Case-Analysis-Chemical-Bank - Case Analysis Chemical Bank...

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Case Analysis: “Chemical Bank: Implementing the Balanced Scorecard” The restructuring of Chemical Bank with the merger of Chemical Bank and the Manufacturers Hanover Corporation has transformed the processes in which the company’s strategies are implemented. In order to create the shareholders’ value (or profits), the company must seek to increase revenue and reduce expenses through various perspectives: financial, customer, internal-process, and learning-and-growth. With the help of these perspectives, the company can create the balanced score card (BSC) and have a deeper understanding of its strategies in both financial and nonfinancial aspects. The BSC “translates an organization’s mission and strategy into a set of performance measures that provides the framework for implementing its strategy. ”It adds three more perspectives—customer, business-process, and learning-and-growth—to the traditional financial perspective. The financial perspective may help a company ensure whether short-term goals are satisfied, but it is not enough to capture the entire process. Thus, the other perspectives are included to provide nonfinancial objectives. These objectives are used to measure the processes and results of each manager’s performance, and decision rights are then allocated accordingly using drivers and responsibility centers. Another reason for the BSC implementation is to tie compensation to the nonfinancial aspects as well as the financial aspects to encompass the performance factors over which managers have control. Why does Chemical’s Retail Bank, a financial institution with the bulk of its inputs and outputs denominated in financial terms, need measures other than financial to motivate and evaluate its performance? Retail banking has emphasized efficient collections and processing of deposits. The services bank provided were very limited. However, the customers’ preference and demand have changed, requiring banks to provide broader product and service line. For that reasons, Chemical’s Retail Bank should find ways to develop new relationships with its customers. It must shift its image from a provider of a narrow set of banking service to becoming a financial
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advisor and service provider for targeted customer groups. Because of this complex competitive market, nonfinancial BSC measures are more suitable for Chemical’s Retail Bank. It can help manager track and motive performance of all levels of the company easily. However financial lacks of specific objectives and cannot reflect business strategy in this new competitive environment in the long run, and it is not a good way to motivate and evaluate the performance of Chemical’s Retail Bank. When the bank uses measures other than financial to motivate and evaluate its performance, it will be more efficient because of specific objectives and management system, which help The Chemical implement customer-centered strategy.
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