Dissatisfaction or problems with implementation very often are the drivers for new innovative ideas. This fact is also true regarding the measurement of the performance of companies. In the past, companies often faced the problem, that, although having a clear formulated vision and strategy, they were not able to transform these into operative goals and actions without losses. But especially in today’s highly competitive and fast changing world, a fast and effective translation of strategy into action is necessary and relevant for success. Additionally the used systems for controlling, that were to a large extend geared to the accounting data of the companies, did not match the modern expectations anymore.
Table of Contents
1. Introduction
2. The Concept of the Balanced Scorecard
2.1 The four Perspectives
2.2 Derivation of Objectives and Measures
2.3 The Cause and Effect-Chain
2.4 The Strategic Management Process
3. The Case Wells Fargo Online Financial Services
3.1 The Problem
3.2 The Implementation of the Balanced Scorecard
4. Criticism on the Balanced Scorecard
5. Conclusion
Objectives and Research Focus
The primary objective of this paper is to examine the Balanced Scorecard (BSC) framework as a strategic management tool and to illustrate its practical application through the case study of Wells Fargo Online Financial Services (OFS). The research addresses how companies can bridge the gap between abstract strategic goals and concrete operational actions, especially when facing competitive market pressures.
- The theoretical foundations and the four core perspectives of the Balanced Scorecard.
- Methodologies for deriving strategic objectives, measures, and cause-and-effect chains.
- The integration of the BSC within the broader strategic management process.
- A practical analysis of how Wells Fargo OFS utilized the BSC to overcome operational cost-center challenges.
- A critical evaluation of the limitations and challenges associated with the BSC model.
Excerpt from the Book
3.1 The Problem
As Wells Fargo had the first-mover advantage, by 1998 it was holding a significant share of all electronic banking users in the US. The customer segment, that was appealed by online banking was very attractive. There were four elements, that made the development of the Wells Fargo Online Financial Service (OFS) of interest:
First the average online costumer stayed longer with the bank than the average traditional costumer.
Second the cross-selling opportunity was higher as the average online customer was holding one more product than the typical Wells Fargo customer.
Third, the online costumer was more profitable for the bank, as he carried higher balances in both deposits and loans.
And forth, the bank could safe money by channelling traditional banking costumers into the lower-cost online banking.
The problem was, that the OFS was treated as a cost centre within the Wells Fargo bank. As Wells Fargo used financial metrics to measure its performance and was evaluating its departments using the cost-recovery-model, OFS was projected to be closed soon.
The OFS team believed, that the emphasis on financial metrics alone could lead to wrong decision-making and that the short-term goal of cost-reduction in the long-term could have an opposed effect, especially in the online-market. Additionally OFS was facing the problem of frequently changing priorities about the initiatives to be carried out due to the high velocity in the online market regarding new technologies, threads and customer demands.
Chapter Summaries
1. Introduction: Discusses the motivation for implementing new performance measurement tools due to the inadequacy of traditional accounting-based systems in a fast-changing competitive environment.
2. The Concept of the Balanced Scorecard: Details the four perspectives (financial, customer, business process, learning and growth) and explains how they form a coherent strategic framework via cause-and-effect chains.
3. The Case Wells Fargo Online Financial Services: Analyzes the specific implementation of the BSC to transition from a narrow cost-center focus toward a strategic, value-oriented business model.
4. Criticism on the Balanced Scorecard: Evaluates common academic and practical critiques, specifically regarding missing stakeholder inclusion and the lack of external competitor analysis.
5. Conclusion: Summarizes the effectiveness of the BSC, noting its potential as a management tool while highlighting the lack of empirical proof for its universal superiority.
Keywords
Balanced Scorecard, Strategic Management, Wells Fargo, Performance Measurement, Financial Perspective, Customer Perspective, Business Process, Learning and Growth, Strategic Objectives, Cause-and-Effect Chains, Cost Center, Implementation, Management Control, Corporate Strategy, Online Financial Services
Frequently Asked Questions
What is the primary purpose of this paper?
The paper evaluates the Balanced Scorecard as a strategic tool for performance measurement and demonstrates its real-world implementation at Wells Fargo Online Financial Services.
What are the four perspectives of the Balanced Scorecard?
The four perspectives are Financial, Customer, Business Process, and Learning and Growth.
How does the BSC differ from traditional controlling systems?
Unlike systems focused solely on accounting data, the BSC provides a multidimensional view that links operational measures to high-level strategic objectives.
What is the importance of the cause-and-effect chain in the BSC?
It helps uncover essential drivers of financial success by visualizing how objectives across different perspectives are interconnected.
What was the main problem faced by Wells Fargo Online Financial Services?
The unit was incorrectly treated as a simple cost center and was at risk of being closed due to an over-reliance on short-term financial performance metrics.
Does the BSC work for all companies?
The author argues that while the BSC is highly effective for customer- and quality-oriented strategies, it may be less appropriate for companies focused purely on cost reduction and process optimization.
How did Wells Fargo categorize their strategic initiatives?
Initiatives were separated into "strategic" and "business as usual," and further classified based on whether they were function-specific or cross-functional.
What is a major criticism regarding the BSC's scope?
Many critics point out that the model lacks an explicit "competitors' perspective" and does not adequately account for external stakeholders like society or suppliers.
- Arbeit zitieren
- Yasmin Shoaib (Autor:in), 2006, The Balanced Scorecard and its Implementation in Wells Fargo Online Financial Services, München, GRIN Verlag, https://www.grin.com/document/63220
