Unit 3 interim Assignment 1

FINAL ASSESSMENT

Student ID: Effective word count:

1552472 (Main text of Part 1& 2)
4,950; Max. allowed 4,950
Module Name:

Strategic Management CRKC7020

Assignment Title:
Unit 3 Final Assignment – Looking at Bukhatir Group; focusing on its
most successful business Unit - Conmix Limited, from the Balanced
ScoreCard conceptual perspective. A case-study.

Assignment Deadline:
November 24, 2019

I Confirm that I have read the University Regulations on Plagiarism and

that this assignment is my own work.
Unit 3 interim Assignment 2

Table of Contents
TABLE OF FIGURES / EXHIBITS...........................................................................................................................3
EXECUTIVE SUMMARY..........................................................................................................................................4
OBJECTIVE..................................................................................................................................................................4
GOALS........................................................................................................................................................................4
CASE STUDY: BALANCED SCORECARD APPLICATION IN CONMIX LIMITED...............................................................4
CONCLUSIONS.............................................................................................................................................................4
BACKGROUND: THE COMPANY, ITS LEADERSHIP, STRATEGY & ENVIRONMENT.............................5
LEADERSHIP AND STRATEGY....................................................................................................................................5
UNITED ARAB EMIRATES: ECONOMIC PROFILE.......................................................................................................5
INFRASTRUCTURE / CONSTRUCTION INDUSTRY IN UAE.........................................................................................6
Competition..........................................................................................................................................................7
STRUCTURE OF THE STUDY.................................................................................................................................7
PART 1: BALANCED SCORECARD: STRATEGIC IMPERATIVE AND EVOLUTION...............................9
1.0 INTRODUCTION: DEFINITION AND HISTORY......................................................................................9
2.0 ARGUMENTS THAT INFLUENCED DEVELOPMENT OF BSC........................................................11
2.1 EVOLUTION AND ARGUMENTS FOR AND AGAINST BSC............................................................................11
2.2 CRITICISM AND LIMITATIONS.....................................................................................................................12
3.0 BSC: IMPLEMENTATION, ADAPTATIONS AND STRATEGIC MANAGEMENT FIT...................14
3.1 TRANSLATING THE VISION AND STRATEGY AND COMMUNICATING THE LINK.........................................14
3.2 BUSINESS PLANNING AND IMPLEMENTATION............................................................................................17
3.3 FEEDBACK AND LEARNING........................................................................................................................17
3.4 ADAPTATIONS IN BSC...............................................................................................................................18
3.5 BSC: STRATEGIC MANAGEMENT FIT AND RELEVANCE TO BUSINESS CHALLENGES................................19
PART 2 : APPLICATION OF BALANCED SCORECARD IN CONMIX LIMITED.......................................21
1.0 INTRODUCTION.........................................................................................................................................21
2.0 LINKING STRATEGIC OBJECTIVES WITH SHORT-TERM MEASURES: STRATEGY MAP....23
3.0 CONSTRUCTING BSC: THE FOUR PERSPECTIVES IN CONMIX LIMITED................................25
3.1 FINANCIAL PERSPECTIVE...........................................................................................................................25
3.2 CUSTOMER PERSPECTIVE...........................................................................................................................26
4.3 INTERNAL BUSINESS PROCESSES...............................................................................................................28
3.4 GROWTH AND LEARNING...........................................................................................................................29
4.0 BSC PROGRAMS IN CONMIX: CREATING ALIGNMENT TO STRATEGY...................................33
CONCLUSION............................................................................................................................................................34
BIBLIOGRAPHY AND REFERENCES.................................................................................................................36
APPENDIX..................................................................................................................................................................39
A. BSC DEVELOPMENT TIMELINE IN BIL............................................................................................................39
B. EXHIBIT 1-3.1: TRANSLATING AND LINKING THE VISION AND STRATEGY....................................................40
C. EXHIBIT 2-3.1: BSC MAP FOR CONMIX WITH STRATEGIC THEME.................................................................41
D. EXHIBIT 2-3.2: COMBINED TYPOLOGY OF BUSINESS UNIT COMPETITIVE STRATEGIES.................................42
E. EXHIBIT A-1.1: UAE: SECTOR-WISE CONTRIBUTION TO GDP.......................................................................43
Unit 3 interim Assignment 3

Table of figures / Exhibits.

Exhibit 3.1: Financial Perspective 1........................................................................................31

Exhibit 3.2: Customer Perspective 1.......................................................................................31

Exhibit 3.3: Internal Business Process 1................................................................................32

Exhibit 3.4: Growth & Learning 1.............................................................................................32

Unit 3 interim Assignment 4

Executive Summary

Objective

The objective of this case-study was to understand the theoretical imperative and
application of Balanced Scorecard (BSC) to actual Business unit (BU) context. The
study aimed to show how BSC can be used by BUs to implement and execute strategy
and to align short-term measures with long-term corporate mission, vision and strategy.

Goals

The main goal in the case-study of Conmix Limited was to demonstrate application of
BSC in executing BU strategy. And to show how progress in achieving long-term goals
can be monitored by short-term measures against set targets by focusing on success
factors (KSFs).

Case study: Balanced Scorecard Application in Conmix Limited

Bukhatir Group (BIL) implements its mission and strategic vision in its BUs using BSC.
Conmix Limited is one the group’s most profitable and successful BU. BIL helps setup
BU strategy starting from financial projections. Conmix’s product-market decisions are
oriented to a differentiated Analyzer, as per Porter’s Strategy Typology. Its strategy
objectives emphasized Revenue Growth as well as ROIC in the Financial perspective
and flexibility in its internal processes (Olson, et al., 2002).
To grow revenue, specific actions emphasized improving quality and customer
satisfaction and retention, on-time delivery and new products. Customer satisfaction
was linked to objectives in the customer perspective while Improving quality / on-time
delivery and new products were linked to actions in Internal business process and
Growth perspectives respectively. All the action objectives in respective BSC
perspectives had specific short-term measures (KPIs) and KSFs linked to individual
employee and the overall performance appraisal system (Kaplan & Norton, 2007).

Conclusions

The study helped to demonstrate the application of BSC as a strategic management

system that can not only help measure performance but also create a mechanism for
operationalizing the strategic objectives. Conmix used BSC to link measures (short-
term) with long term strategic objectives of the company to avoid suboptimization and
keep long-term objectives on track, (Kaplan, 1996; Kaplan & Norton, 2017).
Unit 3 interim Assignment 5

Background: The Company, its Leadership, Strategy & Environment

Conmix Limited was founded in 1975 as partnership between German Gulf Enterprises,

Bukhatir investments Limited Group (BIL) and Karl Eppie GmbH (Stuttgart, Germany).

BIL acquired all stake and owns Conmix 100%. BIL is a highly diversified investment

company with interests in retail, real estate, construction, Oil & Gas and education.

Conmix supplies various construction industry market segments including,

Ready-mix Concrete, Dry-mix concrete, Pre-mix plasters, Concrete repair systems,

Grouting, Floorings, Waterproofing, surface treatments, Sealants, Concrete admixtures,

Tile adhesive & Grouts and Commercial and industrial paints. The company has four

main divisions organized by product category: Ready-Mix Concrete, Premix Plaster +

Paints, Construction Chemicals and Water Treatment.

Leadership and Strategy

Conmix success story is mostly attributed to the CEO who had been with the company

for past 24 years till end of August 2019. During his Tenure, Conmix LTD enjoyed long,

stable and successive years of effective leadership, vision and strategic direction

centered on diversification and generic differentiation that resulted in exponential growth

to become one of the respected companies in the Construction industry. Its vision and

strategic context and application using Balanced Scorecard was reviewed in this case-

study.

United Arab Emirates: Economic Profile

United Arab Emirates (UAE) is a federation of 7 states with a population in 2017 of 9.4

million. It is traditionally conservative, liberal in culture and authoritarian politically.

Unit 3 interim Assignment 6

Before oil discovery, economy depended on fishing and Pearl industry. Since it started

oil exports in 1962, the economy has diversified to include tourism and trading (BBC,

2018). The country was ranked first in Gulf Coast Countries (GCC) region and 17 th

competitive economy globally in the Global Competitiveness report of 2017-2018 (UAE

Government, 2019). See Appendix (e).

Infrastructure / Construction Industry in UAE

The construction sector contributes 8.4% to UAE’s Gross Domestic Product (Appendix

e). The sector is one of the largest employers and determinants of economic activity in

the country (UAE Government, 2019). Cement is a lead indicator of construction activity

and health in the region. Cement accounts for about 15-20 per cent, or about $4 billion

of the total value of building materials sold in the GCC today. Currently (2016 - to date)

there has been over-capacity in cement as the country only consumes 50% of the total

supply. The excess is exported (Goodwin, 2017).

The sector is dominated by large multinational infrastructure contracting

companies such as Wade Adams and China State Construction who create demand for

various construction and building materials such as concrete and steel. The main

building materials market segments are made up of stone, bricks, cement, concrete,

glass, steel and aluminium (Goodwin, 2017). There are sub-segments specialized in

cement-based value-added products such as Concrete, Concrete repairs, Grouting,

Plasters, Tile Adhesives and waterproofing (BASF, 2019). Conmix Limited competes in

the concrete and other cement-based value-added specialized segments with a total

market share of about 15% in terms of volumes (Conmix Limited, 2019).

Unit 3 interim Assignment 7

Competition

An Oligopoly of producers dominate the supply of construction materials (except steel)

in the segments in which Conmix competes. These include BASF, Sika, Fosroc, Mapei

and Weber Saint-Gobain. BASF, Sika, Mapei and Fosroc are the ‘Big Players’ and

multinational corporations. There are many isolated suppliers of Ready-mix concrete,

steel, Paints, construction chemicals and construction equipment / services (BASF,

2019).

Structure of the study

This case-study is divided into 2 parts. Part 1: final assignment question 2 & 3 -

Critically examine the concept: define the concept; identify when it was first discussed

and what the arguments were for its creation; discuss how the concept then evolved [..]

noting any adaptations. The concept in this study is BSC. How BSC fits in today’s

business challenges and strategic management is explored. Part 2 demonstrates real-

life application of BSC in Conmix as a performance measurement framework and as a

strategy implementation tool for executing operational plans and budgets. Before and

after part 1 and 2 are background details and conclusion respectively.

As per assessment requirement, this study makes reference to a minimum of 10

peer reviewed articles / publications related to BSC. The peer reviewed publications are

identified by their bold text with (peer-reviewed) at the reference end in the

Bibliography / Reference section.

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PART 1: Balanced Scorecard: Strategic Imperative and Evolution

1.0 Introduction: Definition and History

The Balanced Scorecard (BSC) is a conceptual performance management tool that

encompasses financial and key non-financial measures related to customers, internal

business processes, and organizational learning and growth needs. These measures

are placed in a concise scorecard to monitor performance (Anonymous, 2016). Robert

S. Kaplan and David R Norton who popularized the concept, argue that the critique,

mostly by academicians, is based on this narrow definition and perception of BSC. They

assert that this definition and related critic ignore the role of BSC in strategic execution

(Kaplan, 2012). Organizations are likely to adopt BSC as both a management tool for

strategic execution and performance appraisal that minimizes suboptimization (Kaplan

& Norton, 1992).

The BSC was first published in Harvard Business Review (HBR) in 1992,

following a research program involving 12 companies. The initial focus was to explore

new approaches to performance assessment for firms whose value originated from

intangible assets as opposed to financial or physical assets This overcame the limitation

of using only financial measures in traditional performance evaluation (Kaplan & Norton,

2001). Early adopters recognized the additional value of BSC as a strategic

management tool (Kaplan & Norton, 2007). Over the last 25 years BSC has evolved

from the early focus of using multiple measures for balancing the company’s

performance to a strategic management system and tool for balancing short- and long-

term objectives (Kaplan, 1996).

Unit 3 interim Assignment 10

Recent work focus on need to tie measures together in a causal chain of

performance. And to test validity of the causal relationship to guide strategy

development (Tayler, 2010). This seems to be focused on addressing the lack of a

Systems Dynamics Framework (SDF) to estimate measures and their relationships and

to validate causal linkages on the strategy map (Kaplan, 2012).

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2.0 Arguments that influenced Development of BSC

The initial purpose of BSC was to address limitations and imbalance in performance

assessment that was purely financial. BSC created a balance by incorporation non-

financial and non-quantitative information into performance assessment and provided a

framework for long-term interpretation of business that was lacking from lagging

financial measures (Llach, et al., 2017; Kaplan & Norton, 1992).

2.1 Evolution and Arguments for and against BSC

Between 1992-1995, Kaplan & Norton uncovered value of BSC in linking Long-term

strategy with short-term actions, following work with early adopters (Kaplan, 1996). The

early adopters of BSC had been frustrated with conventional financial accounting’s

irrelevance in interpreting future of their companies (Llach, et al., 2017). BSC’s early

success (noted by Kurtzman and Urresta indicating 64% adoption among companies in

1997) arose from the need to establish effective strategies for the long-term and to use

not only quantitative accounting information, but also qualitative information in

evaluating performance of companies and aligning every aspect of the organization

(Llach, et al., 2017).

Kaplan and Norton have argued for BSC as a tool for gauging success of

strategy (Kaplan & Norton, 2007;Tayler, 2010). However, Archival and field research

show mixed results in terms of BSC usage for strategy evaluation purposes. Taylor

argues that the potential limitation of BSC for this purpose in some setttings is the

propensity for decision-makers’ reasoning to be influenced by their motivations; what is

Unit 3 interim Assignment 12

refered to as Motivated Reasoning (MR) in psychology, (Tayler, 2010). Settings in

which evaluators have preferences to arrive at certain conclusions, and for which

information is noisy, ambiguous, or complex, provide fertile ground for motivated-

reasoning processes because evaluators can more easily rely primarily on preference-

consistent information while maintaining an appearance of objectivity (Tayler, 2010, p.

1096).

Recent work focuses on need to tie measures together in a causal chain of

performance. And to test validity of the causal relationship to guide strategy

development (Tayler, 2010). For example, the work of Humphreys & colleges examined

the effect that BSC frameworks of causal linkages and time delay information (delay)

on the strategy map, have on long-term profit performance in a dynamic decision-

making environment, using computer simulation. The study demonstrated the future

trends in BSC and how it can be useful as a strategic tool in dynamic decision-making

environments. The results seemed show correlation between higher profit performance

and decision scenarios in which managers were presented with causal linkages and

delay (Humphreys, et al., 2016).

2.2 Criticism and Limitations

Early criticism of BSC lead by professor Salterio, focused on the initial perspective of

BSC. Salterio argued that rolling-up Business Unit metrics to corporate metrics was

likely to be fraught with difficulty. Kaplan defended BSC approach by insisting that how

much unit metrics roll up into corporate metrics was contingent on corporate strategy

(Kaplan, 2012).
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The critic acknowledged by Kaplan was by Barnabe & Busco who pointed out the

limitations of BSC in terms of lack of systems dynamics approach. They argued that

BSC lacked a model of analyzing historical data to estimate relationships between BSC

measures and to validate causal linkages in the BSC strategy map. Though Kaplan

insisted that BSC should be more than an ad hoc collection of financial and nonfinancial

measures but should include strategic objectives and outcome measures and

performance drivers of those outcomes in a cause-and-effect relationship, a systems

dynamics model to validate the causal linkages seems elusive (Kaplan, 1996; Kaplan,

2012; Kaplan & Norton, 2007). Therefore, causal relationships cannot be fully

incorporated in implementation. The reasons for success or failure of strategic

objectives cannot be fully determined or understood properly (Farokhi & Roghanian,

2018).
Unit 3 interim Assignment 14

3.0 BSC: Implementation, Adaptations and Strategic Management Fit

Perhaps one of the most important benefits of developing BSC internally is the impact it

has on the company’s culture. Having key stakeholders in the organization participate in

constructing the BSC rather than imposing perfect measures of performance on them,

has potential to improve organizational culture (Gibbons & Kaplan, 2015). It facilitates

teamwork which improves employee attitudes and increases job satisfaction (Miguel, et

al., 2014). BSC inculcates a culture of measuring and tracking performance across the

organization. When perspectives (financial, customer, internal process & Growth and

Learning) are conceived as an integral performance management system, key

stakeholders in the organization understand that achievements in one perspective

contributes to improvements in other perspectives (Gibbons & Kaplan, 2015).

3.1 Translating the Vision and Strategy and Communicating the Link.

Translating the vision into action stem from ‘conventional wisdom’ that “what gets

measured gets done” (Wolf, 2010). Often and with very good intentions, top

management normally come up with imposing statements about their vision and

strategy which are elusive in terms of guiding action at the operational level. BSC fulfils

this gap between mission statements and the knowledge of how individual actions can

contribute to its realization (Kaplan & Norton, 2007). BSC translates those lofty words

into integrated objectives and measures that can be acted upon. These objectives are

normally agreed and communicated by top executives as drivers of long-term

performance (Kaplan, 1996; Kaplan & Norton, 2007).

Unit 3 interim Assignment 15

The Strategy Map is a crucial link between strategy and BSC measures and

enhances chances of reaching performance goals (Farokhi & Roghanian, 2018). The

Strategy map helps to describe the strategy in clear fashion that depicts all the causal

linkages between organizational objectives and individuals’ day-to-day activities (Kaplan

& Norton, 2001). After describing the company strategy in a consistent and reliable

framework using the strategy map that outlines all relationships and causal linkages,

constructing the BSC performance measures follows logically. Appropriate parameters

are specified in each of the four BSC perspectives. Parameters include objectives

(tangible/intangibles to be achieved), Measures / KPIs (how results will be determined),

Targets (near-term goals) and initiatives (KSF or what is being done) (Kaplan & Norton,

2001). See appendix c.

Appendix (b) shows the linking of vision and strategy and how this translates into

four perspectives of BSC and the long-term objectives and short-term measures to be

acted upon in each perspective. The Financial perspective focuses on creating

shareholder value with objectives depending on the stage in the lifecycle of the BU.

Most BUs tend to be in the stage where they attract investment while they are expected

to deliver handsome returns on invested capital and maintain and grow their market

share (Kaplan, 1996). Though profitability is common, typical objectives in financial

perspectives include revenue growth – expanding product offerings, differentiation and

reaching new markets, Cost reduction -reduce direct/indirect costs and share common

resources with other BUs and Asset Utilization – reduce working/physical capital

required to support volume of business, (Kaplan, 1996).

Unit 3 interim Assignment 16

Customer Perspective focuses on identifying the customer and the market

segments in which the BU will compete. The generic objectives and measures include

customer satisfaction and retention and market share. Market share and customer

satisfaction are key success factors for revenue growth in the financial perspective; this

makes implicit the causal linkage, (Kaplan, 1996).

Internal Business Process are the ways in which the company fulfils its vision,

creates and delivers customer value propositions and realizes shareholder value.

Kaplan insists that internal business process measures should focus on processes that

will have the greatest influence on customer satisfaction and realizing financial

objectives. Customer satisfaction seem to be everywhere. It’s a key success factor and

a measure that helps companies focus on their customers. This helps the company to

innovate and develop new markets and products. This is a stark contrast to traditional

measures that focus on incremental improvements (Kaplan, 1996).

Growth and Learning helps the organization to identify deficiencies in current

resources and capabilities, technologies, skills and knowledge required to meet future

customer requirements (Kaplan, 1996). Globalization and rapid technological changes

have implications on sustaining competitive advantage and therefore companies should

be able to identify measures from the principal sources of people, systems and

organization, that will help the company adapt to changing competitive circumstances.

Generic measures for people may include employee satisfaction. For systems

measures may include real-time availability of customer information and for organization

the measures may focus on aligning of employee incentives with key BU success

factors (Kaplan, 1996).

Unit 3 interim Assignment 17

3.2 Business Planning and Implementation

BSC helps turn BU strategic objectives into operational plans and budgets. It integrates

budget and operational planning with strategic planning (Kaplan & Norton, 2007). In this

way budgets and operations support the strategic imperative by emphasizing financial

outcomes and identification and inclusion of success factors (KSF) that will drive those

desired results (Puska, et al., 2015). This streamlines the planning process as BSC

users can select objectives from the four perspectives and set measures and targets

and the actions that will be taken to achieve the desired targets (Kaplan & Norton, 2007;

Grant, 2013).

Linking BU strategy to operational planning and budgeting can help companies

implement short-term and long-term goals using the BSC. Alignment through strategy

awareness, linking personal goals and rewards to BU strategic objectives are crucial for

implementation and success of BU objectives. The role of leadership in this context is

imperative. Leaders should mobilize resources to support BSC. They should surmount

the leadership challenge of change that is occasioned by implementation of BSC

(Kaplan & Norton, 2001).

3.3 Feedback and Learning

BSC gives managers capability to know whether the implementation of the strategy is

on track and the reasons if not (Kaplan & Norton, 2007). Though translating the vision,

communication and linking and business planning help in strategy implementation using

BSC, they are inadequate being single-loop systems (Kaplan & Norton, 2007). In a

VUCA (volatile, uncertain, Complex and ambiguous) world companies need to develop

capabilities for double-loop learning - Learning that challenges people’s assumptions

Unit 3 interim Assignment 18

about cause-and-effect relationships (Kaplan & Norton, 2007). This facilitates strategic

learning in which the company tests strategies and the assumptions underpinning them

and institutes necessary changes.

By articulating the vision, defining in operational terms results that the company

must achieve, and linking individual efforts to BU objectives, BSC communicates a

holistic model and provides those elements essential for strategic learning (Kaplan &

Norton, 2007). BSC enable understand and communicate the link between strategy and

company environment, making it clear how the company will deploy resources to

achieve its mission and goals (Grant, 2013).

3.4 Adaptations in BSC

The scorecard should be “unbalanced,” based on the strategy of the business -

(Olson, et al., 2002, p. 2)

The notion of unbalancing BSC is useful for implementation. In their “value disciplines”

notion, Treacy and Wiersema posited that product leaders should emphasize the

innovation and learning perspective, customer intimates should emphasize the

customer perspective, the operationally excellent should emphasize the internal

business and all of the value disciplines should pay attention to the financial

perspective, Treacy and Wiersema (1995; quoted in Olson, et al., 2002, p. 2).

Appendix (d) demonstrates the rationale of unbalancing the BSC based on BU’s

strategic framework in which it makes product-market decisions (Olson, et al., 2002).

For example, Conmix’s strategic typology is that of an Analyzer with Differentiated

Offerings (ADO). The company waits for ‘big players’ in the market to introduce

innovative products. Once products are widely accepted, Conmix moves to market its
Unit 3 interim Assignment 19

‘differentiated’ offerings. The company takes advantage of shortcomings and failures of

competitor products to penetrate the new product segment. By focusing on improving

quality, performance and fast delivery relative to competitors, the company has

positioned itself as a flexible and solution-oriented vendor in the construction industry.

Given this strategic orientation, Conmix’s requirement for success will be

different from the ‘big players’(prospectors). While the four BSC are essential, Conmix’s

performance requirements in its key capabilities of flexibility and leveraging market

opportunities rapidly while minimizing risk, should be the emphasis of the BSC

construct, rather than balancing all perspectives. Performance evaluation should be

suited to strategic orientation because different strategies have different modal

requirements of success (Olson, et al., 2002).

This adaptation (unbalancing) of BSC to suit particular performance requirements

underpins the importance of employing more than one tool for making strategic

decisions (Grant, 2013). Unbalancing BSC borrows from the concept of Generic

Strategies posting that a firm can pursue differentiation or cost advantage to gain

competitive advantage (source: Olson, et al., 2002; Scott, 2003).

Strategists argue that implementing BSC could be easier and straight forward in

an ideal world. But given VUCA, were sometimes strategy and plans are only

hypothesis in leaders’ minds and information is limited, Combining BSC with other tools

such as SWOT is inevitable. BSC SWOT is one adaptation that can help close gaps in

BSC implementation in VUCA world (Brown, et al., 2001).

Unit 3 interim Assignment 20

3.5 BSC: Strategic Management fit and Relevance to Business Challenges

Strategy provides a link between the company and its environment. The role of strategic

management is to determine how the company will organize itself to deploy resources

within its environment to achieve its mission. Strategic Management, therefore, helps to

drive performance by setting goals and monitoring results against targets (Grant, 2013).

However, Performance goals are long-term, but performance targets need to be

monitored in the short-term to provide an effective control system. This creates a

potential problem of suboptimization were pursuit of short-term targets may jeopardize

long-term profit maximization (Grant, 2013; Kaplan & Norton, 1992). Most performance

evaluation tools seem to be limited by this problem and cannot provide future insight

beyond their lagging measures (Grant, 2013).

BSC provides a clear framework of linking short-term measures to long-term

objectives through a comprehensive approach that identifies leading measures and

linking them to desired long-term outcomes using a strategy map. By identifying both

the desired outcomes and drivers of those outcomes BSC balances short-term

measures with long-term objectives and minimizes suboptimization. By emphasizing

financial objectives and linking them to leading measures in the customer, internal

business process and growth and learning perspectives, BSC helps to balance

performance assessment and align key organizational aspects (Kaplan, 1996).

By aiding strategy execution through operationalizing of plans and budgets, BSC

provides a lever to many business challenges and a good fit in strategic management,

but it’s not a panacea (Grant, 2013). Most strategist have advocated for adaption of
Unit 3 interim Assignment 21

BSC with other tool to address gaps apparent in BSC implementation such as motivated

reasoning, lack of information and VUCA. Others seek unbalancing to suit strategic

orientation in which product-market decisions are made (Brown, et al., 2001; Olson, et

al., 2002).
Unit 3 interim Assignment 22

PART 2 : Application of Balanced Scorecard in Conmix Limited

1.0 Introduction

The prominent feature of BSC is its ability to translate strategy into action and among

the essential steps is to develop a BSC map (appendix b) that depicts key cause-and-

effect relationships in the organization (Farokhi & Roghanian, 2018). Appendix (a)

outlines a six-step BSC development timeline, typically employed in BIL, starting with

establishing strategic goals, Identifying strategic themes, building BSC map, defining

metrics and targets, identifying programs and creating an implementation plan (Kaplan

& Norton, 1992).

After constructing the BSC map the challenge is to reach consensus on the

relationships between various BSC aspects and KPIs, agreeing measures for every

objective in each perspective and assigning quantitative values and targets (Farokhi &

Roghanian, 2018). In BIL, due to strategic nature of BSC, information about setting

strategic goals and themes is normally held in secrecy at corporate office and only

specific BU strategic objectives are communicated. Some assumptions were made

based on informal conversations and management tone in regular meetings. The BSC

construct in this study is based on the company’s medium-term frame strategic planning

from 2016-2020.

In this case-study focus will be on BSC map and steps that follow from it.

Chapter 2 details the development of Conmix’s BSC map. Chapter 3 details the

construction of the four BSC perspectives, taking into account the causal linkages

depicted in the map. Chapter 4 shows how the company is aligned to strategy.
Unit 3 interim Assignment 23
Unit 3 interim Assignment 24

2.0 Linking Strategic objectives with Short-term measures: Strategy Map

Conmix’s strategy map is developed and reviewed through a series of meetings

between three management level groups: Leadership team from corporate office, Core

team of Top management and divisional managers and measurement team of line and

functional managers. Based on previous year performance, the review meetings realign

the strategy map to ensure its continued relevance to long-term objectives and strategic

themes. The reviews ensure that the cause-and-effect linkages on the map provide

clarity and helps in building and implementing BSC measures at operational levels. The

strategy map used in this study is based on the 2017 construct; the only one available

to this author at the time.

Leadership team articulates the strategy, offers support for BSC

implementation, communicate the key concepts of the organizational objectives and

how BUs can contribute to achieving them. Vice Chairman of BIL leads the team.

The Core team translates corporate strategy into BU objectives, are responsible

for building the strategy map and do hard work of collecting and analyzing data,

documenting processes and initiating operation plans. They provide expert opinions,

identify effective performance evaluations, KPIs and their value levels in each BSC

perspective. The key to strategy execution is achieved by linking the strategy process to

action, through the operating plan; to motivation and accountability, through

performance management; and to resource allocation through capital budgeting -

(Grant, 2013, p. 146). The strategy map clarifies this link. The Core team ensures

performance targets cascade down the organization through setting of employee

Unit 3 interim Assignment 25

performance targets that are linked to the reward and appraisal system, to create focus

on KSF that will drive overall desired performance in the company (Kaplan & Norton,

2001).

The Measurement Team are responsible for implementing short-term

operational plans in respective functions of Finance & Administration, Sales &

Marketing, Production, Quality Assurance & Control and procurement. After face-to-face

sessions and agreeing performance measures and targets (KPIs) with respective staff,

measurement team managers upload and lock-out KPIs for employees using the

LinkHR system. These KPIs are reviewed biannually and used to appraise employee

performance. This creates a vital link between short-term actions in respective

perspectives with overall BU objectives (Kaplan & Norton, 2001).

Exhibit 2-3.1 in appendix (c) is a BSC Strategy map of Conmix depicting the

relationships and causal linkages between various aspects / objectives in the four

perspectives (Exhibits 4.1 – 4.4). The Exhibit links Financial objectives (what

shareholder value is) to the underlying customer and internal process perspectives

(strategic theme of creating shareholder & stakeholder value) and learning and growth

perspective (Sustaining stakeholder & shareholder value). This creates a mechanism of

translating strategic vision into concrete actions using BSC (Anonymous, 2016).
Unit 3 interim Assignment 26

3.0 Constructing BSC: The four Perspectives in Conmix Limited

Conmix Strategy map (Appendix c), shows how the Financial perspectives provides the

strategic direction. It is also the focal point when operationalizing the company mission

through the Customer, internal business process and learning and growth perspectives.

3.1 Financial Perspective

Treacy and Wiersema posit that all value disciplines should pay attention to the

Financial perspective because each value discipline has a performance perspective that

is a leading indicator of financial objectives (Olson, et al., 2002). And Kaplan posits:

Ultimately, all causal paths from the measures on the scorecard should be linked to

Financial objectives (Kaplan, 1996, p. 67).

Despite the emphasis on ‘balancing’ performance, most companies like Conmix

Limited are mostly keen on financial success. This obscures the drivers of that success

as the annual reports are dominated by financial statements such as Profit & Loss

(P&L), Balance sheet, Income statements and cashflow statements. This seems to be

supported by the work of Bento and colleagues positing that in the world where

Shareholder Value Maximization is pervasive, Financial measures take preeminence in

evaluations, appraisal and bonus decisions compared to other considerations, such as

Corporate Social Responsibility (CSR) (Bento, et al., 2017). And True for Conmix, CSR

oriented objectives do not seem to appear on its BSC; probably intentionally obscured

or isolated from operating units by the corporate office, as posited by (Porter & Kramer,

2007).
Unit 3 interim Assignment 27

Conmix had set out five objectives in its financial perspective according to its

2017 BSC – improve cash flow, Grow Revenue, improve Net Operating Margin, achieve

ROIC > 21% and Reduce Costs. Cascading from corporate strategy these BU Financial

objectives set a tone for leading measures in other BSC perspectives of Conmix.

The emphasis to grow revenue seems to have stemmed from continuing decline

in Sales from the company’s biggest and oldest division (‘cash cow’) according to

reliable internal sources and consistent with industry analysts’ views. Starting from

2017, Sales of Ready-Mix Concrete (RMC) have plummeted exponentially to 60% of

2016 levels at present. Low entry barriers, availability of capital, diffusion of technology

and ‘cheap’ Cement led to proliferation of RMC Batching plants. Anticipated increase in

concrete demand as Expo 2020 projects got underway, led to over-capacity and drastic

reduction in unit prices of RMC. Cement price in UAE being an indicator of construction

industry health, has been in steady decline for some time due to oversupply. Though

prices were expected to rebound, Certain Cement Factories such as RAK Cement

recorded loses (>USD 5.7 million) in 2017 (Mubasher, 2018; Goodwin, 2017).

Conmix Strategic focus, since then, has been to grow home and expand export

sales from other divisions especially Premix Plaster and Construction Chemicals. The

target is to achieve year/year revenue growth of 15% from 2017- 2020. In 2018, 20%

revenue growth was attributed to expanded exports into Iraq. Exhibit 3.1 depicts Conmix

Financial perspective with respective objectives, KPIs and KSFs.

3.2 Customer Perspective

The main objectives in the Customer perspective for Conmix are Customer Satisfaction,

Customer Retention, market share growth and improve customer profitability. Customer
Unit 3 interim Assignment 28

satisfaction and retention are leading measures of revenue growth because only when

customers rate their buying experience as extremely satisfying can the company count

on their repeat business (Kaplan, 1996).

Conmix’s financial objective of Revenue growth, originating from corporate

strategic mission, cascade into customer perspective’s specific actions such as

improving customer satisfaction and quality. The measures (KPI) for customer

satisfaction include satisfaction surveys and complaints rate. Customer Satisfaction is

driver of future performance (leading measure), with complaints rate being the outcome

(lagging) of efforts or KSFs that include improving quality (reducing defects rate) and

enhancing customer experience and service. To ensure quality, Conmix has

implemented ISO 9001:2015 quality management system (Conmix Limited, 2019).

As depicted in Exhibit 3.2, the other objectives include increasing market share

and customer profitability. Conmix realized that a lot of customers were abusing the free

sample provision to acquire free products for their works. Normally these customers did

not make valuable orders (minimum order quantity) and were engaged in habitual

complaints to justify their requests for free samples. Continued servicing of these

customers was becoming unprofitable for the company. Customer profitability objective

became a necessity under these circumstances. By tracking the cost of sales as

proportion of order value for each customer, the company can isolate unprofitable

customers and track product returns and underlying reasons.

Market share is related to customer satisfaction, retention and new customer

acquisition. Market share growth may translate into increases in sales volumes that is

linked to capacity utilization, a KSF that appears as an objective in the internal business
Unit 3 interim Assignment 29

process, demonstrating the causal linkage (see Appendix c, Exhibit 3.2 & 3.3). The

measures of customer satisfaction, complaints rate and improving quality, and

increasing market share form part of the key performance requirements (KPIs) for the

sales & marketing personnel. This demonstrates alignment of employees to BU

objectives and the causal path linking customer perspective measures to financial

objectives (Kaplan, 1996).

4.3 Internal Business Processes

Flexibility and customer-focused service are key capabilities of Conmix. This is

consistent with its Analyzer with Differentiated Offerings (ADO) product-market

strategic orientation. Given this strategic orientation Conmix should be expected to

excel in the Customer and Internal Business process (IBP) perspectives (Olson, et al.,

2002). Key objectives for Conmix’s IBP include improving quality, enhancing customer

service & experience, On-time Delivery (OTD) and inventory management. It can be

noted that enhancing Customer service and experience and improving quality were

KSFs for the customer perspective; manifesting the key causal linkages.

Recapping on the general concept of what gets measured gets done, the

emphasis by Conmix on objectives of OTD and customer service reinforces its strategic

typology orientation (Analyzer) that enhances flexibility and customer focus. OTD

measures of delay in supply (lagging) and proportion of orders completed on time

(leading) are prominent in the internal process perspective. Also prominent is the

measure of customer service index (CSI); a leading measure of customer satisfaction

linked to the customer perspective. Customer satisfaction is a driver of revenue growth,

a key Financial objective of Conmix (Kaplan, 1996). Smart Inventory management

Unit 3 interim Assignment 30

initiatives like ‘just in time’ and identifying fast-moving items and keeping minimum stock

levels are crucial to success in flexibility and OTD as Conmix seem to have realized.

Exhibit 3.3 depicts the IBP perspective in Conmix and the measures that are

undertaken to ensure that IBP objectives contribute to achieving BU objectives. This

author has a role in the IBP objective of improving quality. As a QC Engineer KPIs

include reducing defect rate and minimizing customer complaints and ensuring

effectiveness of the Quality Management system by eliminating Non-conformances

(NCs). Individual employee KPIs are linked to overall IBP objectives through the setting

of goals involving face-to-face interactions with the Line Manager.

3.4 Growth and Learning

For Conmix, as for many other companies using BSC, the Growth and Learning

perspective provides an opportunity to assess the infrastructure (people, systems and

organizational procedures) required to sustain shareholder and stakeholder value and

to meet future customer requirements (Kaplan, 1996). The company uses this

perspective as a platform to improve management controls through provision of

information systems. This requirement goes with improving knowledge and skills of

employees.

Key objectives include Employee Empowerment, Technology deployment

continuous improvement and sales from new products. Focus on sales from new

products seems to have been influenced by declining sales of RMC. The company

purposed to increase the proportion of sales from new products by 10% year-on-year

for the medium-term frame as part of its growth strategies.

Unit 3 interim Assignment 31

Conmix realizes the importance of employee satisfaction as a driver (leading

measure) of customer satisfaction. The company believes that if employees are

satisfied they will focus on serving and satisfying the customer (Westcott, et al., 2014).

Employee satisfaction surveys measure motivation within the empowerment objective.

Exhibit 3.4 depicts the Growth and Learning perspective with an employee satisfaction

(ES) rate target of >85%. The achieved ES in 2018 was 91%. Training is a leading

measure of employee empowerment with a target of 3 hours equivalent of full-time

study (FTS) per year for staff category to line manager level.

Conmix seems focused on implementing management controls and providing

requisite training. While most companies, like its competitor BASF, use this perspective

to build core competencies such as Research and development (R&D) and build a base

for innovative products, the Conmix seems content with the Analyzer approach (BASF,

2019; Kaplan, 1996).

Unit 3 interim Assignment 32

Chapter 3 Exhibits: Conmix BSC perspectives

Exhibit 3.1: Financial Perspective 1

Target KSF /Actions

Strategic Objective KPI Unit
Value

Improve Customer satisfaction; new

Revenue Growth sales value year/year** % 15
products / Markets /Export

surcharge on late receipts; Reduce

Improve Cash flow Accounts Receivables age (AVG)* Days <60
inventory turnover

Improve Return on Proportion of Net operating profit after Improve operating margin; minimize
% 21
Investment (ROIC) taxes over invested capital* cost of capital

Profitability (Cost Net Operating margin* 25 Reduce overall cost of sales;

% Control indirect costs;
Reduction) Proportion of indirect cost/sales* 35
Source: Conmix Balanced Scorecard 2017.

Key
(*) Lagging measures
(**) Leading Measures
FTS Full Time study

Exhibit 3.2: Customer Perspective 1

Target KSF /Actions

Strategic Objective KPI Unit
Value

Satisfaction survey** % >85 Improve Quality, customer service & experience

Customer satisfaction
Complaints* rate <12/year Reduce products defect rate

Proportion of Repeat
Customer Retention % >80% Improve Quality, customer service & experience
Orders **

Volumes Increase sales effort and customer contact time and

% 15%
increase/year** capacity utilization
Increase Market share
Key Customers
% 75% Customized service to key accounts
account share**

Cost of sales/order Eliminate long-term unprofitable customers/orders;

Customer Profitability % <60
value* reduce returns
Source: Conmix Balanced Scorecard 2017
Key
(*) Lagging measures
(**) Leading Measures
Unit 3 interim Assignment 33

Exhibit 3.3: Internal Business Process 1

Strategic Target
KPI Unit KSF / Actions
Objective Value

Reduce Inventory Proportion of cost of sales over Just-in-time inventory management; Isolate fast-
ratio >1
turnover WAC of Inventory** moving items

Defects rate per 1000 units of Increase frequency of routine quality testing;
Improve Quality ratio <0.001
product (DRKU)* Employee job-focused training

proportion of orders on time over

On-Time Delivery >75 Increase stock levels of fast-moving RM /FG;
total orders** %
(OTD) reduce cycle time
Delay in Supply(order delay) <10

Idle / Downtime* Hrs/day <2 Increase routine preventive maintenance

Increase Capacity
Utilization proportion of actual to potential
% >70 Reduce setup /start-up time
output**

Proportion of on-time service Identify gaps in Customer service delivery and

Customer Service % >80
(CSI) ** close them, increase contact time
Source: Conmix Balanced Scorecard 2017

Key
(*) Lagging measures
(**) Leading Measures
CSI Customer service index
RM Raw Material
FG Finished Goods
WAC Weighted average cost of inventory

Exhibit 3.4: Growth & Learning 1

Strategic Target
KPI Unit KSF / Actions
Objective Value

Sales from New Proportion of sales from new

% 10 Increase promotion & sales of new products
Products products **

Motivation (ES rate)** % >85 Increase employee engagement & welfare

Employee
Empowerment Training equivalent of FTS
hrs >3 Increase employee focused training
/year**

management technology system

Technology Y/N Y implementation of management control systems
deployment*

Continuous No. of Major NC from internal Review quality processes / procedures /

NOS. <3/Year
Improvement Quality Audit** Standards
Source: Conmix Balanced Scorecard 2017
Key
(*) Lagging measures
(**) Leading Measures
FTS Full Time study
NC Non-conformance in Quality/Functional processes.
Unit 3 interim Assignment 34

4.0 BSC Programs in Conmix: Creating alignment to strategy

Getting every employee involved in making strategy contributes to success of BU

objectives (Kaplan & Norton, 2001). Conmix employs two main programs to create

alignment to BU objectives:

1. The setting of aligned personal and BU objectives and;

2. The Appraisal and Reward system linked to strategic objectives

Every beginning of the year, face-to-face interactions between line managers and team

members are held. Line managers explain and communicate the objectives that are to

be achieved and the measures and performance requirements needed from the team.

The result is the creation of aligned personal and BU goals with respective KPIs.

At year-end performance appraisals are held to review performance relative to

the set KPIs. Again, this involves face-to-face interactions and the line manager and

team agree assessment outcomes. The outcomes are used to guide promotion, bonus

salary increments and rewards decisions.

Strategy Awareness, though emphasized as crucial to attaining alignment, does

not seem to come out clearly from BIL and Conmix. (Kaplan & Norton, 2001). This is

probably due to the confidentiality of issues of strategy in the company.

Unit 3 interim Assignment 35

Conclusion

BSC has been used in many organizations to address the limitations of Financial

measures for performance evaluation and to align long-term strategic objectives with

short-term measures and to cascade corporate strategy to BU objectives (Anonymous,

2016). However, BSC is not a panacea. It has pitfalls, weakness and limitations.

Conmix has used BSC to execute BIL’s strategic mission through the Customer,

internal business process and learning and growth perspectives by leveraging the

causal relationships. BSC also helps to measure and monitor performance while

creating strategic aligned within the company. For example, Conmix’s Financial

objective of Revenue growth, originating from corporate strategic mission, cascade into

customer perspective objective such as improving customer satisfaction whose KSFs

include quality and customer service. Customer service and improving quality translate

into key objectives of the internal business process perspective. The Growth and

Learning perspective ensures employees are trained and skilled to provide the required

product/service quality, customer service and value. The measures (KPI) in each

perspective are linked to goals of employees. This creates alignment and unit of

purpose in the company to achieve BU objectives (Kaplan & Norton, 2001).

However, causal relationships may not be fully implemented in Conmix as in

many other companies using BSC because causes of failure or success of strategy

cannot be fully understood in VUCA world. A systems dynamics framework that can

estimate measures and their relationship in a given context and validate causal linkages
Unit 3 interim Assignment 36

using historical data maybe helpful in these circumstances, but this seems elusive from

BSC as the critique by Barnabe & Busco rightly noted (Kaplan, 2012).
Unit 3 interim Assignment 37

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Goodwin, D., 2017. Khaleej Times: Business: GCC building materials market rides region's real
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Humphreys, K., Gary, M. & Trotman, K., 2016. Dynamic Decision Making Using the
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Unit 3 interim Assignment 38

Kaplan, R. S., 1996. Linking the balanced scorecard to strategy. California Management Review,
39(1), pp. 53 - 79.

Kaplan, R. S., 2012. The balanced scorecard: comments on balanced scorecard

commentaries. Journal of Accounting & Organizational Change, 26 October, 8(4), pp. 539 -
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Kaplan, R. S. & Norton, D. P., 1992. The Balanced Scorecard—Measures that Drive
Performance. Harvard Business Review, January - February. (Peer-reviewed)

Kaplan, R. S. & Norton, D. P., 2001. The strategy-focused organization : how balanced
scorecard companies thrive in the new business environment. Boston: Harvard Business School
Press ; London : McGraw-Hill distributor.

Kaplan, R. S. & Norton, D. P., 2007. Using the Balanced Scorecard as a Strategic
Management System. Harvard Business Review, pp. 1-14. (Peer-reviewed)

Kim, J. & Rhee, J., 2012. An empirical study on the impact of critical success factors on the
balanced scorecard performance in Korean green supply chain management enterprises.
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reviewed)

Llach, J., Bagur, L., Perramon, J. & Marimon, F., 2017. Creating value through the
balanced scorecard: how does it work?. Management Decision, 20 November, 55(10), pp.
2181 - 2199.
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Miguel, Á. C. M., Jose, M. H. G., Beatriz, P. F. & Jose, L. G. G., 2014. Does the balanced
scorecard adoption enhance the levels of organizational climate, employees’ commitment,
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Mubasher, M. G., 2018. ZAWYA. [Online]

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strategy, and performance. Business Horizons, May-june. (Peer-reviewed)

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Puska, E., Busa, M. & Fill, M., 2015. Measurement of Business Performance using the
method Balanced Scorecard. International Journal of Transport and Logistics, Volume 15,
p. 1. (Peer-reviewed)

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[Accessed 17 October 2019].
Unit 3 interim Assignment 40

Appendix

a. BSC development timeline in BIL

(source: Bukhatir Investments Limited files)

Balanced Scorecard Project

Development Timeline

1 1 1
Development Steps / Week => 1 2 3 4 5 6 7 8 9 0 1 2
                               

Step 1: Establish Strategic Goals    

Step 2: Identify Strategic Themes (3-5)  
Step 3: Build a Strategic Map    
Step 4: Define your Metrics & Targets      
Step 5: Identify your Programs      
Step 6: Create an Implementation Plan    

Comments
The six-step development process normally takes 12 weeks. Once completed the next step is to
cascade out the Balanced Scorecard to other parts of the organization based on the
Implementation Plan. Three different types of teams are used within the process:
1. Leadership Team: From Corporate office. understands and articulates strategy &
strongly supports the BSC.
2. Core Team: Most important team (consisting of BU top management & Finance team)
since here is where most of the hard work takes place -Collect and apply data, build
maps, document the process, etc.
3. Measurement Team: Lower level personnel (line managers and staff) who have detail
understandings about measurement.
Unit 3 interim Assignment 41

b. Exhibit 1-3.1: Translating and Linking the Vision and Strategy

Source: (Kaplan & Norton, 2007)

Financial
what shareholder value is
Objectives:
Measures:
Targets:
KSFs:

Customer Internal Business Process

How customers see us? How do we satisfy
Objectives: Vision & Shareholders & Customers?
Measures: Strategy Objectives:
Targets: Measures:
KSFs: Targets:
KSFs:

Growth & Learning

How will we adapt and change to keep
our vision alive while satisfying
employees?
Objectives:
Measures:
Targets:
KSFs:
Unit 3 interim Assignment 42

c. Exhibit 2-3.1: BSC Map for Conmix with strategic theme

Strategic Theme: Creating & Sustaining Stakeholder &

Shareholder Value

Source: Conmix Limited BSC 2017 (unclassified)

Unit 3 interim Assignment 43

d. Exhibit 2-3.2: Combined Typology of Business unit Competitive Strategies

(Michael porter and Robert Miles- Charles Snow approaches)
(source: Olson, et al., 2002; Scott, 2003)

Emphasis on new Product-Market Growth

Heavy Emphasis No Emphasis
Prospector Analyzer* Defender Reactor
Units with strong Units primarily
core business; concerned with
actively seeking to maintaining
expand into related Differentiated
Differentiation product markets position in
Competitive strategy

Units with Differentiated mature markets

concerned offerings Units with no
with attaining
clearly defined
growth through
product-market
aggressive
Units with strong Units primarily development or
pursuit of new
core business; concerned with competitive
product-
actively seeking to maintaining strategy
market
expand into related low-cost
Cost opportunities
product markets position in
Leadership with low-cost mature markets
offerings

Capabilities and performance requirements for different strategy typologies

Strategy Orientation

Key capabilities Innovation Flexibility Efficiency Imitation

Performance Financial, Financial,

Customer and Customer and Financial, and
Requirement / Mostly focused
Learning & Internal Business Internal
BSC on financial
Growth Process Business
Perspective perspective
Perspectives Perspectives** perspectives
emphasis
(* Conmix Limited strategy orientation), (** Performance perspectives for Differentiated Analyzer like Conmix)
Unit 3 interim Assignment 44

e. Exhibit A-1.1: UAE: Sector-wise contribution to GDP

source: (UAE Government, 2019)

Economic sector Sector contribution to the

GDP for 2017 (in per cent)

(Extractive Industries (including Crude Oil and Natural Gas 29.50%

Wholesale and Retail Trade; Repair of Motor Vehicles and 11.70%
Motorcycles
Financial and Insurance Activities 8.60%
Construction and Building 8.40%
Transformative Industries 8.30%
Public Administration and Defense; Compulsory Social Security 5.80%
Real Estate Activities 5.70%
Transport and Storage 5.40%
Electricity, Gas and Water 3.20%
Information and Communications 2.90%
Professional, Scientific and Technical Activities 2.60%
Accommodation and Food Services Activities 2.20%
Administrative and Support Services Activities 1.90%
Other sectors 3.90%