Modeling of Balanced Scorecard in Life Insurance Company

Ashif J. Tadvi (PGDIE, NITIE, Mumbai)

Rakesh D. Raut (Research Fellow, NITIE, Mumbai)

Abstract
As companies around the world transform themselves for competition that is based on information, their
ability to exploit intangible assets has become far more decisive than their ability to invest in and manage
physical assets. This paper develops a Balanced Scorecard (BSC) for Sales executive working in India
insurance company that measures and evaluates their day-to-day business operations from following four
perspectives: finance, customer, internal business process, and learning and growth. This model of
Balanced Scorecard (BSC) for insurance sales Executive is completely new concept, which is based on
the observation and traditional practical approach in typical sales department of any insurance company.
Considering the nature of this business, looking at one set of numbers is not enough in life insurance. To
arrive at a holistic view on how well a sales executive is doing, you need to consider performance across
multiple parameters. This balanced card will be the foundation for the Area Manager of Sales department
to evaluate and measuring the performance of sales executive in balanced way and proposes the balanced
performance measuring system to map and analyze. While suggesting balanced scorecard, different
insurance sales performance metrics have been reviewed and distributed into four perspectives. This helps
managers to evaluate sales executive performance in a much-balanced way from all angles of business.

The Methodology adopted for developing this model is quite straight in manner that implementation of
final balanced scorecard in sales department with no major changes in organization structure.
Area manager defines the vision and mission of their sales department, according to the departments’ goal
sales executive should align their strategies and come with their own vision and mission for specific
period over which his performance can be map and analyze. Thereafter identifying the sales model of the
sales department which is generally practice in Indian Insurance Company. Through general observation
found that Strategic/Consultative Selling Model is practice in India. The description of
Strategic/Consultative Selling Model in literature that is generally practice in India sales department.
Identifying the key performance indicator and key result indicator that truly evaluate performance of sales
executive. Then categories the indicator based on perspective from which the balanced scorecard matrix
will be developed.

Main Text
Day to day entry of foreign player in India life insurance sector put considerable pressure on the sales
department. Even the life insurance companies are in intense competition. By the 1980s, many executives
were convinced that traditional measures of financial performance didn’t let them manage effectively and
wanted to replace them with operational measures. Arguing that executives should track both financial
and operational metrics, Robert Kaplan and David Norton suggested four sets of parameters.
First, how do customers see your company? Find out by measuring lead times, quality, performance and
service, and costs. Second, what must your company excel at? Determine the processes and competencies
that are most critical, and specify measures, such as cycle time, quality, employee skills, and productivity,
to track them. Third, can your company continue to improve and create value? Monitor your ability to
launch new products, create more value for customers, and improve operating efficiencies. Fourth, how
has your company done by its shareholders? Measure cash flow, quarterly sales growth, operating income
by division, and increased market share by segment and return on equity (HBR).
What you measure is what you get. Senior executives understand that their organization’s measurement
system strongly affects the behavior of managers and employees. Executives also understand that
traditional financial accounting measures like return on investment and earnings per share can give
misleading signals for continuous improvement and innovation—activities today’s competitive
environment demands. The traditional financial performance measures worked well for the industrial era,
but they are out of step with the skills and competencies companies are trying to master today.
The increasing competition on the market place and the changes in the environment requires
constant improvements within the organizations. Constant improvements are necessary in order for
companies to maintain their competing strength and edge, and thereby guarantee their continuous
survival.
Need for Research: Balanced scorecard is applied in many of industries of around the world and in India
whether it is a banking, manufacturing, supply chain, etc but still it’s not used in Indian Life insurance
sector. Particularly not for any sales executive of sales department, because of different nature of life
insurance product and its sales cycle. The problem related with the sales executive in Indian context is
that performance measures are solely based on premium (financial measures). Which gives only one
aspect of its performance, hence to fairly judge or evaluate the performance of sales executive and to
increase the overall profitability of business balanced scorecard approach can be used

Methodology
Traditionally, in sales department of Life insurance company the method used for the evaluation of sales
executive is to rank the executive based on the financial data such as premium collected in weekly,
monthly or yearly. The model which is used today in sales department is consultative sales model, based
on this only we’ll apply balanced scorecard in this industry. This approach will help us in evaluating the
performance of sales executive. As the purpose of this paper is to evaluate the use of the BSC paper can
be characterized as being descriptive. A descriptive paper involves that the investigated subject is
being described without answering the question “why”. In order to investigate what success factors
may exist when employing the BSC tool interviews can been performed at region offices within the
branch of sales and these offices have been compared to region offices that are non-BSC users.

To design the balanced scorecard in the sales department following methodology is adopted.
 Identifying the objectives of sales departments
 Strategic Initiatives for sales Department
 Identifying the Key Success Factors for the Strategic Initiatives
 Understanding the Processes Leading to Internal & External Customer Satisfaction
 Identifying Technology that Supports the Initiatives
 Identifying the Departmental Culture required for Achievement of the Strategic Initiatives
 Identifying Motivation Plan for the Initiatives
 Identifying Human Resource Development Needs for the Initiatives
 Developing KPI's that support the Initiatives
 Developing the Balanced Scorecard
 Validating the KPI's and Scorecard
 Scorecard Implementation Strategy
 Overcoming resistance to KPI and scorecard implementation

Motivation

Nilsson (2005) argues that the control system’s most important assignment is to get the
employees motivated to perform the actions that are of interest for the organization. In this sense,
motivation (our ninth success factor) can be defined as the degree to which employees are engaged in a
particular behaviour. Some authors such as Olve et al. (1997) point out that the BSC model concretizes
the company’s long-term direction and vision into the daily activities. For the reason that the scorecard
is broken down into different parts of activities the control of the business is adapted in a way that
locally is understood as more relevant than earlier models. This increases the understanding and
motivation, which, in turn, leads to higher propensity to change as well as stronger forces to carry through
the strategies.

Fig: The Balanced Scorecard automates and centralizes the issuance and tracking of objectives, targets,
measures and initiatives. (Source: learn.com)

Conclusion

Many companies adopted early balanced-scorecard concepts to improve their performance measurement
systems. They achieved tangible but narrow results. Adopting those concepts provided clarification,
consensus, and focus on the desired improvements in performance. More recently, we have seen
companies expand their use of the balanced scorecard, employing it as the foundation of an integrated and
iterative strategic management system. Companies are using the scorecard to clarify and update strategy,
communicate strategy throughout the company, align unit and individual goals with the strategy, link
strategic objectives to long-term targets and annual budgets, identify and align strategic initiatives, and
conduct periodic performance reviews to learn about and improve strategy.
The concept BSC interesting as sales executive could now work from a new dimension, that is, it made it
easier for them to follow up the results from different ratios.
Organization’s values benchmarking in their concept they found it easier to compare the different regions
and local offices to one another as well as comparing itself to other businesses within the same branch of
industry. It was all about competing against the best businesses on the market place, and the BSC
tool was one way of structuring the benchmarking process as to how and in what ways the
company should compete.
The sales executive as well as the organizations strategy could be seen in all four perspectives of the BSC.
As such, the BSC gave a clear structure on how to implement the strategies. What is more, the BSC was
also considered as a “modern” management control system that many businesses implemented.
Before the employment of the BSC took place, made use of many other control reports where they
only concentrated on the financial ratios such as premium collected within specified period.
Organization continually strives to increase its effectiveness within different processes.

References

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