Balanced Score for the Balanced Scorecard: a Benchmarking Tool

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A balanced scorecard is a tool to provide management a way to bridge the gap between the organization’s strategy and vision and the operational processes used to do business. It enables the company to look at more than just the financial targets, but to include nonfinancial measures such as customer service, internal business processes and more. These intangible measures provide better focus on the organization’s long-term strategies. This paper is an attempt to analyze Frieda Fizz decision to utilize a balanced scorecard as they expand into new geographic areas. The strengths and weaknesses of each perspective are discussed along with the pros and cons of using

Introduction- To be competitive, organizations must be both strategic and tactical to the nth degree, must be proactive rather than reactive, and must find a way to measure this easily and accurately. One way to accomplish this is through a Balanced Scorecard approach; a tool often viewed as one of the best tools that helps organizations translate strategy into performance. In general the BSA (Balanced Scorecard Approach) allows for a clear strategic and tactical directions for the organization, retains financial measurements in a summation along with their links to performance, and highlights an important and robust measurement system that links and integrates customers, stakeholders, processes, resources, and performance into single measurement strategy.

The balanced scorecard was first identified by Kaplan and Norton in 1990 as a management tool to help management to summarize the key factors to conduct a successful business, and to align the whole business operations according to the overall business strategies. Then, in the following year, they implemented the balanced scorecard in various companies to conduct the study, and it appeared that the balanced scorecard was the key to drive the performance in the companies. It provided the management all the necessary strategic information by emphasizing enablers over results and changing strategic management paradigms.

To bridge the gap between strategy and action, organizations use the Balanced Scorecard, BSC. This tool aligns business activities to the organization’s strategy and vision thereby boosting the internal and external communications as well as monitoring its performance against strategic objectives by incorporating financial and non-financial elements from various perspectives into a single framework. Therefore, the BSC is essential in steering an organization to focus on its most relevant areas that push the organization to success by clarifying performance in relation to the business strategy. An organization can thus use BSC to achieve customer satisfaction through innovation thereby strengthening its financial position, achieve a competitive advantage and retain clients.

The Balanced Scorecard has emerged in recent years as a performance measurement system in various organizations. This paper will discuss the origin and concept of the balanced scorecard and how it was first implemented. We will then review the criticisms on the balanced scorecard methodology as well as analyse the strengths and weaknesses of this performance measurement tool.

The Balanced Scorecard (BSC) is one of ‘Performance Management System’ used widely around the world (Kaplan, 1993). This system is used to track the pivotal elements of a business, and allow managers to make decisions based on these measures to improve the company. Firstly, this essay will further introduce the BSC and then, its development throughout the years. Thirdly, the essay will suggest that the BSC is indeed effective as a ‘Performance Management System’ and that, lastly, it does help with the process of acquiring other companies.

The Balanced Scorecard is a strategic measurement approach that provides a method of aligning business activities with the organization's strategic plan and monitoring performance of strategic goals over time. A set of balanced measures is used, rather than focusing on the single, traditional bottom line. The original scorecard developed by Kaplan and Norton (2004) was divided into five perspectives (or measurement areas):

) “A Balanced Scorecard system provides a basis for executing a good strategy well and managing change successfully.” Demonstrate the validity of this statement by selecting an organization of your own choice and showing how strategies can be transformed into objectives, measures, targets and initiatives. You should cover all four aspects of the balanced scorecard. [20 marks]

Benchmarks are set with respect to critical areas of strategic and operational significance that influence an organization’s performance. “These could be well-known problem areas in an organization that could be clearly defined or activities/processes where improvements result in maximum benefits” (Sekhar, 2010). In order for a new strategic management strategy to be implemented, the idea must be first presented to management, and then management must understand the benefits and value of benchmarking, and then get the organization to percieve this value as well.

The scorecard addresses a serious deficiency in traditional management systems: their inability to link a company’s long term strategy with its short-term actions. Managers using the balance scorecard do not rely on short-term financial measures as the sole indicators of the company’s performance. The scorecard introduces four new management processes that, separately & in combination, contribute to linking long-term strategic objectives with short term actions.

It entails specifying the organization 's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. A balanced scorecard is often used to evaluate the overall performance of the business and its progress towards objectives. Recent studies and leading management theorists have advocated that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all stakeholders.

A balanced scorecard can be thought of as a strategic management tool, which the management of various organizations can use to monitor how the activities of employees affect the related operations. The origin of the concept can be traced back to the 1990s when Robert Kaplan and David Norton developed and published the idea in Harvard review journal. It can transform a company’s mission and vision into objectives, which can be quantified and measured. Therefore, it can quantify financial performance, the performance of business processes in the market, innovation performance, and employee performance among others. This tool can further be defined by two characteristics. Firstly, it focuses on organizations ' main agenda. Secondly, it uses a small number of data to measure various processes. This paper seeks to determine the ideal inputs for the four major elements of the Balanced Scorecard.

Organisations, in order to increase performance, profitability, efficiency and to gain a competitive advantage, will benefit from a good strategic performance measurement system to ensure that lower-level managers are acting in a way that is consistent with top managers’ goals and whole organisation’s strategy. One the dominant system is the balanced scorecard framework (Hill, Jones & Schilling, 2015, p.376). The Balanced Scorecard (BSC) defined as “a tool that translates an organisation’s mission, objectives and strategies into performance measures. It is used to implement strategy and to monitor and manage performance, and may form part of the

2Dr. Talwar Sabanna, Professor and Dean, School of Business and Economics, Department of Studies in Economics, Rani Channamma University, Belagavi-591156 (Karnataka), India.