for Corus Group plc:

Objectives

Measures

Targets

Initiatives

Employee Satisfaction and Retention

Training hours per week for each employee

Provide two hours of training to each employee once a week.

Training on new business processes and technology.

Employee Productivity

Revenue per employee

Optimize revenue per employee to the extent possible.

Efforts to reduce downtime time and increase employee efficiency.

High employee turnover has always been a fact of life in many industries. Hitherto, the costs to recruit and train new employees eat away at the company's bottom line. To stay competitive, the company

needs to not only attract the best possible employees for the job, but develop a straightforward strategy to retain them. Training hours per week for each employee is important for the company as it will provide the following advantages:

* enhance employee recruitment and retention

* improve productivity and innovation

* establish career development programs

* set research and development priorities

* improve the operation of call centres or other similar operations

Employee productivity is another issue which is important for the company. When used with the appropriate selection of other ergonomic accessories like keyboard trays, glare filters, and ergonomic chairs, a good LCD arm can help provide an ergonomically comfortable working environment. Revenue per employee could be achieved with one of the following examples:

* Make Productivity and Utilization a corporate goal.

* Set targets for each team and each person.

* Automate time recording with clear goals for billable hours.

* Motivate the teams and individual employees with personal goals.

* Provide corporate wide visibility on how each team and person is doing.

2. Internal Business Process Perspective

[IMAGE]This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately. In addition to the strategic management process, two kinds of business processes may be identified: a) mission-oriented processes, and b)

support processes. Mission-oriented processes are the special functions of government offices, and many unique problems are encountered in these processes. The support processes are more repetitive in nature and hence easier to measure and benchmark using generic metrics

Figure 2

Figure 2 represents the Internal Business Process Value-Chain Perspective

According to this perspective, the following measures are more important for Corus Group plc:

Objectives

Measures

Targets

Initiatives

Product Design and Development

Market research on products requirements (time to market)

To provide products in line with the market needs

Focus on market research and research and development.

On time delivery

Process Efficiency

Reducing the throughput to the extent possible

Focus on process efficiency and elimination of bottlenecks.

Product design and development is an important issue for the company. This approach should be built around observation of real consumer behavior. This approach allows us to build on the strengths of each method, thus overcoming the weaknesses of individual methods when used

stand-alone. Interpreting the findings from several different research angles allows the company to build a complete story about what is truly important to its costumers

This will be achieved by using a market research plan. Employees who should deal with this matter are consumer researchers and they must focus on the following:

* Figuring out who the target consumers are

* Uncovering their unmet needs and desires (what is appealing?)

* Understanding what motivates people to value products

* Translating discoveries (all of the above) into the development of new product ideas

* Using the insights gained to support intelligent business decisions

On-time delivery applies to the Just In Time model. Just in Time, or JIT is a set of techniques to improve the return on investment of a business by reducing in-process inventory, and its associated costs. The process is driven by a series of signals, or Kanban that tell production processes to make the next part. Kanban are usually simple visual signals such as the presence or absence of a part on a shelf-enhanced product stability. On-time delivery should provide the following advantages to the company:

Ø Increase customer satisfaction

Ø Reduce dependence on key individuals to pull projects out of trouble

Ø Increased repeatability of success facilitates more accurate strategic planning

Ø Improve quality and morale which will lead to less staff turnover

3. Customer Perspective

This perspective identifies the importance of customer focus and customer satisfaction in any business. The measurements should answer

the questions, "What do existing and potential customers' value from our organization? How do they see us?" This perspective requires a high degree of honesty and soul searching. Measuring the customer's perspective must take into account the real needs and desires of the customer base. The organization must know whether or not it has fulfilled their customer's requirements to stay in business. According to Kaplan and Norton, these core measures include customer satisfaction, retention, new customer acquisition, customer profitability, and market and account share in each specific segment.

Figure 3

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Figure 3 represents the Customer Perspective

However, these measures present some of the disadvantages of the financial measures: they reflect past performance. Therefore, it is important for managers to also identify what are the attributes that the customers attach value to and choose the value proposition that they want to deliver to the targeted customers. Kaplan and Norton then suggest selecting objectives and measures from among three classes of attributes: product and service attributes (functionality, quality and price), customer relationship (quality of purchasing, experience and personal relationship), image and reputation.

Figure 4

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Figure 4 represents the Internal Business Process Value-Chain Perspective

According to this perspective, the following measures are more important for Corus Group plc:

Objectives

Measures

Targets

Initiatives

Customer Retention

On-time delivery

Maintaining the scheduled delivery time provided/given to the customer

Constant checks on production and delivery time.

Customer Satisfaction

Number of complaints

Reduce number of complaints to zero

Provide products in expectation with the customers' needs

Customer retention will be provided by dealing with the Just In Time mentioned in the previous perspective (Business Process Perspective-On time delivery). However, this technique could be beneficial not only for the organization, but also for its staff. Therefore, the staff should advantage in the following:

Ø Improve its quality and morale and eventually staff turnover

Ø Understand their own role in the process of developing a product

Ø Recognize how they can work with training specialists to maximize the potential of an company's human resources

Customer satisfaction is another issue the group must focus on. In order to achieve this, first important issue is to recognize the importance of obtaining a high response rate in customer satisfaction surveys and secondly to provide products in expectation with the customers' need. This will determine the most important customer satisfaction attribute to address given a set of responses to comparative items in a given business scenario. The main benefits of customer satisfaction will include the following:

a. Customers stay with the company longer

b. Customers deepen their relationship with company

c. Customers demonstrate less price sensitivity

d. Customers recommend company's products or services to others

4. Financial Perspective

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.

There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data in this category. Of course, money is still important and management gets excited about money. However, the question that should drive the financial perspective is "How do we know that we are creating maximum benefit for our shareholders?"

Some typical measurements might include:

* Revenue growth and mix

* Cost reduction improvement

* Cost of Quality Analysis

* Cash-to-Cash cycle

According to this perspective, the following measures are more important for Corus Group plc:

Objectives

Measures

Targets

Initiatives

Revenue and Growth Mix

Sales and Market Share

Sales growth targets of 15% every year and market share to be equal to or more than its competitors.

Focus on marketing and sales strategy.

Asset Utilization

Reduction in inventory

Maintain least inventory possible and at the same time fulfill market demand

Focus on demand and supply processes (supply chain management)

Sales revenue is the value of sales made within a trading period. It must not be distinguished with cash received. This is because a company includes within revenue any sales made on credit. Growth Mix therefore invests mainly in equities, which provide good potential returns. Limited investments are also made in connections and cash, so an element of risk limitation is also included. In order to growth sales, a good marketing and sales strategy is required. Therefore, the benefits of this strategy will be the following:

* The company's attention is focused on one specific market area, which is likely to result in its marketing campaigns being far more cost and time-efficient.

* Specialists in the prospective customer's own field can increasingly build up a reputation as being just that.

* The company's promotion material is highly relevant to their needs, and is less likely to be junked

* The company stands out from its competitors

* By differentiating from its competitors, prospective customers are less likely to focus on price as the key issue, thus enhancing the company's profit margins

Asset Utilization is a tool used to model how efficiently the company uses its assets to perform its value function. It is utilized to achieve breakthrough improvements in profitability such as cost reduction, revenue growth, and reducing inventory. In order to reduce inventory, the company must focus on issues such as supply chain management. Maintaining least inventory as possible will provide to the company the main following advantage:

* By controlling excess inventory, variable carrying costs (interest and insurance) and financial reserves that allow for obsolete inventories, can be minimized to improve various company operations.

Advantages and disadvantages of the Balanced Scorecard system

Advantages

§ The Balanced Scorecard system considers both financial and non-financial factors.

§ It is well designed for compensating lower-level employees.

§ It provides detail of firm performance beyond that obtained from market-determined measures.

§ Many modern businesses and government agencies hold most of their value in their intangible assets, namely their people, and the knowledge those people have.

§ Also, modern companies recognize that mission success (or competitiveness in the case of commercial companies) is largely driven by the ideas and innovations that come from their people.

§ Knowledge workers communicate and create in complex ways, and their work does not fit the supply-chain model. Therefore, executives need a new way to assess how well their organization is functioning, how to predict future performance, and how to align the organization toward new strategies to achieve breakthrough performance.

§ The balanced scorecard has evolved to support strategic planning and management this new work environment. The balanced scorecard system transforms the strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis.

§ It provides a framework that not only provides performance measurements, but helps planners identify what should be measured. It enables excutives to truly execute their strategies.

Disadvantages

§ The Balanced Scorecard system is not a market-determined performance measure.

§ It may not align perfectly with a shareholder wealth maximization goal.

§ It is somewhat difficult and time-consuming to implement a comprehensive balanced scorecard system in a large organization. It will require sustained top-level support and commitment to ramp-up and put the system in place. This is where most of the difficulties and problems emerge.

§ One should not focus on a balanced scorecard initiative unless the organization has a high-ranking potential, has adequate funding and is ready to meet the challenges of change.

In conclusion, one can understand that it is not only financial figures which should be taken into consideration, when thinking about investing or possibly working for a company, but also other parameters, such as customer perspective, internal processes, which are equally or may at times be more critical when taking a decision. Therefore, this is why an efficient Balanced Scorecard system must be produced for a company in order to help one make some decisions, as it will develop feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results, however, a Balanced Scorecard system will assist Corus Group plc in developing information around both the internal and external business processes in order to improve its strategic performance and results, thus will bridge its gap between its European competitors.

In the next lines, a quote which focuses on the whole meaning of the balanced scorecard is provided.

"A core group of three employee-based measures--satisfaction, productivity and retention--provide outcome measures from investments in employees, systems and organizational alignment." The Balanced Scorecard, Kaplan and Norton (p. 146)

Growth, Innovation and Learning Perspective

Objectives:

1. Employee Satisfaction and Retention

2. Employee Productivity

Measures:

1. Training hours per week for each employee

2. Revenue per employee

Targets:

1. Provide two hours of training to each employee once a week

2. Optimize revenue per employee to the extent possible

Initiatives

1. Training on new business processes and technology

2. Efforts to reduce downtime time and increase employee efficiency

Internal Business Process Perspective

Objectives:

1. Product Design and Development

2. On-Time Delivery

Measures:

1. Market research on products requirements (time to market)

2. Process efficiency

Targets:

1. Provide products in line with market needs

2. Reduce the throughput to the extent possible

Initiatives:

1. Focus on market research and research and development

2. Focus on process efficiency and elimination of bottlenecks

Customer Perspective

Objectives:

1. Customer Retention

2. Customer Satisfaction

Measures:

1. On-Time delivery

2. Number of complaints

Targets:

1. Maintain the scheduled delivery time provided/given to the customer

2. Reduce the number of complaints to zero

Initiatives:

1. Constant checks on production and delivery time

2. Provide products in expectation with the customers' needs

Financial Perspective

Objectives:

1. Revenue and Growth Mix

2. Asset Utilization

Measures:

1. Sales and Market Share

2. Reduction in inventory

Targets:

1. Sales growth targets of 15% every year and market share to be equal or more than the company's competitors

2. Maintain least inventory as possible and at the same time fulfill market demand

Initiatives:

1. Focus on marketing and produce a new sales strategy

2. Focus on demand and supply processes (Supply Chain Management)

Bibliography

Books

* Robert ANTHONY and Vijay GOVINDARAJAN (2003):

Management Control Systems, (Paperback), 2nd edition,

* Gerry JOHNSON and Kevan SCHOLES (1998):

Exploring Corporate Strategy Text and Cases, 6th edition, FT Prentice Hall

* Paul R. NIVEN (2002)

Balanced scorecard step-by-step: maximising performance and maintaining results,

2nd edition, Wiley

* Robert S. KAPLAN, David P. NORTON(1996)

The Balanced Scorecard: translating strategy into action,

1st edition, Harvard/McGraw Hill

* Robert S. KAPLAN, David P. NORTON:

The Balanced Scorecard: Translating Strategy into Action (Online Enhanced Edition-PDF)

* Robert S. KAPLAN:

The Balanced Scorecard: Measures That Drive Performance (Online Enhanced Edition-PDF)

Articles

* Article named "Balanced Scorecard as a tool forInternal Audit"

CFAJuly 2004 issue.

Websites

* http://www.corusgroup.com

* http://www.balancedscorecard.org

* http://www.business-intelligence.co.uk/ reports/public_scorecard/casestudies.asp

* http://www.appliedlearninglabs.com/kmaps/balanced.html

* http://www.asq-qmd.org/new_article/new_article4.htm

* http://www.findarticles.com/p/articles/

* http://www.processdriven.org

* http://www1.pr.doe.gov/bsc001.htm

* http://www.balancedscorecard2.com/dnlp4576.html

* http://www.baldrige.com/Baldrige%20Criteria.htm

Media

* The Balanced scorecard, managing future performance

(1993), [VIDEO] Robert S. Kaplan, David P. Norton by Harvard Business School

* CD--VCR Directory of Private Equity and Venture Capital in the UK and Europe 2001/2002 by VCR Publisher

Appendix

* Figure 1 was found on the http://www.balancedscorecard.org website

* Figures 2,3 and 4 were found in the Online Enhanced Edition-PDF) of Robert's S. Kaplan and David's P. Norton book: The Balanced Scorecard: Translating Strategy into Action

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