Balanced Scorecard Analysis

Decent Essays

Kaplan and Norton (1996c) defined Balanced Scorecard as a framework that helps organizations translates strategy into operational objectives that drive both behaviour and performance. They realized that although traditional financial performance measures worked well for the industrial era, but were proving to be insufficient in measuring the abilities and competencies essential for survival in changing economic environment. Traditional performance indicators tend to measure financial and accounting aspects, impacting long-term productivity and profits, whereas, Balanced Scorecard provides the measures of synthetic indicators which companies should focus on, such as customer reactions, profits, quality and flexible production selection (Martin, …show more content…

It is commonly adopted as a strategic management system to describe the organization's vision of the future and create shared understanding; clarify and update corporate strategy; communicate strategic objectives throughout the organization; align customer need and business objectives; work as a holistic model of strategy allowing all employees to see how they contribute to organizational success; link strategic objectives to targets and budgets; build a reward system that is geared to achieving targets; and obtain feedback on the effectiveness of the strategic view" (p. …show more content…

The Balanced Scorecard holds the monetary point of view since financial measures are important in considering the measurable economic costs of actions already taken (Kaplan & Norton, 1996c). Financial performance measures help the organization to assess the ability of the organization in formulating strategies, implementing them and execution of those strategies that helps the company to achieve its objectives. (Kaplan & Norton, 1992a). Financial objectives of an organization relate to profitability are measured by return on capital employed or economic value added, operating income (Kaplan & Norton,

Get Access