In the second half of the 1990’s business management philosophy moved on to conquer new territories with the emergence of the Balanced Scorecard-theory. The Balanced Scorecard complements financial measures of past performance with measures of the drivers of future performance. The objectives and measures of the scorecard are derived from an organisation’s vision and strategy. This new way of thinking provides a framework for converting strategic targets into operationalised action plans complete with activities and measures on every organisational level. At first the philosophy was implemented in the business environment. As the benefits of the new way of thinking and acting have been perceived, the same ideology has been applied also in public, non-profit organisations.

The adaptation of the system requires transformation and modification of the theory in order to make it converge with the implied host environment. As the implementation of a Balanced Scorecard demands versatile verbal and numerical documentation — both in the path of (hierarchy-wise) delegation and setting of targets as in the path of reporting and measuring the realisation of the implied strategy, it is more than natural to consider the impact of and on information technology in such a context.

The aim of this paper is to describe the transformation process of the general framework into a working and pro-active concept meeting the evolving needs for strategic management in the university environment. This paper will also go on to describe how this change process will be realised with the developed technology platform called University Elements.

Managing universities in Finland

Up to the mid-1980s, the administration of the Finnish higher education system was centralised. The internal organisation and decision-making of universities was regulated by administrative orders and decrees. The university budget determined the allocation of funds in strict detail. Decrees on studies and degrees dictated curricula and the provision of instruction. Teachers' duties were laid down in detail in collective agreements.

In an effort to improve university performance, the Finnish higher education steering system began to be overhauled in the mid-eighties. More decision power was delegated to universities, mechanisms for management by objectives were introduced, and performance evaluation was expanded. In recent years, regulations have been lifted and authority transferred from the Ministry of Education to the universities; within the universities, the rector's position has been strengthened and his or her authority increased, while power has been delegated to the faculty and department levels. At the same time, budgetary and regulatory control has given way to steering of performance, backed up by a shift to budgeting by objectives and the development of evaluation systems.

University budgeting has been reformed to consist of block grants, according to which universities receive salary and other current expenditure coverage as a global amount and have considerable discretion over the use of these funds. Current expenditure consists of core funding, project funding (to ensure funds for projects of national relevance), and performance-based resources.

Currently strategic planning in the universities is still very much dominated by the joint dialogue with the Ministry of Education and still focuses on a three-year performance agreement between the Ministry and the university. In these negotiations the role of the university is defined in perspective of the national strategy and goals are set for universities concerning their performance, cost-effectiveness and overall efficiency. Described by quantitative goals, the targets concern, for instance, Master’s degrees, Doctor’s degrees, adult education and international student changes for three-year periods for each university. Also the funding frame and the allocation for the next fiscal year are agreed upon in these negotiations. Based on the results of these negotiations and on past performance, universities are then granted a lump sum budget of which they can dispose to the best of their abilities.

The importance of developing strategic management in universities

It shouldn't come as a surprise to anyone that the environment tends to change. The current main driver of change is the availability of and the demand for information. As a result borders and boundaries, both physical and mental, are fading; what previously was national becomes international and the array and availability of services increases. With that comes a growing awareness of potential and possibilities. And with a wide palette of possibilities comes increased demands from service- and product-aware interest groups, who will, unless their demands are fully met, turn to other, readily available service providers. And this is a situation which every organisation active in any industry and sector faces and needs to act upon.

This is also true for the university sector. In its quest to provide services to the society, it tries to satisfy the needs of an increasingly aware interest group, consisting of internal (personnel, students...) and external customers (government, regions, companies, new students....). A few examples: companies are only willing to interact and co-operate with universities that provide relevant, high-quality and state-of-the-art services in teaching and research. This also applies to students who apply to and study at the university. Otherwise they choose not to, which, in turn, would affect operational preconditions of the organisation such as funding. The government wants a university sector which, in an international sense, is considered high profile and competitive; this is reflected in their budgetary strategies which, in turn, affects the funding of individual universities. The personnel might want a working environment which is high profile, stimulating and supportive; this affects the quality, inspiration and initiative of the personnel. This requires financial resources, thus affecting the status and qualities of the university. Which affects the attractiveness of the university in the eyes of its interest groups. Which in turn affects funding.

In the university environment such cyclical dependency threads come in a multitude, everyone equally important. Every possibility becomes tightly connected to one or many demands. And in this complex environment it is more and more bestowed upon the university itself to discern its future role and image in the eyes of its different interest groups. This implies potential weighed down by peril, and it means freedom weighed down by demanding responsibilities, responsibilities the management of the university has to identify and react to - before somebody else does.

In the environment set by these changes the university is first and foremost faced with a challenge of developing a method for strategic management and implementation, derived from extensive knowledge of environmental demands and complete with implementable long-range plans for the entire organisation. A process and tool for strategic feedback is needed. More effective models of institutional management and internal processes are to be identified and developed. Organisational units need to become more responsive to internal procedures and more sensitive to respond to other pressures and challenges triggered by the environment. The university is to be managed like and as a product brand. An administrative flexibility has to be achieved, revising the traditional system of setting up permanent posts by redefining work duties, driving on changes in personnel and competence management and force improvements in the legislation on universities and degrees.

The list goes on, but in short it tells the story of a reality in which resources are scarce and demands are many. Hence, in order to be able to focus the (at times) meagre assets on the correct activities the university needs a realistic view of its current status and processes, a proper methodology to review and plan its actions, correct and real-time information to support its internal demands and processes and strong leadership to implement the outlined detailed strategies and plans. The environment of and the demands on a university convergence on many levels towards those of a privately owned company. And, as any privately owned company, the university now faces a competitive future, a future in which a continuous and pitiless battle over resources and customers is fought according to rules set by the environment and the competition.

University Elements – the tool for Strategic Management

University Elements - the project

With the above described vision in mind three universities, Ministry of Education and a commercial software company formed a project consortium with the purpose of developing an IT-system to support the future processes of strategic planning, management and reporting in the university environment. The project was named University Elements and the functionality and underlying theory is based on the Balanced Scorecard (BSC) management philosophy.

The universities participating in the project are Helsinki University of Technology, Turku School of Economics and Business Administration and Åbo Akademi University (Turku). Because of the wide scope and purpose of the project, universities are represented in the project both by higher management (the rector-level) as well as representatives for different functions, defining the real needs, contents and functionality of the system.

The software application is being developed by Elementum Ltd, a Turku-based software company with long-standing experience in strategic management systems in the corporate world. The functionality of the application rests on Elementum's modular and flexible Elements-technology.

University Elements - an introduction to the product

University Elements is a strategic planning tool planned, implemented and integrated with the aim of streamlining the strategic planning process throughout the entire organisation of the university. The theoretical management framework of the functionality and processes of the application are based on the concept of the Balanced Scorecard-philosophy, which assumes operationalised strategic goals communicated and tracked through all organisational levels. Based on the structured formulation of visions and strategies, University Elements is a versatile tool for goal-setting, communication and tracking on all functional levels of the university.

Support throughout the strategy process

University Elements supports the entire strategy process, from the formulation of a common vision to the follow-up of its strategic and tactical implementations in a Balanced Scorecard-context. By actually linking visions and strategies to operative targets on all levels of the organisation, the strategies are effectively communicated down into the organisational hierarchy and its many activities, streamlining the organisation and aligning its competencies.

Picture 1. Support for the strategy process in a BSC-context

Visions - a common goal

Visions are formed on a conception of the current and future state of reality. This conception is based on an analysis of the current and future development of the operating environment, which is then complemented with an analysis of the current organisation, its strengths and weaknesses and its past performance. The vision statement of the organisation becomes the joint target of several consecutive strategies. It is formulated through cause-effect chains, which, based on the view of the future, sets the pace, ways and targets for the organisational strategies to achieve. When a vision statement is well structured according to set standards it is easily divisible and translatable into relevant and attainable targets for time period-related strategies.

Strategies - the steps to reach the common goal

The vision is linked to operative activities through a structured set of operationalised strategies. Therefore, the vision is split into consecutive strategic periods, which together strive to form the high-level cause-effect path towards attaining the vision.

Resting on an overall environmental analysis, each strategy has to be conveyed down through all layers and functions of the organisation, always keeping in mind the overall strategy of the organisation. To ensure the implementation of the strategy, each functional unit in the organisation is assigned a role according to its position in the hierarchy and in the overall vision and evolution plan. To this role the strategic targets of each unit are defined as sub-tasks to the targets of the hierarchical level above. In this way a vertical chain of connected targets and sub-targets is created throughout the entire organisation, retaining the logical action link to the overall vision.
 
 

The Balanced Scorecard - a balanced set of measures

The concept of the Balanced Scorecard rests firmly on the philosophy of turning strategic objectives into tangible and measurable action. An operationalised view on visions and strategies requires that overall objectives are translated into operative targets and action plans on every organisational level. Targets on all levels are described through cause-and-effect relationships and their realisation is tracked through documented measures. Traditionally the performance of the organisation has been viewed against pure financial measures; the BSC-method strives to link the financial performance of past activities with measures of the drivers of future performance by incorporating all dimensions of organisational activity. Hence the financial aspect is complemented by a process-, the learning and growth- as well as the customer dimension. By identifying, integrating and communicating both financial and non-financial targets and measures, a more complete, balanced, view of the activities of the organisation is created.

In the University Elements-environment the Balanced Scorecard-method is implemented to fit the needs of the operating environment of universities. In this environment the whole process from vision and strategy formulation for the entire university to individual strategies and action plans for faculties or even subjects is viewed against one (1) set-up of dimensions. Through this philosophy of a homogenous palette of dimensions, the vertical chain of targets and sub-targets are easily operationalised and communicated, enabling a unified and structured way of planning, managing and tracking long-term operations on all levels of the organisation.

Picture 2. The BSC-dimensions

The dimensions are:

resources; the foundation for future development of the organisation is laid through current financial resources. Such are, for instance, public grant as well as both public and private funds. Lower in the organisation this implies budgetary funding and external sources.

organisational development; investments into IT, infrastructure, organisational structures and knowledge. Of special interest is expansion into new research topics and the balance between research and teaching.

processes; organisational development affects the processes by which the organisation conducts its operations. Such processes are research, teaching and several support processes such as the function of the library.

interest groups; improved processes improves the manner in which the organisation serves its external and internal customers and how these groups receive the services rendered by the organisation. The degree of satisfaction among customers affects the financial foundation for the next strategic period.

When a cause-effect-chain is created by combining all four business dimensions, targets for a specific organisational level are set. Using the above-defined dimensions, one follows (for each target) the thought of "how are we going to allocate our given financial resources between maintaining and developing our organisation and improving our internal processes through which we are in contact with our interest groups, who in the future will affect our financial resources which we allocate….". When this chain is defined and documented for each target, the organisation as a whole or any level of it has a set of measurable steps, which all have to be fulfilled both horizontally and vertically (organisation-wise) in order to achieve the target one initially set out to reach.

Reporting

The reporting and tracking structure of the University Elements is based on the organisational hierarchy it is representing. As an organisation is constantly in change, with regards to both structure and function, an IT-solution intending to support the management of such an organisation needs to be at least equally flexible. Therefore University Elements provides necessary options and tools for adjusting the structure and functionality according to physical and philosophical changes made in the organisation it is trying to depict.

Reporting and tracking of the implemented strategy on all levels of the organisation requires two types of reports: standardised routine reports and ad-hoc reports. Ad-hoc reports are reports, which are online composed from data in the operating environment of the university; these reports are equally useful in an official context as for internal management and reporting. Hence, the user will be able to easily create and save reports consisting of data from any existing data storage facility connected to University Elements.

The second type of report is a standardised, organisation-wide routine-report, used for, for instance, financial follow-ups or external reporting. These standardised reports form the spinal network of activity tracking running through the organisational layers.

This versatile reporting is based on the notion of real-time data. University Elements takes its data

through direct data channels from existing operative data sources such as the student and personnel data bases and financial management systems. Therefore the reports within the University Elements always and automatically contain guaranteed up-to-date data straight from its original source.

Summary

University Elements is an IT-solution that supports the planning, implementation as well as the tracking and reporting processes of strategic management in the current and future operating environment of universities. By implementing the philosophy of operationalised strategies, it provides the necessary tools for the formulation, communication and ad-hoc reporting of strategic and operational targets on all levels of the organisation.

With its dynamic structure, University Elements is a management tool that lives and breaths flexibility and adjusts to the changing needs of the organisation. A changing organisation or environment is not a threat, not even a challenge, it is an opportunity. An opportunity to let the user concentrate on managing the process of change and the impact of that on the organisation itself by not having to worry about providing the data for it. Just let the Elements take care of that.

REFERENCES

CRE Institutional Evaluation Programme: Institutional review o the Helsinki University of Technology, CRE Reviewers’ Report, Association of European Universities (CRE), Geneva, 1998

Hölttä, S. & Lappalainen, A.: Resource allocation in Finnish universities — response to increasing external complexity, Paper presented in the 20th Annual EAIR Forum, Spain, 1998

Kaplan, R.S. & Norton, D.P.: The Balanced Scorecard – Translating Strategy into Action, Harvard Business School Press, Boston, 1996

Newcomer, K.E.: Using Performance Measurement to Improve Public and Non-profit Programs, Jossey-Bass Publishers, San Francisco, 1997

Ramsden, P.: Learning to Lead in Higher Education, Routledge, London, 1998

Contact information

Niclas Lindgren, Project Manager

Lemminkäisenkatu 20 B, FIN-20520 TURKU, Finland

e-mail: niclas.lindgren@elementum.fi

Phone: +358-2-413 0050

Fax: +358-3-413 0020

Anneli Lappalainen, Senior Adviser

Helsinki University of Technology, Finland

P.O.Box 1000, FIN-02015 HUT, Finland

e-mail: anneli.lappalainen@hut.fi

Phone: +358-9-451 2065

Fax: +358-9-451 5010