DIRE DAWA UNIVERSITY
COLLEGE OF BUSINESS & ECONOMICS
DEPARTMENT OF MANAGEMENT
BALANCED SCORECARD (BSC) PRACTICES OF ETHIOPIAN
AIRLINES
Name Id no
1. Nadhi Gutu 1205862
2. Edelawit Zemedkun 1205545
3. Wubalem Tadesse 1205288
4. Haymanot oxeday 1205660
5. Mariya Abdi 1205768
6. Firomsa Abdi 1205593
7. Biruk Abate 1205499
8. Selamawit G/egzaber 120640
9. Wazir Yusuf 1205286
10. Tamerat Mamuye 1206032
Submitted to: Ins. Mahteb
Submission date: 23/05/2024
Contents
INTRODUCTION ........................................................................................................................................ 3
ORGANIZATION PROFILE ...................................................................................................................... 5
ASSESS THE SELECTED ORGANIZATION'S UNDERSTANDING OF BALANCED SCORE CARD
PRACTICES: ................................................................................................................................................ 6
ASSESS THE ORGANIZATION'S OVERALL BALANCED SCORE CARD PRACTICES: ................. 7
THE COMPANY'S STRENGTHS REGARDING BALANCED SCORE CARD PRACTICES ............... 8
THE EXISTING WEAKNESSES REGARDING BALANCED SCORE CARD PRACTICES ................ 9
RECOMMENDATIONS ............................................................................................................................ 10
INTRODUCTION
The Balanced Scorecard (BSC) is a strategic performance measurement framework that provides
a balanced view of an organization's performance across multiple dimensions. It goes beyond
financial metrics and incorporates other perspectives, such as customer, internal processes, and
employee learning and growth. The BSC enables organizations to align their strategies, track
progress, and make informed decisions to achieve their long-term objectives.
The Balanced Scorecard (BSC) was created by Dr. Robert Kaplan, a professor at Harvard
Business School, and Dr. David Norton, a consultant and former professor at Harvard Business
School. They introduced the concept in the early 1990s through a series of articles and
subsequent books.
The initial article, "The Balanced Scorecard: Measures that Drive Performance," was published
in the Harvard Business Review in 1992. This article laid the foundation for the BSC framework
and introduced the concept to a broader audience. Dr. Kaplan and Dr. Norton further developed
and expanded upon the BSC framework in their subsequent books, including "The Balanced
Scorecard: Translating Strategy into Action" (1996) and "The Strategy-Focused Organization:
How Balanced Scorecard Companies Thrive in the New Business Environment" (2000).
Since its introduction, the Balanced Scorecard has gained widespread adoption and has become a
prominent strategic management tool used by organizations worldwide to align their strategies,
measure performance, and drive success across various perspectives.
The BSC consists of four interconnected perspectives
Financial Perspective: This perspective focuses on financial outcomes and measures the
organization's financial performance, including revenue growth, profitability, and return on
investment. It helps assess the effectiveness of the organization's strategies in generating
financial results.
Customer Perspective: This perspective examines how the organization is meeting customer
needs and expectations. It includes measures such as customer satisfaction, customer loyalty,
market share, and customer retention. By understanding and addressing customer requirements,
organizations can enhance their competitive position and sustain long-term success.
Internal Process Perspective: This perspective evaluates the internal operations and processes
critical to delivering value to customers and achieving financial goals. It involves identifying key
processes and measuring their efficiency, quality, and innovation. Examples of measures include
cycle time, defect rates, process improvement initiatives, and product/service innovation.
Learning and Growth Perspective: This perspective focuses on the organization's ability to learn,
innovate, and develop its people and infrastructure. It encompasses measures related to employee
skills, training, motivation, information systems, and organizational culture. By investing in
learning and growth, organizations can enhance their capabilities and adapt to changing
environments effectively.
The objectives of the Balanced Scorecard
Strategy Alignment: The BSC helps align organizational objectives with its overall strategy. By
linking performance measures across different perspectives, it ensures that actions and initiatives
are consistent with the strategic direction of the organization.
Performance Measurement: The BSC provides a comprehensive framework for measuring
performance beyond financial indicators. It enables organizations to assess their performance
across multiple dimensions, providing a more balanced view of their overall health and progress.
Communication and Coordination: The BSC facilitates communication and coordination within
an organization. It helps different departments and a stakeholder understand how their activities
contribute to the overall strategy and encourages collaboration towards common goals.
Strategic Focus and Prioritization: The BSC helps organizations identify and prioritize strategic
objectives. By setting targets and tracking performance in each perspective, it enables them to
focus on key areas that drive success and allocate resources accordingly.
Continuous Improvement: The BSC promotes a culture of continuous improvement by
highlighting areas for enhancement and identifying performance gaps. It encourages
organizations to analyze the root causes of underperformance and take corrective actions to
achieve their strategic objectives.
ORGANIZATION PROFILE
Ethiopian Airlines is the flag carrier airline of Ethiopia and one of the largest and most reputable
airlines in Africa. Here is a background on Ethiopian Airlines:
Establishment and History: Ethiopian Airlines was founded on December 21, 1945, making it
one of the oldest airlines in Africa. It began operations in April 1946, initially flying domestic
routes within Ethiopia. Over the years, the airline expanded its network and transformed into a
global carrier, connecting passengers to various destinations worldwide.
Ownership and Management: Ethiopian Airlines is wholly owned by the Ethiopian government,
and it operates under the Ministry of Transport. The airline has a well-established management
structure, with a board of directors overseeing its operations, and a CEO leading the day-to-day
management.
Hub and Network: Addis Ababa Bole International Airport, located in the capital city of
Ethiopia, serves as the primary hub for Ethiopian Airlines. From this hub, the airline operates an
extensive network of domestic and international routes, connecting passengers to over 125
destinations across Africa, Asia, Europe, the Americas, and the Middle East.
Fleet and Operations: Ethiopian Airlines operates a modern fleet of aircraft, which includes a
diverse range of wide-body and narrow-body jets. The fleet consists of various aircraft models
from manufacturers such as Boeing, Airbus, Bombardier, and more. This allows Ethiopian
Airlines to serve a wide range of destinations and accommodate different passenger capacities
and cargo requirements.
Services and Awards: Ethiopian Airlines offers a comprehensive range of services to its
customers, including passenger transportation, cargo services, and aviation training through its
aviation academy. The airline is known for its commitment to safety, service quality, and
operational excellence. It has received numerous awards and accolades, including recognition for
its on-time performance, customer service, and overall excellence in the aviation industry.
Vision and Mission: The vision of Ethiopian Airlines is to become the leading aviation group in
Africa and provide exceptional air transport services. Its mission is to connect Africa with the
rest of the world, support economic growth, and contribute to the development of the African
continent through air transportation and related services.
Ethiopian Airlines has played a significant role in promoting connectivity, tourism, trade, and
economic development in Ethiopia and throughout Africa. It continues to expand its operations,
invest in modern aircraft and technology, and strengthen its position as a leading African airline
in the global aviation industry.
ASSESS THE SELECTED ORGANIZATION'S UNDERSTANDING OF
BALANCED SCORE CARD PRACTICES:
General understanding of how the Balanced Scorecard may be applied in their practices:
Financial Perspective: Ethiopian Airlines would likely have financial objectives to ensure
profitability and sustainable financial growth. This may involve targets such as revenue growth,
cost reduction, and return on investment.
Customer Perspective: Ethiopian Airlines would focus on customer satisfaction and loyalty to
maintain a competitive advantage. Key metrics could include on-time performance, passenger
satisfaction ratings, and customer retention rates.
Internal Process Perspective: Ethiopian Airlines would identify critical internal processes that
contribute to customer satisfaction and financial success. This might include factors like aircraft
maintenance, flight operations, ground services, and cargo handling. Key performance indicators
(KPIs) could measure efficiency, quality, and innovation in these processes.
Learning and Growth Perspective: Ethiopian Airlines would emphasize employee development,
organizational culture, and technological capabilities. This perspective aims to ensure that the
company has the necessary skills, knowledge, and infrastructure to support its strategic
objectives. KPIs may include employee training hours, employee satisfaction, and technology
adoption rates.
By using the Balanced Scorecard, Ethiopian Airlines can assess its performance holistically and
identify areas for improvement. Regular monitoring and reporting on the key metrics enable the
management team to make informed decisions and adjust strategies as needed. It is important to
note that the specific objectives and metrics used in Ethiopian Airlines' Balanced Scorecard
would depend on their strategic priorities and unique circumstances, which may have evolved
since my last knowledge update.
Principles of the Balanced Scorecard that Ethiopia Airlines organizations comprehend to
effectively implement the framework:
Balanced Perspective: The organization understand the importance of balancing multiple
perspectives (financial, customer, internal processes, learning and growth) to achieve long-term
success. Each perspective contributes to the overall organizational performance.
Strategy Alignment: Ethiopian Airlines comprehend the concept of aligning its strategic
objectives with the BSC framework. This involves translating the organization's mission and
vision into specific goals and actions across the four perspectives.
Key Performance Indicators (KPIs): Ethiopian Airlines identify and select appropriate KPIs for
each perspective of the BSC. The organization should comprehend how to develop meaningful
and measurable indicators that reflect progress towards strategic objectives.
Cascading Objectives: Ethiopian Airlines understand the importance of cascading the BSC down
to lower levels of the organization. This ensures that individual departments and employees have
clear objectives that align with the overall strategic direction.
Performance Monitoring and Reporting: The organization comprehend the need for regular
monitoring and reporting of performance indicators. This enables timely feedback, performance
evaluation, and facilitates informed decision-making.
Strategy Execution: Ethiopian Airlines understand that the BSC is not just a measurement tool
but also a management system. It requires active engagement from leadership and effective
communication to drive strategy execution throughout the organization.
ASSESS THE ORGANIZATION'S OVERALL BALANCED SCORE CARD
PRACTICES:
Evaluating the extent to which the organization has implemented Balanced Score Card practices
in its operations and management:
The implementation of the Balanced Scorecard at Ethiopian Airlines involved a systematic
process of defining strategic objectives, identifying critical success factors, and developing key
performance indicators for each perspective. The airline’s BSC framework comprises four
perspectives: financial, customer, internal processes, and learning and growth.
In the financial perspective, Ethiopian Airlines focuses on key financial metrics such as revenue
growth, profitability, cost control, and return on investment. These KPIs help the airline track its
financial performance and ensure sustainable growth in a competitive market environment.
In the customer perspective, Ethiopian Airlines emphasizes customer satisfaction, loyalty, and
service quality. The airline uses KPIs such as on-time performance, passenger feedback scores,
and service delivery standards to measure its performance in meeting customer expectations and
enhancing the overall travel experience.
In the internal processes perspective, Ethiopian Airlines looks at operational efficiency, process
improvement, and innovation. The airline monitors KPIs related to aircraft utilization,
maintenance efficiency, fuel consumption, and safety standards to optimize its operational
performance and drive continuous improvement.
In the learning and growth perspective, Ethiopian Airlines focuses on employee development,
training programs, and organizational culture. The airline measures KPIs such as employee
engagement levels, training hours per employee, and knowledge sharing initiatives to foster a
culture of learning and innovation within the organization.
THE COMPANY'S STRENGTHS REGARDING BALANCED SCORE
CARD PRACTICES
Strategic Alignment: The BSC helps Ethiopian Airlines align its operations and management
practices with its strategic objectives. By translating the organization's mission and vision into
specific goals across different perspectives, the BSC ensures that activities are focused on
achieving the overall strategy.
Performance Measurement: The BSC provides a comprehensive framework for measuring
performance across multiple dimensions. It allows Ethiopian Airlines to track key metrics in
areas such as financial performance, customer satisfaction, internal processes, and employee
development, providing a balanced view of the organization's performance.
Clear Communication: The BSC facilitates clear communication of strategic objectives and
performance targets throughout Ethiopian Airlines. It ensures that employees understand the
organization's goals and their individual roles in achieving them, promoting alignment and
engagement.
Accountability and Decision-making: The BSC promotes accountability by setting clear
performance targets and regularly monitoring progress. It helps Ethiopian Airlines identify areas
of underperformance and take appropriate actions to address them, facilitating data-driven
decision-making.
Continuous Improvement: The BSC encourages a culture of continuous improvement at
Ethiopian Airlines. By regularly evaluating performance against targets and identifying areas for
improvement, the BSC supports learning and growth, fostering innovation and efficiency within
the organization.
THE EXISTING WEAKNESSES REGARDING BALANCED SCORE
CARD PRACTICES
Implementation Challenges: Implementing the BSC effectively can be challenging, requiring
significant time, resources, and organizational commitment. Ethiopian Airlines face difficulties
in aligning different departments, establishing suitable metrics, and integrating the BSC into
existing management processes.
Data Availability and Quality: Ethiopian Airlines encounter challenges in obtaining accurate and
reliable data for measuring the identified KPIs. Inconsistent or incomplete data can undermine
the effectiveness of performance measurement and decision-making based on BSC metrics.
Overemphasis on Quantitative Metrics: The BSC primarily focuses on quantifiable metrics,
which may not capture all aspects of Ethiopian Airlines' performance. Qualitative factors, such
as employee satisfaction or organizational culture, may not be adequately represented in the BSC
framework.
Limited Strategic Flexibility: The BSC's structured framework limit Ethiopian Airlines' ability
to quickly adapt to dynamic market conditions or changing strategic priorities. The predefined
perspectives and metrics may not always align perfectly with emerging strategic needs.
Employee Engagement and Alignment: Ethiopian Airlines needs to ensure that employees are
actively engaged in the BSC process and understand how their contributions connect to the
organization's strategic objectives. Without sufficient employee buy-in, the effectiveness of the
BSC may be compromised.
RECOMMENDATIONS
Review and Align Strategic Objectives: Ethiopian Airlines should periodically review and ensure
alignment between its strategic objectives and the BSC framework. This involves evaluating
whether the objectives are still relevant, measurable, and aligned with the organization's mission
and vision.
Enhance Data Collection and Quality: Ethiopian Airlines should prioritize data collection and
ensure the availability of accurate and reliable data for measuring key performance indicators
(KPIs). This may involve implementing robust data collection systems, improving data quality
assurance processes, and leveraging technology for efficient data management.
Balance Quantitative and Qualitative Metrics: While the BSC primarily focuses on quantitative
metrics, Ethiopian Airlines should consider incorporating qualitative factors that are critical to its
success. This may involve identifying and measuring qualitative indicators such as employee
satisfaction, customer feedback, or innovation initiatives to provide a more comprehensive view
of performance.
Foster Employee Engagement: Ethiopian Airlines should actively involve employees in the BSC
process to enhance their engagement and ownership. This can be achieved through regular
communication, training sessions, and creating opportunities for employees to contribute ideas
and suggestions for improving performance.
Enhance Performance Reporting and Communication: Ethiopian Airlines should improve its
performance reporting and communication processes related to the BSC. Clear and concise
reporting mechanisms, along with effective communication channels, will ensure that
performance updates and strategic objectives are effectively shared across the organization.
Foster a Culture of Continuous Improvement: Ethiopian Airlines should promote a culture of
continuous improvement by encouraging innovation, learning, and knowledge sharing. This can
be achieved through initiatives such as employee training and development programs, cross-
functional collaboration, and recognition of achievements aligned with the BSC.
Regularly Evaluate and Adapt the BSC: Ethiopian Airlines should periodically evaluate the
effectiveness of the BSC framework and make necessary adjustments to align with changing
business dynamics. This involves assessing the relevance of the perspectives, modifying KPIs,
and incorporating emerging strategic priorities.
