IntroductionThis paper will analyze theimportance of the contribution of the Balanced Scored card to Ryan Air, one ofnumber one flying airlines of Europe and it evaluate the overall performancemeasured in both financial and non-financial aspects of the organization andconclude with the recommendations.Ryan Air annual report 2017states that it grow to become one of the best low cost airline in Europe withits safety and punctual time schedule with ever growing number of its Boeingsof 737 and serving 131 million customers of 33 countries having 86 bases and205 terminals. Its target is for 200 million customers by 2024.2.Performance Management: Hunter and Nielsen (2013) defined performancemanagement as organization’s sole ability to attain measurable goals andobjectives with planned strategy.However, Flenor (2015) explained the impact onproductivity of organization upon mismanaging of its performance and bearingthe burden of poor design and implementation by employees and supervisors.Apparently, the sole purpose of PerformanceManagement is to prepare detailed strategy and plan for building and executinga effective performance management system. (Flenor,2015).
From the above authors, it clarifies performancemanagement is the crucial functions of organization for its smooth tenure.However, the strategic tool is essential for its transformation. Therefore, theBalance Scored Card was developed to strategically asses the performancemanagement. Figure 1. Evolution of performancemeasurement methods Theevolution of performance measure methods consists of performance measurementrecommendations, performance measurement frameworks, performance measurementsystems where the Balanced Scored Card is used as strategic tools in both PerformanceMeasurements Frameworks and Systems.3. The Balance Score CardIn 1990,Norton and Kaplan worked together to find a best possible indicator through aKPMG-sponsored project examine why organizations key performance indicators arenot limited to financial measures only. Later, both come up with a concept or key toolwhich was published the Balanced Score Card concept in Harvard Business Reviewin 1992, 1993 and 1996 repetitively.
They have argued that traditionalfinancial accounting measures, like the Return on Investment (ROI) and paybackperiod, offer a narrow and incomplete picture of business performance, and thatreliance on such data hinders the creation of future business value. As aresult, they suggest that financial measures must be supplemented by additionalones that reflect customer satisfaction, internal business processes, and thelearning and grow ability. Their Balanced Scored card was planned to complement”financial measures of past performance with measures of the drivers of futureperformance” (Kaplan and Norton, 1996b).
Figure2: Balance Score CardThe BalancedScorecard 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 HarvardBusiness Review that individual companies will have separate BalancedScored card as per their classification of industry suited as per their size,nature of industry and type.3.1.1 The financial perspectiveThe financial perspective is recognized for theimportance of short-term financial results obtained from the analysis offinancial targets for institutions in the competitive environment (Kaplan andNorton, 2000: pp. 9-15). The healthy turnover of cash flow with thereduction of the price of tickets support to capture market share in various Europeandestinations by air travel.
According to Morning Star’s Ryan Air’s profitabilitystatistics on the Return on Equity was 32.82 which is one of the highest in 10years span and the percentages operating cash flow was 438.00 at the yearending fiscal year of 2017. The gross profit margins were 46.22% which is slightlyhigher of 4% than the previous year of 2016. This clearly suggests robustfinancial positions of Ryan Air.
3.1.2 The customer perspective One of the top priority of the company is to maintaindecent position of perspective from customer. Kaplan and Norton stressed on measuringfactors which matters to customers. The customer has positive thoughtson Ryan Air when it comes to its cheapest Europe air travel.
However, Ryanair penalizecustomers who are incompatible of using online bookings. (Moreno et al. 2015)Asper the article in Guardian editorial, Ryan air fare prices to manydestinations of Europe is lowest comparing to its competitors and prized bymany of its valued clients who purchase lowest priced tickets repetitively. Themain attraction factors to buy air ticket in Ryan air is due to its lowest airfare that saved hard earned money of its clients.
Apparently, the Guardian(2017) highlighted how it could become lowest expected airlines due tocancellation of flights. It seems that Ryan Air is not matching up with theexpectation of ordinary customers in terms of its services and on timedelivery. 3.1.3 The internal processperspectiveKaplan and Norton (1992) believe thatin internal business process perspective, organizations only focus ondepartmental measures.
The Balanced Scored Card approach emphasizes the measurement ofintegrated processes across an organization. Cost, quality, throughput and time measuresshould be defined for processes that span multiple departments, such asprocurement, production planning and control, order fulfillment. Indeed, thismodel can be externalized to include customers, suppliers and other partners.As per the corporation news desk of Ryan Air (2017), ithad to grant the demand of pilot to register union to proceed efficientdelivery and deadlines to operate its flight during Christmas without anydelays and eminent strike.Ryan Air maintains its punctuality within time frame of15 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 flightscompared with other airlines.
3.1.4Innovation and Learning perspectivesThe Innovationand learning focuses intangible drivers of future such as Human Capital,Information Capital and Organization Capital. Typical example measures, and keyperformance indexes include staff engagement, skills assessment, performancemanagement scores and corporate culture audits.Pralhad& Ramaswamy (2000) while investment in intangible assets, such as training,is treated as an expense. But the competence of customers is an intangibleasset, often a matter of knowledge and skill. It should be considered capital.Telegraphpublished the Ryan Air policy on being competitive to offering improvement incareer prospects to job security to its employees.
4.ConclusionsRyanAir’s main strategy lies on the low-cost market penetration, new route andstrong brand development in market. However, the real-world scenario hashighlighted only focusing on financial perspective of balance score card wouldlead to losses in the long-term as it got issues in other three perspective i.einternal, customer, learning and innovation. There are underlying opportunitiesafter assessing and identifying on weak areas of the Balanced Score Card tofurther strengthen and develop its organizational performance to increasesustainable profit in the longer run.
The key to success is future-oriented and while certain elementsof the scorecard are fundamental to the industry, the key driver of success isthe strategy adopted and the ability to keep ahead of competitors. When using the balancedscorecard approach, Ryanair needs to ensure it establishes the correct levelsof control to avoid its strategy from being misinterpreted by members of stafflower in the organization. Instituting management control assists the organizationby allowing managers to influence other members of staff to ensure compliancewith the strategy. To ensure success, Ryanair must bring some changes in itsmanagement and business model. Some of the useful recommendations are givenbelow. It must focus on its services to meet the passengers’ minimumexpectation. There is still enough room for further research on the BalancedScoredcard of Ryan Air.