Application of balanced scorecard in strategy formulation and implementation at telkom Kenya limited

Abstract

Effective strategy formulation and implementation are key challenges in strategic management. Defining workable strategies and translating them into action is a nightmare to managers of many organizations. As a performance management tool balanced scorecard can assist organizations to focus, align and clarify their vision and strategy and to translate the strategies into action. The study evaluated the application of balanced scorecard in strategy formulation and implementation at Telkom Kenya Limited. It set out to establish strategy formulation and implementation processes, challenges and how application of balanced scorecard bridged the gap between formulation and implementation. It also set out to establish balanced scorecard implementation process at Telkom Kenya, challenges posed during implementation, and extent of its success. The study was conducted through interview of ten informants drawn from Telkom semor management group. The primary data was collected and analyzed through content analysis and secondary data was obtained from Telkom strategic plan, annual reports, and management meeting reports. The informants were defined in such a way that they comprehensively cover the four perspectives of the balanced scorecard as prescribed by Kaplan and Norton. The study showed that Telkom Kenya has used balanced scorecard as a performance management tool to help focus on key strategic objectives and to align departmental and individual objectives to corporate objectives. Telkom also uses performance management system, linked to balanced scorecard, to reward its senior staff as variable portion of their pay. Through management convention the balanced scorecard results are discussed and contentious issues clarified continuously and progressively to staff. Telkom also uses SAIFA (speed, anticipation, initiative, follow-up, and accounting) cultural transformation model to not only change the culture but to firmly embed balanced scorecard by guiding individual actions, aligning them to corporate strategy and linking reward/reprimand to performance. The study established that even though the balanced scorecard has contributed greatly to achievement of set objectives there were several challenges in implementing the same. Some of these challenges included: Inadequate skills and hands on knowledge on balanced scorecard implementation; difficulties in formulation of departmental objectives that are aligned to corporate objectives; difficulty in formulation of strategies that ensure delivery of the set objectives; difficulties in setting priorities in a highly volatile and changing environment; having KPIs that are too vague and difficulties arise when measuring and appraising staff performances departmentally - to set targets and to link rewards to the measures, particularly the 'soft' information is impossible; fear of targets by staff; Telkom is a very large organization and therefore ensuring that consistent message is cascaded to all staff and adhered to is not easy; and culture change. All these challenges need to be taken in consideration for organizations using or wishing to use balanced scorecard tool for strategy formulation and implementation for they may affect the outcome seriously. The study showed that the balanced scorecard tool can be effective in strategy formulation and implementation if it is linked to simple, measurable, achievable, realistic and time-bound objectives. It also recommends periodic reviews of the scorecard to evaluate the existing strategy in order to allow for meaningful amendments. Incentive schemes like variable portion of salary should be linked to the scorecard to reward excellent performance and to reprimand non performers. The results of the study are consistent with the existing body of knowledge by various scholars in the field. Further research needs to be done to find out how balanced scorecard can be used to influence change management in organizations. More research also needs to be done to see how effective the balanced scorecard has been in strategy formulation and implementation in companies operating in telecommunication and other industries in Kenya that have adapted it