This paper will analyze the
importance of the contribution of the Balanced Scored card to Ryan Air, one of
number one flying airlines of Europe and it evaluate the overall performance
measured in both financial and non-financial aspects of the organization and
conclude with the recommendations.
Ryan Air annual report 2017
states that it grow to become one of the best low cost airline in Europe with
its safety and punctual time schedule with ever growing number of its Boeings
of 737 and serving 131 million customers of 33 countries having 86 bases and
205 terminals. Its target is for 200 million customers by 2024.
Hunter and Nielsen (2013) defined performance
management as organization’s sole ability to attain measurable goals and
objectives with planned strategy.
However, Flenor (2015) explained the impact on
productivity of organization upon mismanaging of its performance and bearing
the burden of poor design and implementation by employees and supervisors.
Apparently, the sole purpose of Performance
Management is to prepare detailed strategy and plan for building and executing
a effective performance management system.
(Flenor,2015). From the above authors, it clarifies performance
management is the crucial functions of organization for its smooth tenure.
However, the strategic tool is essential for its transformation. Therefore, the
Balance Scored Card was developed to strategically asses the performance
Figure 1. Evolution of performance
evolution of performance measure methods consists of performance measurement
recommendations, performance measurement frameworks, performance measurement
systems where the Balanced Scored Card is used as strategic tools in both Performance
Measurements Frameworks and Systems.
3. The Balance Score Card
Norton and Kaplan worked together to find a best possible indicator through a
KPMG-sponsored project examine why organizations key performance indicators are
not limited to financial measures only. Later, both come up with a concept or key tool
which was published the Balanced Score Card concept in Harvard Business Review
in 1992, 1993 and 1996 repetitively. They have argued that traditional
financial accounting measures, like the Return on Investment (ROI) and payback
period, offer a narrow and incomplete picture of business performance, and that
reliance on such data hinders the creation of future business value. As a
result, they suggest that financial measures must be supplemented by additional
ones that reflect customer satisfaction, internal business processes, and the
learning and grow ability. Their Balanced Scored card was planned to complement
“financial measures of past performance with measures of the drivers of future
performance” (Kaplan and Norton, 1996b).
Figure2: Balance Score Card
Scorecard framework includes four major perspectives: (1) financial, (2)
customer, (3) internal business process, and (4) Innovation and learning.
However, Kaplan and Norton (1993) stressed in a article published in Harvard
Business Review that individual companies will have separate Balanced
Scored card as per their classification of industry suited as per their size,
nature of industry and type.
3.1.1 The financial perspective
The financial perspective is recognized for the
importance of short-term financial results obtained from the analysis of
financial targets for institutions in the competitive environment (Kaplan and
Norton, 2000: pp. 9-15).
The healthy turnover of cash flow with the
reduction of the price of tickets support to capture market share in various European
destinations by air travel. According to Morning Star’s Ryan Air’s profitability
statistics on the Return on Equity was 32.82 which is one of the highest in 10
years span and the percentages operating cash flow was 438.00 at the year
ending fiscal year of 2017. The gross profit margins were 46.22% which is slightly
higher of 4% than the previous year of 2016. This clearly suggests robust
financial positions of Ryan Air.
3.1.2 The customer perspective
One of the top priority of the company is to maintain
decent position of perspective from customer. Kaplan and Norton stressed on measuring
factors which matters to customers. The customer has positive thoughts
on Ryan Air when it comes to its cheapest Europe air travel. However, Ryanair penalize
customers who are incompatible of using online bookings. (Moreno et al. 2015)
per the article in Guardian editorial, Ryan air fare prices to many
destinations of Europe is lowest comparing to its competitors and prized by
many of its valued clients who purchase lowest priced tickets repetitively. The
main attraction factors to buy air ticket in Ryan air is due to its lowest air
fare that saved hard earned money of its clients. Apparently, the Guardian
(2017) highlighted how it could become lowest expected airlines due to
cancellation of flights. It seems that Ryan Air is not matching up with the
expectation of ordinary customers in terms of its services and on time
3.1.3 The internal process
Kaplan and Norton (1992) believe that
in internal business process perspective, organizations only focus on
departmental measures. The Balanced Scored Card approach emphasizes the measurement of
integrated processes across an organization.
Cost, quality, throughput and time measures
should be defined for processes that span multiple departments, such as
procurement, production planning and control, order fulfillment. Indeed, this
model can be externalized to include customers, suppliers and other partners.
As per the corporation news desk of Ryan Air (2017), it
had to grant the demand of pilot to register union to proceed efficient
delivery and deadlines to operate its flight during Christmas without any
delays and eminent strike.
Ryan Air maintains its punctuality within time frame of
15 minutes which is considered as on time schedule by Air Industry as 88%
arrived on time out of over 600,000 flights as well as less cancelled flights
compared with other airlines.
Innovation and Learning perspectives
and learning focuses intangible drivers of future such as Human Capital,
Information Capital and Organization Capital. Typical example measures, and key
performance indexes include staff engagement, skills assessment, performance
management scores and corporate culture audits.
& Ramaswamy (2000) while investment in intangible assets, such as training,
is treated as an expense. But the competence of customers is an intangible
asset, often a matter of knowledge and skill. It should be considered capital.
published the Ryan Air policy on being competitive to offering improvement in
career prospects to job security to its employees.
Air’s main strategy lies on the low-cost market penetration, new route and
strong brand development in market. However, the real-world scenario has
highlighted only focusing on financial perspective of balance score card would
lead to losses in the long-term as it got issues in other three perspective i.e
internal, customer, learning and innovation. There are underlying opportunities
after assessing and identifying on weak areas of the Balanced Score Card to
further strengthen and develop its organizational performance to increase
sustainable profit in the longer run.
The key to success is future-oriented and while certain elements
of the scorecard are fundamental to the industry, the key driver of success is
the strategy adopted and the ability to keep ahead of competitors. When using the balanced
scorecard approach, Ryanair needs to ensure it establishes the correct levels
of control to avoid its strategy from being misinterpreted by members of staff
lower in the organization. Instituting management control assists the organization
by allowing managers to influence other members of staff to ensure compliance
with the strategy. To ensure success, Ryanair must bring some changes in its
management and business model. Some of the useful recommendations are given
below. It must focus on its services to meet the passengers’ minimum
expectation. There is still enough room for further research on the Balanced
Scoredcard of Ryan Air.