Posted at 10.14.2018
The report shown here with targets the amendments that the CEO needs to follow in enhancing the use of the BSC that has already been in place within the airline for days gone by three years. The BSC is adopted to help managers and co-workers keep an eye on their performance both in financial and non-financial conditions.
The following is the organizational framework of Ethiopian Airlines as of writing this statement.
2. Performance Dimension Approach at Ethiopian Airlines
Ethiopian Airlines uses the Balanced Report Card method of assess its performance. The Flight uses the BSC as a strategic and communication tool to align the vision and strategy of the organization to the entire business activities also to monitor performance when compared with the set in place goals.
The BSC helps to measure the drivers to achieve the strategic objectives of the air travel; by aligning the strategy with the day to day activities, where all included are duly communicated and are aware of what's expected in their future performance.
The BSC maps the Airlines' proper objectives in four perspectives: financial, interior functions, customers, and learning and expansion; and specific metrics are attached to each perspective. The balanced score card permits the stakeholders engaged to view the actions as interior and external to the flight, as a financial and non-financial metric; as well as for comparison of earlier and future performance. My BSC for the existing fiscal is fastened in the Appendix
During the annual set up the CEO communicates the strategic objectives to all or any employees and the focuses on are cascaded from EVPs completely to specific level. Management employees make BSC in appointment with their immediate supervisor and agree on goals and measurements; non-management staff will have ISCs with the KPIs plainly stated.
The BSC as a performance way of measuring procedure in the Air travel can be considered as the control system to monitor the execution of programs and when the targets set are not based on the plan, the airline can review during the mid-year assessment and seek means of improving the entire performance.
As mentioned in B2S4p117 performance management "is associated with an approach to creating a distributed vision of the purpose and aims of the business, helping each staff understand and realize their part in contributing to them, and in so doing, manage and improve the performance of the average person and the business. "In this respect the Air travel endeavours to help each employee understands the targets and 'ensures' necessary tools are provided so that the performance of employees may not be hindered.
"Stakeholders - any group or individual who can affect or is influenced by the successes of the firm's goals (Freeman); or constituents who have a legitimate say on the firm (Hill & Jones). "
The performance dimension approach utilized by Ethiopian Airlines is the Balanced Rating Card; and incredibly several stakeholders were involved during the process of development of the performance measurement system. The next system map shows the stakeholders of Ethiopian Airlines. Regardless of the numerous units of stakeholders, the flight (in reality the Kaplan and Norton model - BSC) focuses on employees, shareholders and customers, that your model is presented as a straightforward form of the actual sophisticated real-life situation if the wider environment is considered.
Fig. 3 System Map of Stakeholders at Ethiopian Airlines
I have tried to include as much stakeholders as you possibly can in Fig3. The environment and process stake holders (B1S18p147) are of particular interest in the identification of stakeholders of Ethiopian airlines. The BSC being truly a tactical and performance measurement tool, stakeholders define the critical elements of strategy need to be identified. Atkinson et al. determined five stakeholder communities and classified them as environmental stakeholders, which is comprised of customers, owners and the city; and process stakeholders comprised of employees and suppliers. Regarding to Atkinson et al. , environmentally friendly stakeholders "defines the organisation's external environment that, subsequently, identifies the critical components of its strategy; "and the procedure stakeholders "work within the surroundings described by the exterior stakeholders to plan, design, use and operate the operations that produce and deliver the organisation's products. "
The following will be the key stakeholders that constitute the development of the BSC at Ethiopian Airlines:
The Air travel is a authorities owned commercial corporation and the actions of the airline are somehow geared with the aims of the national government. The business enterprise being capital rigorous, and prone to various environmental situations (STEEP), the government's stake is so high. The country being very poor, the economic viability of the air travel is given main concern, i. e. the airline has to be profitable. Hence, the financial perspective of the BSC is of high importance to the federal government, and in fact the BSC of the flight is designed like theory Z of Halifax PLC (A) (B2S17p64).
The customers are the very reason that the flight exists and the way the airline is recognized by the clients really matters. Customers of the air travel need a reliable and safe transportation and the service must be at par with rivals' level of service; regarding on-time performance, quality, and loss or damage of passenger goods. Therefore, the customers are at the heat of the performance management as the flight must serve its targeted customers to meet up with the measures in the financial perspective.
This group of stakeholders are the ones that are in the centre of the BSC of the organization; and in the BSC the inner Process perspective and the training and Growth point of view directly affects plus they in turn have an effect on those perspectives. The other perspectives being mutually interdependent will also be affected. In the inner process perspective the employee knowledge of the business process and the knowledge of it help give a quality service as perceived by the customers and drive those to excel in the items they do. The internal process also impacts the financial point of view in such a way that the cost incurred to provide quality service makes factor, where employees have no idea of a cost-effective approach to handling confirmed task. The learning and growth point of view directly affects the employees as they need to learn both along the way of managing their activity and in upholding the corporate culture. The employees drive the business enterprise, and as explained in B2S14p92, the business process will have better impact on client satisfaction.
Atkinson et al. , "argue that organisations can be found to provide the objectives of their owners or sponsors. When the company is commercial, this target may very well be increasing shareholder wealth. "
Ethiopian Airlines being a commercial entity aspires to make profit from its operations and as has discussed above the principal driver is revenue and is aimed at increasing the riches of the owner - the government.
The Air travel from the starting point recognised that the BSC would help manage and evaluate its performance. The BSC perspectives address both the primary and secondary objectives of the organization. "The primary objectives are defined by an organisation's owners or funders. What the organisation expects from and provides to each stakeholder group are supplementary objectives. "
If we evaluate the contribution that the BSC makes through the management of stakeholders interest using Atkinson et al. 's model it can be seen that the perspectives of the BSC model addresses the targets at different levels and lays down the activities in a measureable and tangible manner, in doing so enabling professionals view the point of view concurrently in a coherent manner.
Arguably, at Ethiopian Airlines the BSC has generated some change in the culture where achievements has become a drivers to do more and be recognized. Employees give attention to key target areas and monitor trends that might have an adverse effect on the near future operation of the business generally. The attitude change in stakeholders is also worth mentioning that the BSC functions its purpose of being truly a system of measurement and instilling frame of mind and ethnic change.
The aims of the government - profitability; which of the CEO - creating 'Africa's TOP NOTCH Airline' are not in-line; and probably that may be the reason that the motto, which Ethiopian Airlines found in the beginning of the BSC execution with the Perspective 2010 strategy, altered to 'The New Soul of Africa'. Though the assumed cascading of the BSC is meant to get started on from 'Africa's TOP NOTCH Flight' it starts from the way of earning the airline profitable. All activities are geared in achieving the goals of the financial perspective of the BSC.
Though the BSC reaches its infancy at Ethiopian Airlines, the performance review made every six month is such a long time that some things might fail irreversibly. At Halifax the performance is checked regular monthly and 75% of the info was available within the business. At Ethiopian Airlines, the data collection process is arduous and cumbersome, which makes the monitoring job upsetting. Furthermore, as the info to be analyzed is too much the probability of making error increase and the inaccuracy of data creates resentment.
During performance way of measuring, only the financial point of view is considered. For instance my this past year performance evaluation was based on the revenue target that was presented with, that was 5% less from the prospective. Factors (inside/external) that could have influenced the performance are not taken into account. In the long run this will influence the performance of the employees.
Individual performance will relate right to the Airline's tactical goals, and beliefs, therefore creating significant impact on productivity and profitability.
Targets means of improving on providing smooth, regularly high-quality service that talk about customer issue, allowing to create fruitful relationship.
Creates chance of the employees to continually develop and expand as employees and leaders of the Flight.
Redundant and duties that do not add value are removed
Easy to comprehend the relationships of every perspective
Usually data is not commonly available
Data collection is arduous and de-motivating
Employees contribution to the success of the goals f the airline is cannot be measured, only the effect with their activity can be measured
Team work is thwarted as each staff focuses on individual BSC
The financial perspective is given priority that dwarfs the other perspectives
As mentioned above the data collection and the duty associated with it requires ample time, the utilization of ICT will relieve the duty and in doing this the problems made will lower significantly. Creation of your database for the required information permits each employee to access pertinent information with regards to his process or the goals one intends to achieve. In addition a data basic should be designed for the measures, targets and initiatives that should be taken and integrated. The data foundation helps to easily access information and in doing so associate tasks to employees, having in mind the objectives of the business; and progress can certainly be inspected and can be used as a tool for tracking changes. In Halifax's case 75% of the information was available and the implementation of the BSC was not a big challenge as faced by Ethiopian Airlines.
Ethiopian Airlines implementing the BSC as it was recommended by the consultants it employed. The way to go about had not been clear, even after 3 years the BSC of some of the divisions is not well prepared on a timely manner. Including the commercial division does not have BSC for the existing fiscal 12 months; staffs under that department were forced to get ready their own so that they may have a direction and deliverables to focus on. Ethiopian Airlines can draw lessons from Halifax, as Halifax required over 2 yrs to design and implement; and in truth they were making changes till 1999. The expert which will be hired will need the thorough knowledge of the countrywide and corporate and business culture and coach the mature management on the concepts of the BSC. The consultants need to have their own office where they can monitor the development of the BSC and its own implementation from the top management to lower level supervisor.
The employees of the Air travel have to be current with what sort of business is being dealt in the air travel industry and ongoing training and improvement is mandatory in which to stay business with the ever before changing environment and achieve the Airline's aims. To help the airline concentrate on specific training needs, benchmarking would help to keep in pace with rivals and 'best-in-class' performers. The benchmarking could be on processes or direct result areas. As reviewed in the event research of Britannia Airways (B2S15p133) a lesson can be drawn on the path to go about. A very good example of South West Airline for refuelling an plane in 12minutes, which Southwest used from Solution 1, can also, be employed (B2S15p134). Currently, the airline is utilizing ACE (Obtaining Competitive Excellence) in its Maintenance and Executive Division. ACE can be an operating system employed by United Technology Companies is focused on increasing efficiency and lowering waste. Because the start of ACE at maintenance and Engineering Section, other divisions are also looking to implement and interior benchmarking is taking condition. In Finance department, Ethiopian Airlines is learning best practice from its fierce competition Emirates Airlines. Process re-engineering can be implemented at Ethiopian Airlines to avoid pointless non-value adding steps from the work flow. For instance it sometimes will take half a year to get payment for lost baggage settlement; because of too much time and redundant processes.
As discussed above the BSC has contributed in building a culture of accomplishment and employees are striving to achieve with their level best. If their success is rewarded in a commensurable way, employees' work could increase and their performance as a result can be positively affected. This is related to equity theory (B1S14 p139) which states that rewards inspire employees provided they are really identified equitable and good; and according to expectancy theory inspiration of your employees can be affected by the commensurability the task they perform and the incentive they received; and comparable praise with other acquaintances; and the conception of rewards received by others.
The air travel is yet to take advantage of the execution of the BSC as a performance management system. The BSC at Ethiopian Airlines has a gap but comes after what every performance management system need to follow - a strategy of creating a shared eyesight on the list of employees and management where the objectives are evidently identified and employees know the targets and the measurements attached to those goals. The BSC is aiding the managers to comprehend the inter-relationships of the perspectives which eventually ends in much better decision making and problem fixing, and in the process the flight will be "looking-and moving-forward rather than backward. "B2S14p95.
Hence, the BSC as a performance management system has contributed a whole lot in "building a shared vision of the purpose and goals of the business, helping each employee understand and acknowledge their part in adding to them, and by doing this, manage and improve the performance of the average person and the business. " The BSC should not be regarded as a panacea for the health conditions which the company has, but as far as the performance dimension is concerned. Although BSC is in the right tabs on serving its purpose as a performance management tool, the practise is definately not being perfect.
The airline without having shipped necessary training to execute the given process in a much better way the focuses on are being extended in order to increase profit; and personnel are also forced to take care of multiple tasks in order to increase production, and following the desired output is reached another stretch will observe and some of the staff become redundant, which results in lay-off. The very personnel who helped boost the productivity sometimes becomes victims.
Chairman and CEO of Milliken & Co. , emphasized on the role enjoyed by continuous improvement in customer perspective and interior business process perspective, which implies that the internal measures which an organization needs have great effect on the satisfaction of customers B2S14p92. In the same way the airline needs to work on interior business techniques and customer perspectives. As people will be the principal resources in attaining the organizational goals Ethiopian Airlines needs custom-made training and development that are given by aviation experts or the regulatory body - IATA.
According to Kaplan and Norton "the steps are made to pull people toward the entire vision. Senior managers may know what the outcome should be, nevertheless they cannot inform employees exactly how to achieve that result, if only because the conditions in which employees operate are constantly changing. " Here, the necessity for worker empowerment is called for. Employees aren't empowered enough to fully utilize their skill and creative skills and the flight benefits thereof.
The dependence on an information technology should get priority. As in some cases of measurement, the info needed for analysis already is accessible and sometimes in a sophisticated form, but exactly what will be required will be the discipline and the management commitment and capability to analyse the info; this demands intensive training in data analysis or use of it at all degrees of the management hierarchy. As regarding Halifax PLC, the info was available and it any member was able to access it from any computer. (B2S17p67)
As mentioned above the market leaders of the organization set the eye-sight and communicate to the employees and targets and procedures are located in each point of view so that the performance of the business is measured; but the perspective changes and the employees have a moving focus on which will be difficult to hit. Hence, the leadership of the flight must be concentrated in the execution of the strategy where in fact the operations are aligned with the targets which the flight must achieve.
Ethiopian Airlines runs in different civilizations and the attitudes and values attached to the work ethics will vary in all localities. The BSC that has been at first conceived by hq found in Ethiopia and with Ethiopian mentality is being compelled to be integrated with the same condition in other places, even in highly developed countries in European countries and the united states, which is too restrictive in the manner employees use their creative imagination and the method of contributing to the progress of the airline. The BSC for hq as well as for the field office buildings, though have a goal have to have variations with the local civilizations and way to do things or the amount of economic or technical development. Regarding Halifax the region administrator and the branch administrator had different pieces of management practices. (B2S17pp69-70) Furthermore, the perspectives used are being used as dogma, which could have been amended for revenue creating divisions and support offices. The support office instead of getting the financial perspective, they can have 'efficiency and success perspective'. Hence, a lot should be done in the implementation of the BSC.
The airline manages in environments where the business process needs the involvement of the community in a single way or another, as its earnings is produced from these neighborhoods. The BSC developed by Ethiopian airlines, though follows the basic platform laid down by Kaplan Norton, and needs to devise a way where other key stakeholders can be attended to - the community and suppliers.
Finally, though the BSC is workable performance dimension strategy for the air travel, it needs to address the contribution made by employees and suppliers; and the role of the community in which the airline operates must be tackled.