Critical Evaluation of the Performance of Loughborough Business School Essay

This critical evaluation sets out to measure the performance of the business school, which is now known as School of Business & Economics (SBE), in light of two users, undergraduate students and Loughborough University. This evaluation will then propose a potential balanced scorecard (BSC) that could be used to include the planned increase in tuition fees alongside a discussion as to why this new proposed balance scorecard reflects the impact in light of undergraduate students and Loughborough University. It will conclude by answering the question, ‘Do performance measures significantly enhance the value of the Loughborough Business School?’ Outlying the benefits of performance management techniques we are able to conclude that once performance measures are adapted indeed potential benefits can become realized.

Different performance measures

It is often stated that “Measurement managed companies outperform non-measurement managed companies,” (Lingle & Schiemann, 1996) thus an evaluation of various performance methods will be discussed drawing upon one performance measure in particular, the balanced scorecard. Having analysed the theoretical side of the balanced scorecard we will look to see the impact it has in practicality as, “Measuring performance will have no impact unless action is taken as a consequence of that performance measure,” (Fitzgerald, 2007).

Whilst a range of frameworks in planning and implementing performance measurement systems have been established, the Balanced Scorecard, (Kaplan & Norton 1992), remains the most famous (Chen et al, 2008 cited in Zangoueinezhad & Moshabaki, 2011). A possible explanation as to why was shown in the Royal Botanic Garden Edinburgh paper by CIMA stating the “balanced scorecard can and should be adapted to suit an individual organisation”. The BSC also takes account of numerous dimensions, integrating company targets with the strategy. This is critical in a complex organisation such as a University as with multiple stakeholders including students, parents and society, along with a large set of objectives and missions, it is essential to have a performance control system to link these together. Therefore, the balanced scorecard allows the management to link these together whilst also reducing the agency problems by aligning goals of managers and shareholders, which is why we decided the balanced scorecard would be the most relevant in the Business School’s context.

http://www.sciencedirect.com/science/journal/10445005/11/1%20pg.82 pg 82

An alternative measurement system is the Performance Pyramid (Lynch ; Cross, 1991) which integrates corporate objectives with operational performance indicators whilst combining financial, non financial as well as operational and strategic indicators, (DR. MARK GILMAN, 3rd Conference on Performance Measurements and Management Control (Nice, September 22-23, 2005). However, results under this measure are not shown in a quantifiable way, for example not showing the customer satisfaction increase rate. Alongside this, the performance pyramid is highly focused on cost and therefore provides a historical view, encouraging short-termism (Kennerly ; Neely, 2002 cited in Neely, 2002). Contrasting this, the balanced scorecard permits a range of perspectives allowing a sustainable long term outlook.

The Results and Determinant Framework (Fitzgerald et al, 1991) links the results and determinants of performance, raising the need to identify key drivers of performance to obtain target results (Kennerly ; Neely, 2002 cited in Neely, 2002). However, the framework limits to provide definitions of the dimensions to aid employee understanding and as a result is left to management’s discretion. On the other hand, “under the balanced scorecard approach, top management translates its strategy into performance measures that employees can understand and can do something about” (Seal et al, 2003, pg. 696). The balanced scorecard allows the strategy to be understood through the detailed critical measurements that give a deeper definition of what is meant by the strategy so that there is no ambiguity.

The latest development in performance measurement systems is the Performance Prism (Neely et al, 2001). This system focuses on all stakeholders and as a result has received overwhelming positive feedback even though it neglects to consider how the performance measures are going to be realised (Tangen, 2004 cited in Fitzgerald, 2011, Balance Scorecard Approaches to Performance Management, BSC010, Management Accounting and Control, Loughborough University, 17/11/11)).

Through analysing the range of performance measurements, we feel that the balanced scorecard is the most appropriate and relevant measure for the Business School as it draws together different aspects of a business into a report that is easily understandable and can aid decision making. This is also supported by the research from…. Showing majority of orgs use bsc

Development of the Balanced Scorecard

Traditionally the management accounting focus was in purely financial performance measures, but in the modern age greater emphasis is now being given to non-financial measures, such as those found in the balanced scorecard, as they predict financial performance in the long term. The old financial measures were inadequate as they were one-dimensional such as return on investment or increased profits; therefore it provided an incomplete picture of the business performance to the CEO’s.

The characteristics of a good BSC system should incorporate the following criteria

* Translate strategy to objectives

* Range of measures

* Comparative measures

* Report results regularly

* Drive the system from the top

As shown in appendix 1, we have produced a balanced scorecard in order to evaluate the performance of the business school.

The four perspectives of the balanced scorecard, which are innovation and learning, internal business processes, customer perspective and financial perspective, should be dependent on each other. In such a system it is known that a change in one direction would lead to changes in all four sections of the balanced scorecard. A positive balance of any one goal will affect the whole organisation. For example, a higher programme excellence (internal business perspective) can lead to higher quality students attending the business school (customer perspective), which will increase the rankings in league tables (financial perspective) and lead to increased funding and therefore more support for teaching innovation (learning and growth perspective).

The government has announced that they will be cutting funding to Universities, but have increased the cap that Universities can charge for tuition fees to �9000 in order to fill the gap, meaning in reality Universities are not receiving any increased funding, but is changing who they are receiving the funding from. For these reasons, the balanced scorecard’s critical measures may change priorities to ensure the university is able to compete in the market. The balanced scorecard allows this flexibility to ensure that there is not an information overload, and only critical processes are measured (Kaplan, R. Norton, D. (1992)).

As students will be providing the funding, their expectations will be increased as they will want higher value for the money they are paying. This means programme excellence measures, shown on the balanced scorecard (Appendix 1), will become an increasing priority as the programmes, contact time, technology and facilities will all have to reflect the increase in tuition fees, even though in reality there is no increase in funding from the university’s point of view. In particular, some courses may suffer cuts if there are not enough students on a particular programme. UK applicants have fallen by 12% (Cook, C 2011) and this increases worries that programme cuts could become a reality. The Business school needs to make sure their programmes are not cut and therefore need to concentrate on measures such as ensuring innovative programmes and contacts within industry as these are key measures that attract students.

The vision of the university is to be internationally recognised through quality research, attractive undergraduate and postgraduate programmes and diversity of students and staff, which is reflected in the balanced scorecard. For example there are measures to attract students to the business school such as league table position (financial) and average graduate grade (customer). To promote quality research there is contacts with Industry (internal), collaborations with industry through research (Customer) and number of grants received (financial).

So far, the balanced scorecard seems a feasible method for a critical evaluation of the performance of the business school from both undergraduate and Loughborough University perspectives.

To increase funding, and make sure that the Universities reputation internationally increases, the measure of number citations in journals should be a priority as this can track how well the academics are performing and potentially link reward systems to this which is smoothed over a number of years to ensure the performance is sustained and appeals to their internal commitment to the balanced scorecard (Thooper 2007). This can also allow employees to align their individual goals with the business school’s goals as the academics want to succeed in their research field. This is critical as the government no longer fund grade 2* research and so the business school needs to increase its research grade in order to benefit from funding.

For universities to charge the �9,000 tuition fees, they must be able to prove that they are widening participation, and are gaining a certain amount of students from low-income families. Therefore, a priority measure would be measuring the diversity of applicants into the business school, which will also provide valuable information about the numbers of international students, and a way to monitor that application numbers are still high. If this is not monitored then the University could suffer with decreased funding.

Using the balanced scorecard to measure performance of SBE

Although the balanced scorecard provides a flexible and integrated approach to performance measurement, some of these measures result in lagged indicators of performance such as those from financial and customer perspectives. For example the average grade of student’s measure is a lagged indicator because improvements cannot be made until the end of the process.

A lagged performance measurement using the balanced scorecard is the international recognition of the business school’s research. It was last measured in 2008 by the Research Assessment Exercise (RAE). The highest grade awarded is 4* which means that the research is of world leading quality. Only 15% of business research is 4* at Loughborough University compared to 55% of the Art and Design research. This suggests that the business school has considerable room for improvement when it comes to their research. The disadvantage of this type of measurement is that the school had to wait until the results were published before they could evaluate their methods to improve. On the other hand, if research was monitored constantly then improvements could have been made while in the process. The research needs to be of the highest quality if the university wants to attract the best quality students. Undergraduates will want premier quality lecture material, especially for the high tuition fees they will now be paying. The school’s research is internationally recognised but is just short of world leading, this should indicate to undergraduates that the school together with the university are constantly improving and are not far off the mark.

Also, the school has recently “been awarded EQUIS accreditation by the European Foundation for Management Development (EFMD), the benchmarking system recognised globally as an accreditation body of quality in management education.” Being part of the 1% of elite business schools in the world is a great achievement. It is excellent for both undergraduates and Loughborough University. It shows that undergraduates will receive quality education; it is especially attractive now due to the results of tuition fees increasing. It is also a step towards accomplishing Loughborough University’s vision of being globally recognised.

“Loughborough University School of Business and Economics has a reputation amongst employers for producing graduates of outstanding academic excellence and enviable practical skills.” The business school has shown programme excellence through collaborations with industry through sandwich courses which in turn has attracted and developed high quality students. This boosts the starting salary for graduates, which in turn increase the reputation of the university and possible funding from the alumni. Producing high quality students could increase the reputation of Loughborough University, however further funding from alumni is not guaranteed which is a flaw in the balanced scorecard because the causal links aren’t proven. A suggested approach to overcome this problem could be to provide further incentive for additional funding from alumni members. One way this could be achieved is by offering an engraved gold plate which would be placed on the alumni wall to recognise the contribution made.

Some measures of the balanced scorecard are extremely useful in that they provide us with clear performance indicators; however the lagging indicators can prevent the improvement of some aspects of the business school. Therefore, the balanced scorecard approach has room for improvement and is not particularly straightforward to apply to universities.

Recommendations ; Conclusion

* Flexible and adaptable, however it is difficult in context of academic institutions – 3 different sections instead of 4 – Krishna will send backup

* Golden plate

* SBE doesn’t currently use BSC, they could use it with other performance measures (financial) to provide a full overview of the performance of the uni – internal and external. (league tables)

* Overall it can be concluded that the balance scorecard is useful in integrating goals and strategy but when implemented with respect to academic institutions it can be limited in measuring overall performance. “the Balanced Scorecard does not provide a bottom line score or a unified view with clear recommendations: it is simply a list of metrics”. (Jensen, Michael C., Value Maximization, Stakeholder Theory, and the Corporate Objective Function, October 2001)

References

* (Asghar Moshabaki, 2011) “Measuring university performance using a knowledge-based balanced scorecard”, International Journal of Productivity and Performance Management, Vol. 60 Issue: 8, pp.824 – 843, accessed [27/11/2011]

* (Cook, C ,24/11/11), ‘Fall in University applicants prompts fee concerns’, Accessed 14/01/12

* Farid et al – Balanced Scorecard application in Universities and Higher Education institutes

* (Fitzgerald, 2011, Balance Scorecard Approaches to Performance Management, BSC010, Management Accounting and Control, Loughborough University, 17/11/11)

* (Hanne Norrekit, 15 March 2000), Management Accounting Research, vol 11, issue 1, pg 82,

* (Jensen, Michael C., Value Maximization, Stakeholder Theory, and the Corporate Objective Function, October 2001)

* (Lingle & Schiemann, 1996)

* (Kennerly & Neely, 2002 cited in Neely, 2002) Measurements Framework: A review. In: Neely A, 2002. Business performance measurement: theory and practice. [s.l.]: Cambridge University Press. 2002, pp145-156

* (Kaplan, R. Norton, D. (1992). The Balanced Scorecard–Measures That Drive Performance.’, Harvard Business Review, Vol. 70 Issue 1, (p71-79)

* (Kennerly ; Neely, 2002 cited in Neely, 2002)

* DR. MARK GILMAN, 3rd Conference on Performance Measurements and Management Control (Nice, September 22-23, 2005)

* (Neely et al, 2001) cited in DR. MARK GILMAN, 3rd Conference on Performance Measurements and Management Control (Nice, September 22-23, 2005)

* (Rae 2008) http://www.rae.ac.uk/results/intro.aspx

* (Rae 2008 Quality Profiles) http://www.rae.ac.uk/Results/qualityProfile.aspx?id=162;type=hei

* (Seal et al, 2003, pg. 696)

* (Thooper 2007 cited in (Fitzgerald, 2011, Balance Scorecard Approaches to Performance Management, BSC010, Management Accounting and Control, Loughborough University, 17/11/11))

* http://www.lboro.ac.uk/departments/sbe/about/index.html