Unum Corporation’s Balanced Scorecard Development

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Background information

Established in 1848, UNUM is an insurance company that caters for people with disabilities and special risks. After its establishment, the company set out different goals and objectives as well as the duration is expected to take in realizing these goals. To facilitate in ensuring that the company met the deadline, a balanced scorecard was developed. It is with this respect that this paper aims at looking into some of the strategies that the company used to ensure that the balanced scorecard helped it realize its objectives (UNUM Corporation 1997).

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Developing new goals for UNUM Corporation

To develop new goals and objectives for UNUM Corporation, James Orr sought to seek assistance from managers from the various departments within the company. Consequently, he established a team comprising of thirteen managers from different departments. The team was expected to set out goals on financial, productivity and customers. It was also expected to research and learn on elements and functionalities of scorecards for a period of eight months. The team was required to look into challenges affecting the company and formulate strategies to help in alleviating the challenges.

To guarantee that the scorecard effectively addressed the goals of every department, Orr helped the team in coming up with sub-committees that looked into matters affecting the various areas of interest in the company. For instance, a human resource sub-committee was established to look into issues affecting the ‘people’ in the company (UNUM Corporation 1997). The sub-committee evaluated employees’ input in the different departments. In addition, the team was to run a pilot test for the established goals and measures to ensure that they were feasible before they were implemented. Despite the responsibility of coming up with the new goals and measures being bestowed on the team, Orr sought some assistance from experts such as David Gravin.

The relationship between the development of UNUM’s corporate vision, the development of its corporate values and the development of its balanced scorecard

UNUM’s corporate vision is to gain leadership in its business. There is a strong relationship between the development of this vision, the company’s corporate values and its scorecard. In its vision, UNUM aimed at developing products and services that effectively satisfied customers’ needs through the help of its qualified personnel. In addition, its vision is aimed at making the company popular by having qualified staff with the requisite skills and trustworthiness (DeBusk & Crabtree 2006). The company aimed at improving its managerial practices, thus helping it increase its profit margin and making it possible for the company to always make informed decisions and responses to matters affecting its operations.

The organizational values are tailored to the aforementioned visions. To ensure that the company achieves its vision of manufacturing quality products, the company embraced the principle of integrity and ethical standards in manufacturing its products and also in responding to customer complaints. The company emphasized delivering results and establishing individual goals that are aligned with organizational goals.

This is in a bid to help it achieve its ultimate goal of being the leader in the business. UNUM highly valued its employees and customers as a strategy of ensuring that it achieved its vision of being a reputable organization. It ensured that employees were assisted in their bid to improve their skills and competencies. In addition, the company responded to customers’ needs diligently and efficiently. Therefore, the company aimed at building a permanent relationship with its consumers and intermediaries.

The company valued communication as a way of improving its management. This was in line with its vision of improving its profit as well as helping it make informed decisions on matters affecting the company. The management team in UNUM understood that it is only through communication that the company could be able to solve external and internal problems affecting the company.

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The company’s scorecard was developed with four perspectives in mind. These were people, customer satisfaction, shareholder value and operating effectiveness. As the company aimed at ensuring that it builds its reputation, it developed its scorecard in a way that the scorecard helped it relate well with all its employees as well as help in meeting consumer needs.

The use of the balanced scorecard to communicate its corporate goals to employees throughout the organization

The organizational management team understands that the success of a scorecard lies behind the ability of the company to use the scorecard in communicating corporate goals to employees (Gumbus, Lyons & Wilson 2004). To ensure that it has effectively communicated the corporate goals to all its employees, the management team in UNUM has ensured that all the perspective visions included in the scorecard are clearly defined and explained. For instance, in its customer perspective, the company advocates for employees to treat themselves as customers and at the same time embrace the delight of an organizational owner.

This is to help employees ensure that they always strive at delivering results. In addition, the company has established a survey aimed at evaluating the level at which employees are embracing the principles and perspectives contained in its scorecard. Through the survey, the company aims at making more people embrace the implementation of the scorecard and helping those that are sceptical about its effectiveness.

Through the help of the scorecard, the company has come up with an appraisal system that is used in evaluating the managers. The company uses a 360-degree method of performance appraisal to determine if its managers execute their responsibilities in accordance with the corporate behaviour set out in the company’s scorecard.

Besides, employees in UNUM America have come up with a trusted clinic that tries to identify some of the hurdles that exist in different work units and the entire company that make it hard for employees to believe in whatever they are told by their superiors. All the identified hurdles are communicated to employees in the entire company. Consequently, every employee becomes aware of the challenges affecting their operations, leading to them being ready to accommodate strategies formulated by their managers to cater for these challenges.

The role of compensation mechanisms in the balanced scorecard at UNUM Corporation

Compensation schemes play a vital role in boosting employee morale and commitment to organizational goals. Through compensation, employees feel to be valued in an organization, thus striving at helping an organization realize its objectives (Abran & Buglione 2003). Compensation mechanisms such as those that give employees an opportunity to buy part of the company’s shares make their own part of the company.

Accordingly, they feel to are stakeholders in the company, thus treating the company as their own organization (Beasley, Chen, Nunez & Wright 2006). They become devoted to organizational activities and work towards achieving organizational goals. The major role of the compensation mechanism in the balanced scorecard is to make employees feel like to be part and parcel of the company. When employees have the feeling that they partly own the company, they devote themselves to organizational activities. Management in UNUM understands this and, as a result, incorporates a compensation mechanism in its balanced scorecard to help in luring employees to embrace strategies laid down in the scorecard.

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Through the help of the mechanism, the company has made its employees contribute to making decisions on how the company can improve its operations. Employees are interested in knowing how the company works and how its resources are utilized in a bid to help it grow. By learning how the company works, they have improved on customer services as well as organizational efficiency.

By introducing an annual bonus compensation scheme, UNUM is guaranteed that employees will be devoted to achieving the annual goals of the company. As employees understand that there will be a reward for realizing the annual goals, they direct all their attentions to these goals, thus making them channel their efforts into the realization of the goals. The compensation acts as a booster to employees (Anderson & O’Reilly 2009).

They feel to be valued and appreciated, thus being motivated. It is through the compensation scheme that the company managed to achieve its goals one year ahead of the set duration. Otherwise, if the company did not compensate its employees, they would have been reluctant to embrace the established strategies making it hard for the company to achieve its goals within the set time.

The balanced scorecard as a diagnostic control system or interactive control system

A diagnostic control system is one that is used by an organization in identifying the hurdles experienced during its day to day operations. Besides, the system is used in determining if the organization operates as expected (Simons 2005). On the other hand, an interactive control system is one that is used by an organization in helping it improve its performance (Simons 1994). The system is used in directing and reminding employees of the organizational expectations, objectives, visions and missions. Employees refer to the system for any clarification on matters affecting their operations. UNUM Corporation uses its balanced scorecard as an interactive control system.

To develop the scorecard, the company gathered managers from different departments within the company. These managers were given the mandate to look into issues affecting their different departments and come up with measures to counter them. Despite the company seeking assistance from people with knowledge on the development and implementation of balanced scorecards, it closely worked with its employees in developing interlocking goals and strategies that were to be later introduced into the company. Throughout its implementation, the company kept communicating the goals and perspectives established in the scorecards to its employees.

To ensure that the balanced scorecard is effectively implemented in the company, UNUM made sure that it communicated organizational goals, mission and vision to all its employees. The scorecard was developed bearing in mind four perspectives. All the perspectives would only be achieved through interaction between the stakeholders. In realizing the stipulated objectives, the company required employees to refer to the scorecard (Hoffecker & Goldenberg 1994).

Introduction of compensation mechanisms in the balanced scorecards aimed at helping the management freely interact with its employees in making decisions on matters affecting the company. By making employees feel to own the company, UNUM believed that they would freely accept to cooperate with the management in dealing with challenges encountered when executing the daily activities of the organization.

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The balanced scorecard for UNUM corporation

The balanced scorecard for UNUM corporation

The balanced scorecard for UNUM corporation

The cause-and-effect relationship between each of the four perspectives of UNUM Corporation

There is a clear relationship between the cause and effects of the four perspectives of UNUM Corporation. The desire by the company to nurture a good relationship between employees in the company was the driving force that led to the development of the balanced scorecard. Besides, the company’s desire to encourage employees’ participation in helping it achieve its objectives led to it including a compensation mechanism in the scorecard. The success of UNUM in achieving its goals prior to the set duration can be credited to the company’s effort in coming up with viable strategies.

As a way of increasing its returns, UNUM needed to come up with strategies to help it streamline its operations as well as cut down on operations costs. Balanced scorecard implementation was envisioned as one of the most effective methods of achieving these objectives. The inclusion of the operating effectiveness perspective in the scorecard helped the company cut down on operating costs (Bedford, Brown, Malmi & Sivabalan 2008). Orr posits that through the scorecard, the company managed to develop its operating cost structure by twenty-two per cent.

UNUM was in great need of improving its customer value. This could only be achieved through the formulation of strategies that would help it identify the areas that need to be improved as well as gauge its performance. For example, the company aimed at reducing the number of customers who had negative attitudes towards it. Orr asserts that through the scorecard, the company has managed to improve on its level of customer satisfaction.

The success of any company depends on its relationship with shareholders (Hoque & Watford 2000). UNUM aimed at establishing a good relationship with its shareholders by offering quality value. The value was to be in terms of dividends as well as an increase in the price of its shares. The inclusion of this perspective helped the company increase its returns leading to it being in the 39th position out of the 457 companies deemed to be standard and poor.

The Corporate Vision of UNUM Corporation reflected in its goals and performance measures

The goals and performance measures of UNUM were developed in line with the company’s vision. For instance, coming up with a survey that determined employees’ progress reflected the desire by the company to improve customer satisfaction and at the same time develop its employees. The goal of gathering information from employees was aimed at helping the company improve employee relations within the company.

A balanced scorecard plays a significant role in reducing the operating costs of an organization (Banker, Chang & Pizzini 2004). The vision of the operating effectiveness perspective was to increase customer value, improve organizational efficiency and cut down on operations costs. This was reflected in the company’s benchmarks that aimed at ensuring that its operating costs did not go beyond a pre-established mark. Besides, the company had set a goal of cutting down on operating costs by a third come the year 1998.

UNUM valued its customers. Consequently, its balanced scorecard contained a customer satisfaction perspective that aimed at making sure that the company offered products and services that matched customers’ wants. This vision was reflected in its quantifiable measures by the development of measures that helped the company determine if its products and services helped in meeting customers’ needs. The company came up with measures for collecting feedback from customers. The company’s goal was to cut down on the number of people who perceived the company negatively. This would only be achieved through offering quality products.

UNUM was dedicated to offering high value to its shareholders. It is in this respect that the company used dividends and shares price to determine if it actually achieved this vision. In addition, its main target was to be ranked among the first 125 companies of the 500 deemed as standard & poor.

Reference List

Abran, A. & Buglione, L., 2003. A multidimensional performance model for consolidating balanced scorecards. Advances in Engineering Software, 34, pp. 339-349.

Anderson, J. C. & O’Reilly, C. A., 2009. Effects of an organizational control system on managerial satisfaction and performance. Journal of Cross-Cultural Psychology, 40, pp. 761-796.

Banker, R. D., Chang, H. & Pizzini, M. J., 2004. The balanced scorecard: Judgmental effects of performance measures linked to strategy. The Accounting Review, pp. 1-23.

Beasley, M., Chen, A., Nunez, K. & Wright, L., 2006. Working hand in hand: Balanced scorecards and enterprise risk management. Strategic Finance, pp. 49-55.

Bedford, D., Brown, D. A., Malmi, T. & Sivabalan, P., 2008. Balanced scorecard design and performance impacts: Some Australian evidence. Journal of Applied Management Accounting Research, pp. 17-36.

DeBusk, G. K. & Crabtree, A. D., 2006. Does the balanced scorecard improve performance? Management Accounting Quarterly, pp. 44-48.

Gumbus, A., Lyons, B. & Wilson, T., 2004. Designing a strategy to effectively communicate the balanced scorecard. Cost Management, pp. 35-38.

Hoffecker, J. & Goldenberg, C., 1994. Using the balanced scorecard to develop company-wide performance measures. Journal of Cost Management, pp. 5-17.

Hoque, Z. & Watford, J., 2000. Linking the balanced scorecard measures to size and market factors: Impact on organizational performance. Journal of Management Accounting Research, 12, pp. 1-17.

Institute of Manufacturing, 2010. Balanced scorecard. Web.

Simons, R. L., 1994. Interactive control systems: Adapting to competitive environments. Harvard Business Review.

Simons, R. L., 2005. Diagnostic control systems: Determining critical performance variables to support strategic goals. Harvard Business Review.

UNUM Corporation, 1997. Annual report.

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