Balanced Scorecard: A Strategic Management Tool

1706 Words Jan 16th, 2009 7 Pages
Balanced scorecard
A strategy management tool • Introduction Companies today are in the midst of a revolutionary transformation as Industrial age competition is shifting to Information age competition. The cut-throat competition that businesses faced in the last two decades has made them to look for improvement initiatives like Total Quality Management, Just-in-Time (JIT) systems, Employee empowerment and Re-engineering. Though these initiatives resulted in enhanced shareholder value, they were achieved merely by monitoring and controlling financial measures of past performance and focused on short-term goals. This collision between the irresistible force to build long-range competitive capabilities and the immovable object of the
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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.
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Figure 2: Perspectives of a Balanced Scorecard (Kaplan & Norton ,2007. HBR)

1. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority. In fact, there is often more than sufficient handling and processing of financial data. With the implementation of a corporate database, it
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