BSBAALJR'S favorite financial management guru Robert Kaplan of Harvard B-skool

BSBAALSR, the incarnation of MBA programs in terms of quantity and alleged-quality, emphasizes, in order of the importance of the subjects to BSBAALSR, strategy, marketing, operations management, leadership, and then, the subject of this blog-post, "financial management".

BSBAALJR is the incarnation of the MBA programs regardless of alleged-quality. Many of BSBAALJR's gurus define "corporate finance", "financial management", and "financial analysis", as having to do with practically everything under the sun connected with attempts to optimize corporate performance. There is plenty of variation amongst his gurus regarding what these various terms mean. You can imagine the unnecessary confusion that is created due to this kind of lack of terminological standardization.

Yet despite the confusion, his gurus break up their teachings into sections such as finance, financial management, and financial analysis. Therefore to understand BSBAALJR's take on "financial management", we need narrower definitions of what the various sub-fields of study are, even if BSBAALJR's gurus are producing tower-of-babel-like terminological confusion regarding the exact definitions of the various sub-field titles.

Yet despite the confusion, his gurus break up their teachings into sections such as finance, financial management, and financial analysis. Therefore to understand BSBAALJR's take on "financial management", we need narrower definitions of what the various sub-fields of study are, even if BSBAALJR's gurus are producing tower-of-babel-like terminological confusion regarding the exact definitions of the various sub-field titles.

The way I see it, financial analysis involves turning internal and external financial statements into information that can be used for the management of the firm; financial management involves using this info derived from the statements to make decisions, and deciding what this info should describe; and finance involves obtaining of money through loans and sale of stock for use by the firm.

BSBAALJR, the incarnation of B-skools regardless of alleged-quality, has a favorite text in the field of "financial management", which is, "the Balanced Scorecard" ( http://www.amazon.com/gp/reader/0875846513/ref=sib_dp_bod_ex/002-6320582-2337641?%5Fencoding=UTF8&p=S00D#reader-link ), by Robert Kaplan of the Harvard Business School.

BSBAALJR and his gurus agree with the following statement (written by myself) canonizing their high priest Kaplan:

The majority of profit and nonprofit organizations, resemble airplanes whose cockpits are obsolete in the sense that they fail to provide info on all kinds of important measurements. This leads to an obsession with short term cost mimization and profit maximization and a neglect of the long term. The new balanced scorecard approach improves on this sorry neanderthalish situation by helping beknighted managers to balance the financial vs the non-financial, the historical vs crystal-ball measurements, and the external vs internal performance. Although the foolish traditional approach to scoring corporate performance resulted in improvement of existing processes through lower costs, improved quality, and shortened response times, it caused an ignorance regarding WHICH processes are especially important and should be concentrated on. The old-fashioned pre-Kaplan-era financial measures, which deserve the same fate as the steam locomotive and the horse-and-buggy, told the story of the PAST, and were adequate for homo-erectus-like industrial-age companies that could succeed while doing brutish things like living as if the world would end tomorrow due to the return of Christ, telling their customers how ugly their daughters are, and ignoring the long term and customer relationships. But for the new information-age, (did'nt you know we can all be employed providing info to one another, and a new software will allow you to eat the text on your computer screen?) you need the new balanced scorecard, which is to the old way of scoring corporate performance like lunar landers compared to hot-air-balloons, so that you can be smart enough to do hip new things the pre-Kaplan world never knew about, like investing in satisfying customers and employees and improving processes technology and innovation.

There is even a new software out, called strategy2act ( http://www.strategy2act.com/ ), which is designed to help us through the process of the scales falling from our eyes, via the computerization of the balanced scorecard approach.

The traditional approach to "scoring" corporate performance, has involved a financial perspective, wherein measurements of return on investment, cost reduction, productivity, and revenue from new projects, are used to determine to what extent objectives such as improved returns, lower costs, and new revenue generation have been accomplished. Kaplan's new "balanced scorecard approach", adds to the traditional form of scoring corporate performance, three new perspectives.

The customer perspective, uses measurements of customer satisfaction, help desk activity, and customer service availability, response time, and level, to determine to what extent objectives such as increased customer satisfaction and understanding of customer needs are being met.

The business process perspective, uses measures of factors such as production cycle times and "TQM quality" (Total organization using Quality thinking and methods to Manage) to judge to what extent objectives such as insuring and improving product delivery and new product development are being accomplished.

the learning and growth perspective, uses measurements of employee productivity, satisfaction, access to info on the net, morale, and turnover to determine to what extent objectives such as such as to what extent objectives such as acquiring strategic info, improving collaboration and communication between employees, and improving the employee's experience are being accomplished.

Below I have included a table adapted from the website (http://www.balancedscorecard.org/) of a non-profit organization that has sprung up to spread the gospel of the balanced scorecard:

THE FOUR PERSPECTIVES OF THE NEW BALANCED SCORECARD
Perspective	Objectives	Measures
Financial (THE OLD FASHIONED PERSPECTIVE INCORPORATED INTO THE NEW)	Improve returns Lower costs Contribute to new revenue generation	return-on-investment (ROI) Cost reduction Productivity Revenue from new projects (e.g. e-commerce)
Customer (NEW)	Increase satisfaction Understand user needs	customer satisfaction help desk statistics availability Response time Service levels delivery response times
Business Process (NEW)	Ensure and improve delivery of existing services Create new initiatives with positive impact	Quality (TQM) Y2K compliance cycle times effectiveness of new products
Learning and Growth (NEW)	Build a strategic information source Improve collaboration & communication Improve the employee's experience	Employee productivity employee satisfaction employee access to information online Morale Turnover

@2005 David Virgil Hobbs
This essay represents my opinion at the time I wrote it, which does not necessarily correspond exactly with facts at the time I wrote it.