The Application of Balanced Scorecard in Hospitality Industry


Seminar Paper, 2018
9 Pages, Grade: 1

Excerpt

Table of Contents

Introduction

Balance Scorecard (BSC) Systems

Four perspectives of BSC

BSC in Hospitality

Balanced Scorecard at Hilton Worldwide

Limitations and Weakness of BSC

Conclusion

References

Introduction

The increase in competition in the hospitality industry for instance, in the hotel sector has attracted interest in quality improvement and implementation of performance measurement systems in these organizations so as to achieve a competitive advantage in the global market. A good example of the performance measurement system is the use of the Balanced Scorecard (BSC) to translate the strategic goals of the company for instance, research and development into performance measures. Continuous quality improvement in the hospitality industry is essential and it has been used by managers to measure their performance in four different perspectives, customer, financial, internal business process, and learning and innovation (Chan, 2012). BSC is important to managers because it helps them achieve their strategic goals in one area without having to hurt the other area. On that note, BSC has been used by managers to overcome strategic management problems because BSC is strategy-driven hence important in the implementation of a business strategy (Nunes, 2014). That said, the essay will focus on the use of BSC in the hospitality industry, and our case study is the Hilton Hotels worldwide. The essay will show how BSC has been used in Hilton Hotel to measure the company performance. The essay will also discuss how the management compensation plan has been linked with the BSC.

Balance Scorecard (BSC) Systems

History of BSC

The Balance Scorecard was first developed in 1992 by Dr. David Norton and Dr. Robert Kaplan at the Harvard Business School as a performance measurement system in organizations and later translated into a performance management tool. The main idea behind BSC is that learning is essential in any business because it increases internal business operations and this translates into improved customer satisfaction and financial growth in the business (Nunes, 2014).

Four perspectives of BSC

Financial

The financial perspective measure defines the long-term objectives of the organization by showing whether the strategy implemented and executed by the business is contributing to growth in the business. Most of the managers use a financial control system in the business so as to increase the management system of the business. The financial perspective measure uses different measures such as increased assets utilization, cost structure, revenue growth opportunities, and increased customer value. What is important in the financial perspective measure is the emphasis on cost efficiency which is important in delivering value to customers at minimum costs possible and sustained shareholder value (Nunes, 2014).

Customer

The customer perspective measure has been used to determine the ability of the business to produce quality goods and services to the customer, just in time delivery, and overall customer satisfaction which is important for the growth of the business in the future. Different measures are used here such as brand value propositions, partnerships, service, functionality, selection, quality, price, and availability of the product. All these measures are important to the business because they result into customer satisfaction, loyalty, and retention (Nunes, 2014).

Internal Business Process

The internal business perspective emphasizes on the internal business operations that translate into customer satisfaction and financial success of the business. Managers, therefore, identify the core business processes that can meet the customer’s expectations and organizational objective. It is important to note that customer-based measures are important to the business and when identified, they must be translated to meet the expectations of the customers for competitive advantage (Nunes, 2014).

Learning and growth

The learning and growth perspective emphasizes on the effects of organizational alignment such as teamwork, leadership, culture, and the quality of information systems such as networks and databases, and skills and training of employees to support the realization of organizational perspective. The objectives of the business will also be achieved when it has skilled employees, quality information systems, and a culture that leads to the production and delivery of quality goods and services to the customers (Nunes, 2014).

BSC in Hospitality

Characteristics of the hospitality industry

Unlike other sectors, the hospitality industry is unique in its nature. It is service-oriented with enhanced focus on human exchange in the delivery of its services to the customers. The hospitality industry has many characteristics for instance, the product mix whereby customers in a hotel prefer consuming a mixture of products and services both tangible and intangible. Two way communications is another characteristics and it requires the commitment of customers and employees during the delivery service. Diversity is another key characteristic through interacting with diverse customers from different cultures. Relationship building is also another factor which must be enhanced so as to maintain loyal customers and also repeated behaviors from the customers. The industry is also labor intensive requiring huge supply of labor so as to target high-ended customers in the market ( Chan, 2012).

Balanced Scorecard in chain-brand hotels

Hilton Hotel has applied the Balanced Scorecard in chain brand hotels. A good example is the chain-brand in South Africa which was implemented in 1996 because of the changes in demand and expectations of customers and the increasing competition in the industry. Two years later, the chain-brand was able to report increasing revenues per room with much of this success attributed to the BSC. The managers used BSC and they were able to focus on both short-term and long-term drivers to success, brand equity through quality control, rewarding teamwork, performance reviews, sharing of best practices, and linking the BSC with innovative processes in the hotel (Nunes, 2014).

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Excerpt out of 9 pages

Details

Title
The Application of Balanced Scorecard in Hospitality Industry
Grade
1
Author
Year
2018
Pages
9
Catalog Number
V426904
ISBN (eBook)
9783668711631
ISBN (Book)
9783668711648
File size
496 KB
Language
English
Tags
application, balanced, scorecard, hospitality, industry
Quote paper
Caroline Mutuku (Author), 2018, The Application of Balanced Scorecard in Hospitality Industry, Munich, GRIN Verlag, https://www.grin.com/document/426904

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