“A series of seminars on BSC (Balanced Scorecard) have been held recently. However, not all businesses can apply or apply effectively the BSC model. BSC requires four aspects, including human resource - an inherent weakness of most Vietnamese small and medium-sized enterprises,” said Mr Ngo Dinh Duc, General Director of Le & Associates Corporation (L&A).
How do you assess the effect of BSC in corporate governance?
Basing out the efficiency of business operations recorded in other countries, BSC is considered an effective tool. By applying BSC, companies will have a future value management vehicle; build a new system of measurement and strategic management for integrating traditional financial measurements with future, more nonfinancial measurements; visualise and align strategic planning; balance between internal and external forces and between plan and viability; unify all views of different levels on development orientation; deeply change thinking and perception of the leadership and managers; integrate other tools into BSC like ISO, TQM, Lean, ERP, etc. effectively to create a single management system.
In some countries in America, Australia, Europe and Asia, BSC is a common tool companies use to define their strategies and steps. However, the Vietnamese economy is integrating into the world economy, and this is thus a good time for Vietnamese businesses, mainly SMEs, to approach new, more professional working methods and enhance competitiveness to reach new highs.
According to a survey, up to 70 percent of companies listed on the Fortune Global 500 - a ranking of the top 500 corporations worldwide - are applying this instrument. They make success as they have built up appropriate strategic models. BSC plays an important position in business operations. The effect of BSC is evidenced by operating results of some companies in Vietnam like Hau Giang Pharmaceutical Joint Stock Company, Vinh Tuong Group, L & A Corp, Europe Asia Trading Company, Tan Tien Plastic Company, Indochina Construction Corp, etc. After applying BSC, these companies have high growth rates and boost domestic and foreign sales. Particularly, their export growth averages at 30 percent a year.
But in Vietnam, BSC is still a new strategy making approach?
A majority of Vietnamese businesses are small or medium in operating scale, primarily state-owned and private-owned; thus, they prefer a convenient, simple administration and make light of professional, long-term approach. While the global and Vietnamese economies are facing uncertainties and difficulties, it is harder to introduce a new strategy model.
In addition, BSC is a future management tool which directs a company to objectives stated in its vision and mission. The measurement system is formulated to monitor and evaluate the progress of the company towards such objectives; hence this requires it to have a vision and necessary internal strengths in personnel to achieve planned targets. Therefore, it will require a lot of changes in business leaders’ and middle-ranking managers’ awareness in strategic planning. This approach is also very innovative in the administration fashion of Vietnamese companies where the power is in the hands of a small group.
This means that it is not easy for small businesses to apply this model?
BSC is not a magic wand. If a company is too small or has not defined a clear vision and mission or operate in a very volatile business environment like stock and real estate, it does not need to apply this model. Management by Objectives (MBO) tool will work better and more flexibly in the current period.
What is the biggest challenge in applying BSC?
The biggest challenges a company face in applying BSC are derived from the vision and scopes of business operations. The biggest value of BSC tool is to translate intangible values into tangible ones. Intangible values are human capital, information capital and organization capital which are rated as the most valuable assets of an organization as they make up 75 percent of its value. So, applying BSC means aligning human capital - the important and decisive factor to the success of a company - to other BSC dimensions: Internal processes, customer perspective, and finance.
How are companies interested in this model?
Joint stock companies and businesspeople are presently very interested in applying the BSC tool to business administration. And, many international and domestic institutions are actively organising seminars and training courses on this subject in order to meet this very practical demand. Nonetheless, they only care about this and start exploring it as the way they previously did with ERP which used to be viewed as a magic wand to solve all corporate governance requirements but a few of them could apply this application successfully. Many companies are just curious about BSC or imitate others, not actually want to apply it immediately. As a result, not many of them know whether this model is suitable for them or not.
BSC is a strategic business management tool. So, it cannot work if the leadership of a company does not have a right view and good resource preparation, particularly when it touches the "superstructure" of such company. The highest obstacle to the success is the knowledge and understanding of the leadership about BSC and its effects to the development path of the company. To apply BSC successfully, it is impossible to use only words or assign wrong persons but the leadership must be determined enough to implement on the basis of sufficient internal strengths. So, the leadership needs to reconsider before embarking on this model.
Thu Huyen
Vietnamese
