In this article Kaplan and Norton have talked about implementation of Balanced Scorecard as a management tool which provides executives with a comprehensive framework translating company's strategic objectives into a coherent set of performance measures. They argued that by only looking at the financial returns the managers will fail to get overall strategic view of the company. The balanced scorecard helps in understanding organization's strategic objectives and operational processes. The different perspectives which balance scorecard looks at are:
1. Financial Perspective – How does firm look to the shareholders?
2. Customer Perspective – It addresses what the customers expect.
3. Internal business perspective – It help the
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6. Third Round Executive Workshop - The final agreement on vision, objectives, and measurements which were developed in the first two workshops.
7. Implementation - The team develops the implementation plan for the scorecard.
8. Periodic Reviews - Scorecard usage on monthly/ quarterly basis and annual review.
Strength and Weakness of arguments in article
The four perspectives - The holistic approach of financial and non financial measures facilitate understanding how performance is created within the firm and also serves as indicator for future strategies. This is possible as Balance Scorecard serves as input to the creation of strategy maps for the organization with focus on internal learning and growth to drive financial profitability and value to stakeholders. However, the perspectives do not represent the interest of all the stakeholders as suppliers, competitors, government, local communities and environment receive little attention in implementation of a balance scorecard. These factors are also critical for performance management and strategic objectives of the company. Further, Balanced Scorecard seems to represent a static model without the dimension of time and thus establishing cause and effect relationship between different perspectives becomes difficult.
BSC as top down reflection of company’s mission and strategy - The Balance scorecard at corporate level provides the inputs for performance measurement at business unit level and
Soderberg, Kalagnanam, Sheehan, and Vaidyanathan (2011) presented the balance scorecard as a strategic planning procedural tool used by organizations to balance financial concerns, customer concerns, process concerns, and innovation concerns with the main purpose of developing appropriate strategy in favor of a more favorable market position (p. 689-690). Similarly, Lawrence and Webber (2008) illustrated
There are four perspectives when it comes to balanced scorecard. First one is learning and growth which means how the information and knowledge are processed and turned into competitive advantage against other companies. Second is about product manufacturing and making sure that all the products are made the same without any defaults. Third one is about customer satisfaction and making sure that customers are happy with product, service and price. Fourth one is about financial performance and making sure that company’s financial data is used properly.
A balanced scorecard is a method company’s use to measure their performance. It includes objectives, strategies, and tactics. This paper will contain two strategic objectives for each of the four balanced scorecard areas (shareholder value or financial perspective, customer value perspective, process or internal perspective, and learning and growth perspective) for H & R Block. It will also have two strategies for every objective, one tactic for each strategy, and two methods to monitor and control the overall strategic plan for H&R Block.
“The balanced scorecard should translate a business unit’s mission and strategy into tangible objectives and measures. The measures represent a balance between external measures for shareholders and customers and internal measures of critical business processes, innovation and learning and growth. The measures are balance between outcome measures, the results of past efforts, and the measures that drive future performance. And the scorecard is balanced between objective, easily quantified outcome measures and subjective, somewhat judgmental, performance…”
A Balanced Scorecard can be defined as a “performance management tool which began as a concept for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy” (Wikipedia 2009, ¶ 1). Scents & Things will need to develop a balanced scorecard that will assist in meeting and help define the company’s values, mission, vision, and SWOT analysis. The balance scorecard is made up of four perspectives; financial, customer, learning and growing, and internal process. This paper will define each of the four perspectives objectives, performance measures, targets, and initiatives. The paper will also show how the perspectives relate
The balanced scorecard is a strategic measurement strategy used in business and government as a measurement tool. The balanced scorecard should reflect businesses plans and strategic goals. The balance scorecard “was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton (n.n October 8th, 2015). Balanced scorecard is used by managers not only to measure performance but to align their goals and execute the visions and missions of any agency. The balanced scorecard include metrics in different perspective views, these include “The learning and growth perspective, the business process perspective, the customer perspective and the financial perspective”.
The use of balanced scorecard has been developed from the early use as a simple performance measurement framework, a complete strategic planning and management systems. The "new"
To make the balance scorecard accurate, the organizational management team in lines the mission, vision, and strategy of the company into the scorecard. “This depicts the long term and short term success of the strategy. The outcome measures of the balanced scorecard must represent the excellent prior performance and the performance-drivers that lead to the successful and accurate performance.” (Kaplan, R. S. and Norton, D. P.
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,
Balanced Scorecard is a strategic performance management framework that helps organizations to align strategies with both financial and non-financial measures to monitor progress, measure performance, prioritize and reveal improvement opportunities (Henderson, Gary & Mittl). BSC is generally implemented at the corporate level, but it is useful for all levels of the organization. It should not only act as an information system for corporate management, but form a basis for encouraging behavioral change in the organization in order to conform to the vision and
The balanced scorecard is a performance management tool that assists in the management of an organisation’s business strategy using traditional financial measurements combined with non-financial information (Candle 2008). Kaplan and Norton (1992), the creators of the concept, introduced the business scorecard as 4 main perspectives, customer, learning and growth, financial and internal business process. They breakdown the meaning behind each perspective is as follows: The customer
The balanced scorecard (BSC) is an extensively used performance measurement tool introduced to take the strategy and vision of the business into real action from four perspectives: financial, customers, internally progress and learning and grow. (Kaplan and Norton, 1996) From all these four perspectives, it can be seen that this measurement tool is different from others because it concentrates on both financial and operational information rather than only financial figures which make the tool provide a more comprehensive of the business to shareholders and customers. In these years, BSC has developed from the performance measurement tool to a strategic management system. ( Kaplan and Norton, 1996, p 37) However, this essay aims at introducing the balanced scorecard as a performance measurement from its origins, why business needs it, how it can be utilized, how the business can get benefits from adopting this measurement tool and what potential problems and limits it has.
Balance scorecard can communicate the nonfinancial measures into the strategic management via four perspectives which include financial; customer; internal business processes; learning and growth. These four perspectives are in cause-and-effect basis where the acquired of necessary learning and growth can improve the internal business processes and then achieve customers’ satisfaction and finally accomplish the desired financial goal or objective. The construction of strategy maps are top down, begin with the goal or objective and then the means that direct to the destination. Financial perspective generally includes increase of shareholder value or economic value. This can be done through revenue growth and productivity where revenue growth involves expending new products, new markets and new customers or enhance sales to current consumers. Productivity strategy involves lowering cost or improves assets utilization effectiveness. Customer perspective consists of customer-value proposition that differentiate companies through operational excellence, customer intimacy excellence and product leadership. Internal processes perspective can be identified after the identification of financial and customer perspective. This perspective includes internal business
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.
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