An Analysis of Omega Company in a Balanced Scorecard Perspective - Paper Example

Introduction

Organizations must operate under high-quality strategies that are robustly executed to meet the customers, stakeholders', and employees’ expectations. One indicator of an organization's success is its dynamism, which enables it to cope with rapidly changing strategies and develop a way to measure these changes. To compete globally, organizations should formulate Balanced scorecard strategies that help the company establish actions that create value for the stakeholders, satisfy their expectations, and improve managerial services like innovation, internal processes, and learning. Jordao and Novas (2013) stated that the measures used traditionally were inadequate in capturing the companies' changes and intense business environment as these measures focused on physical and financial indicators only. Therefore, the balanced scorecard strategy provides a breakthrough to the shortcomings of the former approach used in the past century. Besides, most companies judged their success based on how much money they made. This focus on the amount of money earned is disadvantageous as it only gives a partial picture of the company's performance in the market. Therefore, a balanced scorecard is a managerial system that portrays the bigger picture of its strategic goals (Root, 2019). These strategic goals help the company’s management to choose the right criteria to measure goal attainment. Omega Company is among the biggest companies in Brazil, which deals with electricity and gas distribution. It is a strong example for all large organizations to model their balanced scorecard strategies.

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Overall Balanced Scorecard Strategies

Balanced scorecard strategies are crucial in any organization as they act as a bridge between developing desirable objectives and attaining them effectively. Besides, a balanced scorecard is a tool that most managers employ in assessing the organization's strengths and weaknesses. A strategy, therefore, describes the general direction that a company should take to achieve its objectives. These strategies could entail the distribution of resources within the company, the company's performance within a single task aims to promote diversification or expansion into several business units. Additionally, all the strategies adopted by a company are geared towards pursuing a competitive edge in the business primarily through cost reduction. BSC works hand in hand with managerial control systems, which act as the basis for delivering on the plans according to the stakeholders and management objectives (Jordao and Novas 2013). A balanced scorecard strategy insists on tracking four aspects of a company: finances, customers, internal business, and learning and innovation.

Omega is a Brazilian-based company that deals with the generation, distribution, and transmission of electric energy and natural gas. This company is the largest in Latin America. Moreover, the Group operates in several regions of Brazil, particularly the south region. Besides, the Omega company group owns over 100 businesses and 15 associates in the South American region (Jordao and Novas 2013). Jordao & Novas (2013) added that the company has over 115 stakeholders spread in over 44 countries. The Omega company's strategy aims at maximizing the value of the stakeholders in a manner that will be sustainable as per the 2005-2035 master plan. The Omega company strategy execution becomes effective through the investment in international projects and enlargement of the action area in which the company distributes electric power and gas.

One of the strategies adopted by Omega company to expand its territories globally is through the formation of associations that will help construct more Omega company branches all over the globe. Unlike other companies, the omega company's BSC model is beneficial. It allows the management to monitor all the factors that contribute to the achievement of the company's objectives, plans, and strategies. This BSC model has enabled Omega company to have a sophisticated planning system and timely modifications in case of risks through a series of essential signals. Therefore, to remain competitive and on top of the list of largest companies, Omega company must keep its stakeholders and customers happy to stay satisfied with the services offered by the Omega company.

Problems Faced by Omega Company

The process of developing and implementing a suitable BSC strategy is, however, costly. Therefore, the Omega company is faced with the challenge of the non-manageable and manageable cost of electricity distribution. The values considered by the National Agency form Electric Energy (ANEEL), and those paid in tariff are consistent with the reference company. Suppose the cost regulation limits of the reference organization are breached. In that case, it cannot be considered by ANEEL, and this will consequently undermine Omega's company objectives from a financial perspective. If the OC reduces cost, investment, and expenses, then the level of quality provided will be significantly compromised, and thus penalties will be imposed by the regulators. Consequently, these penalties will negatively affect the financial goals and the reputation of the company. Besides, the OC finds it a challenge to comply with the regulatory requirements in many countries. For instance, the tariffs are revised every five years, and ANEEL determines the rate and adjustment for the next period (Root, 2019). Therefore, the costs of the OC are evaluated by the regulatory agency, which establishes a new tariff.

Also, the electricity sector is faced with other problems which significantly affect service delivery. Changes in the way electricity is produced, stored, and managed have led to a rapid evolution in the way this sector operates. For instance, the issue of voltage control. IEEE changed its regulation from 1547 constant voltage and gave the distributors the authority to provide voltages required by different investors (Cyndy, 2009). Such voltage control became a challenge as most distributors lacked liberty on the amount of energy to supply to each investor. The technology to carry out the voltage control and a steady voltage supply is also wanting and thus threatening the power quality for customers.

Solutions to the Identified Problems

To overcome the challenge of financial constraints experienced, the Omega company should strike a balance between cost quality and investment. Besides, the electricity distributors are rewarded for their assets. Thus, the company should develop a system of strategies that enable them to impose a maximum rate to charge the customers, which will increase their gain. These gains will enable Omega company to improve its assets and customer satisfaction with the services rendered. Also, proper financial planning will be beneficial in ensuring the execution of strategic initiatives. The company also has to keep the operation cost to the minimum level and avoid penalties for non-compliance with the tariff at all prices. Under such conditions, the company will share the costs of distribution with the customers.

Besides, Omega company uses licensed and internally developed software. This software enables the company to have its business map stored in and displayed through a warehouse. This software allows the management to read from the database, a vital tool for planning in companies. Such software should be customized to automatically feed information to BSC indicators and thus assist the company in easy and faster detection of changes and risks. Consequently, company management can respond swiftly to the risks or the opportunities created by the change. The BSC model's use as the management system in the Omega company is fully aligned to the operational strategy. The issue of voltage control can be solved by adopting switched capacitors, phase-shifting transformers, and synchronous condensers for fault current sources (Cyndy, 2009). The company can also use the static synchronous compensator and static var compensator. Additionally, Omega company should concentrate on formulating strategic objectives, which will help it address all four goals. Example objectives that the company may adopt include increased profits, reduced injuries, improved call time, and increased power efficiency.

Conclusion

The investment of money and time in formulating and implementing a suitable BSE strategy plays a significant role in offering a competitive advantage. Omega company has set a good pace in having one of the best and most modern performance evaluation models, which collaborates with the SI and ensures continuous improvement of processes. BSC is, therefore, a fundamental model as it allows a follow-up of the performance of all financial and non-financial aspects that contribute to the company's strategic objectives. Although flawed, BSC strategies prove to be overwhelmingly successful in large companies. Also, BSC plays an essential role in drawing the company's strategy map, which explains everything contained in the organization's strategy.

References

Cyndy, W. (2009). Challenges for the US Electric Distribution System: Opportunities for CMU. US Department of Energy. Retrieved August 08, 2020, from https://www.cmu.edu/ceic/assets/docs/seminar-files/2014-2015/wilson-2014-cmu-challenges-for-distribution-11-12-14-revred.pdf

Dias Jordão, R. V., & Casas Novas, J. L. (2013). A study on the use of the balanced scorecard for strategy implementation in a large Brazilian mixed economy company. Journal of technology management & innovation, 8(3), 98-107.

Root, C. E. (2019, June 28). Challenges of an Evolving Electric Grid. T&D World. Retrieved August 08, 2020, from https://www.tdworld.com/grid-innovations/generation-and-renewables/article/20972778/challenges-of-an-evolving-electric-grid