Balanced Scorecards: The Customer Service Perspective
Balanced Scorecards
The Customer Service Perspective
Hyde Park Electronics, Futura Industries and Southern Gardens Citrus (SGC) all were able to transform their businesses using Balanced Scorecard (BSC) methodologies that aligned each of their respective businesses to customers so that value was consistently created and delivered, growing each business in the process. Each was able to quickly progress beyond using BSC frameworks as a means to track financial performance to monitoring in real-time how effective their unique value propositions are (Niven, 2013). Moving beyond the financially metrics to customer-centered ones also provided insights into how each company needed to better manage its employees as well. As each of the company’s business models are significantly different, each of their perspectives on how to align their business models to their specific customer’s needs also varies significantly and their approaches to the BSC framework reflect this (Gumbus, Robert, 2006).
Beginning with Hyde Park Electronics, the company initially began its BSC initiatives by concentrating only on the most critical financial metrics of performance including Days Sales Outstanding (DSO), operating income, net income, current ratio and advanced ratio analysis (Gumbus, Robert, 2006). The company quickly progressed from a financially-centric use of BSCs to also include efficiency of on-time delivery, including measuring how well they were meeting customers’ expectations. In addition to measuring these customer-specific metrics, Hyde Park Electronics was interested in tracking Web portal and overall multichannel effectiveness as well, viewing them as indicators of how well their internal processes where orchestrated and contributing to satisfied customers (Gumbus, Robert, 2006). Hyde Park Electronics looked to attain a link between their financial performance and consistent customer performance as this insight would give them a significant competitive advantage in the markets they serve. The electronics industry is one known for very rapid product lifecycles and a continual focus on innovation; only by having insights into how customer-driven strategies can deliver sold financial performance can a business grow in this competitive industry.
Futura Industries also has a very customer-centric culture and use the BSC framework to measure both employee satisfaction and customer satisfaction while also measuring the financial implications of each. Futura’s focus is on the implications of employee satisfaction, a passion for quality and the effects of each on customer loyalty ands profitability (Gumbus, Robert, 2006). This mindset on the part of Futura also gives them a unique, quantified 360-degree view of their customers and their relative levels of satisfaction (Gumbus, Robert, 2006). Futura is also in an industry known for commodity-like pricing and products and as a result concentrates on customers’ expectation over competing on plummeting pricing or bundling that drives down gross margins. The most profitable competitors in commodity-driven industries rely first on the customer experience they deliver to differentiate themselves (Chavan, 2009). This is exactly what Futura Industries does so effectively today and is the philosophy that is guiding their BSC framework initiatives and programs. Futura Industries uses measurements of on-time delivery, customer first-pass yields of 98.9% or more and 20% of all sales from new customers (Gumbus, Robert, 2006). Futura’s senior management uses the BSCs to track the one year turnover of employees by department, total company turnover and do intensive levels of analysis on employee satisfaction (Gumbus, Robert, 2006). The stability of their workforce, they have found, is an excellent leading indicator of customer satisfaction, which Futura management reports is one of the most effective determinants of profitability and productivity over the long-term.
Southern Gardens Citrus (SGC), like Futura, competes in a commoditized business that often leads to price and availability as the two most dominant differentiators. Competing on these two factors is what leads commoditized industries to consolidate prematurely as SGC management indicates is one of the drivers for their adoption of the BSC framework (Gumbus, Robert, 2006). SGC also realized that they needed to align their entire organization back to its core mission, providing a system for reporting organizational levels of performance while also finding areas that needed improvement. The company was able to attain this by concentrating on four areas of customer performance, internal measures of process efficiency, financial performance and the measurement of learning and innovation (Gumbus, Robert, 2006). These factors anchored their BSC framework and gave them the system and process foundation to measure the financial metrics of budget variances and total unit cost per pound, Solids. They also included the internal metrics of juice delivery total oil recovery and total productive maintenance. Most importantly the company measured the percent shipments within specification, loading cycle time and customer service. To track their innovation and learning progress they measure training hours and results and the extent to which they attain continuous improvement in processes (Gumbus, Robert, 2006).
Analysis
Each of these companies had to take a different journey to the same destination of being customer-driven businesses. Their approaches all varied based on the unique challenges and constraints of the industries they compete in, how far their existing reporting systems had progressed, and how the unique characteristics of each of their business models contributed to customer centricism. What made the BSC framework and metrics used by Hyde Park Electronics customer-centric was their continued effort to quantify the value position they had promised to customers. As on-time delivery is a critical part of their customers’ experience, Hyde Park concentrated on this measurement along with tracking the performance of online web portals and overall multichannel effectiveness as well (Gumbus, Robert, 2006). Hyde Park had started out measuring just DSOs, operating and net income first then progressed to analytics that measure customer-driven performance as they are indicators of long-term customer loyalty and value. As is the case with every company in this analysis, Hyde Park Electronics chose a unique value proposition that both fit their company and core strengths and then monitoring it continuously with their BSC framework.
Futura Industries’ use of analytics and metrics in their BSC framework also showed the journey the company had been on to becoming more and more customer-centric. The unique aspects of Futura however are how prominently the metrics of employee satisfaction are in the total equation of customer satisfaction. Their journey to becoming a more customer-centered companies begins with a focus on their core values or standards of a sense of urgency, uncompromising integrity, trust and the commitment to hiring the best people and a devotion to the customer (Gumbus, Robert, 2006). Like Hyde Park Electronics, Futura has been able to successfully extend their core financial metrics to those that are customer-centric, interweaving in how employee satisfaction and its role in retaining profitable customers. The metrics that Futura Industries rely on include on-time delivery, customer first-pass yield of 98.9% or higher and the requirements of 20% of sales all are from new customers (Gumbus, Robert, 2006). By incorporating all of these elements together Futura is able to create a more effective view of their customers, and how Futura’s internal strategies are paying off with greater customer retention and lifetime customer value over time.
The final company, Southern Gardens Citrus (SGC), like Futura, is in a highly commodity-driven business. SGC earns and keeps customers by concentrating on the accuracy and timeliness of their shipments (Gumbus, Robert, 2006). The metrics of percentage of shipments within specification, loading cycle time and customer service performance are al included on the SGC balanced scorecard. As the other two companies in this study have done, SGC has created a unique BSC framework to measure how effectively they are meeting and exceeding customer expectations as measured by sales.
Conclusion
The customer’s perspective was critical to the success of each of these diverse examples of how to make a BSC framework successive in highly commoditized, often competitive challenging and turbulent markets. Two of these three companies, Futura and SGC, have business models that rely in part on process manufacturing techniques that often don’t require continuous customer feedback. Only the packaged products produced by these companies mater from the standpoint of a customer, and this are where each has accentuated their efforts to create a highly differentiated product line. What makes their respective implementations successful is that they have taken very complex business models and manufacturing processes, and aligned them all for accountability directly back to the customer (Gumbus, Robert, 2006). Hyde Park Electronics has also been able to accomplish the same by concentrating on the BSC as a means to stay aligned internally to customer demands. What unifies each of these case studies together is how all these companies strive to meet or exceed the customers’ unique expectations of time. All of them see the challenge of creating an effective BSC first from the standpoint of their customers’ perception of performance and build back from there. This is a best practice that keeps companies thinking in the context of their customers first (Chavan, 2009).
Evaluation
The one measure none of these companies included as the willingness to recommend the company to their peers and trading partners. There is not a single metric dedicated to measuring overall customer loyalty and the willingness to complete a recommendation, which could also be seen as a loyalty score or metric. As Human Resources departments often go about creating surveys to see what percentage of their employees will recommend them, the same holds true for these three companies as well. Factoring in the percentage who would recommend them also gives each company a chance to understand another dimension they could improve on over time as well.
References
Chavan, M. (2009). The Balanced Scorecard: A New Challenge. The Journal of Management Development, 28(5), 393-406.
Gumbus, A., & Robert, N.L. (2006). Entrepreneurs use a Balanced Scorecard to translate strategy into Performance Measures. Journal of Small Business Management, 44(3), 407-425.
Kaplan, RS (2005) A Balanced Scorecard Approach To Measure Customer Profitability. Working Knowledge. Harvard Business School. Retrieved May 17, 2010, from http://hbswk.hbs.edu/item/4938.html
Niven, P. (2013) Customer Perspective. EPM Review. Retrieved March 1, 2013, from http://www.epmreview.com/Resources/Articles/Customer-Perspective.html
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