Balanced Scorecard Alternate Ways of Measuring Performance
Abstract
Many organizations are usefully viewed as a web of relationships between and among various stakeholder groups. An organization may be defined as a "nexus of contracts," where said "contracts" are relationships that are marked by contributions from the various stakeholders in return for inducements provided by the organization. Over the long haul, the success of an organization is a function of the extent to which the needs and requirements of its various stakeholders can be integrated and balanced, without sacrificing any one to the other. There is, in this arrangement, mutual influence and accountability.
It is the main thesis of this paper that many organizations would be well served by making use of the Balanced Scorecard as an alternate way of evaluating a company’s performance.
Introduction
Since its introduction in the Harvard Business Review in 1992, many corporate executives and information technology (IT) professionals have found the concept of Balanced Scorecard it to be a key strategic measuring stick of corporate success. Robert Kaplan and David Norton created balanced Scorecard, often referred to as BSC, in the early 1990’s. Today many large consulting firms like Pricewaterhouse Coopers and Earnst and Young have adopted the balanced scorecard concept.
A balanced scorecard is a framework for translating strategic goals and visions into measurable results for the entire enterprise. The balanced scorecard starts with corporate strategies and objectives, and then uses financial and non-financial measures from across the company to create positive and negative indicators of corporate success for all levels of the organization (Kaplan and Norton, 1992).
These indicators provide an in depth snap shot of corporate performance that managers and executives can use to clearly manage the company for success on a daily basis. Since the scorecard is based on key performance indicators (KPIs) that are directly linked to corporate goals, it provides a true measure of corporate success.
These KPIs consist not just of financial indicators, but also of performance measures in customer satisfaction, internal process, and innovation and improvement (Kaplan Norton, 1992).
The breadth and diversity provided by all four perspectives give managers an ideal cross-func...
... middle of paper ...
...to a system of performance measurements that effectively communicate a powerful, forward-looking, strategic focus to the entire organization. This balanced concept allows an organization to evaluate its performance in different aspects other than financially acceptable balance sheets or income statements.
Bibliography
1.) Atkinson A. A., Waterhouse, J.H., and Wells, R.B. (1997). “A Stakeholder Approach
to Strategic Performance Measurement.” Sloan Management Review (Spring, 1997, pp25-
37): Cambridge.
2.) Kaplan, Robert S. and Norton, David P., (1992). “The Balanced Scorecard: Measures
that Drive Performance.” Harvard Business Review (January-February 1992): 71-79.
3.) Kaplan, Robert S. and Norton, David P., (1996a). “Linking the Balanced Scorecard to
Strategy.” California Management Review (Vol. 39 No.1, Fall, 1996): 53-77.
4.) Kaplan, Robert S. and Norton, David P., (1996b). “Using the Balanced Scorecard as a
Strategic Management System.” Harvard Business Review (January-February 1996): 75-
85.
5.) 5.) Nickols, Fred (1999). “Reconciling and Integrating Stakeholder Needs and
Requirements.” COG News (Spring 1999)
With the goals of 2010 in mind, it is important for the AHA to be able to measure the actions of their employees and ensure the alignment of their behaviors with the strategic goals of the association. The Balance Score Card developed below serves as universal tool to do just that, but also sends a message to leaders and employees across the association that this is the new strategic direction the association will be moving, and this is it will be mapped and measured to ensure we reach our goals for 2010.
The Balanced Scorecard is a business strategic planning system used by management to make decisions based on information provided about the business from four different perspectives. The first of the four perspectives is the financial perspective. Which means that we evaluate our business and conduct research from the shareholders perspective. Next is the internal business perspective, which is an internal evaluation of what the business must be good at to excel. Next is the innovation and learning perspective which is an evaluation of the firm’s ability to continue to improve and create value. The final perspective is the customer perspective, which is looking at the business activities from the customers
‘Though it is intricate to demonstrably prove in quantitative terms that the balanced scorecard can deliver efficiency improvements at the start of its implementation, it can be shown in quantitative terms that a well designed fully cascaded balanced scorecard system should address the needs of a health care system. ’ (Radnor and Lovell, 2003, p. 105)
measures" (Ball, Harbor, Moore, Verlaan-Cole, 2003). The balanced scorecard is organized into four perspectives: financial, customer,internal processes and learning and growth" (Ball, 2003).
In the mid 1980s, and into the 1990s, business leaders realized that a renewed focus on quality was required to continue to compete in an expanding global market. (NIST, 2010) Consequently, several strategic frameworks were developed for managing, and measuring organizational performance. Among them were the Malcomb Baldrige National Quality Award, which was created by and act of congress and signed into law by the President in 1987, and The Balanced Scorecard, which is a performance management tool that was born out of research conducted in the late 1980s and early 1990s by Robert S. Kaplan, and David P. Norton published in 1996 (Kaplan, 1996). Initially the renewed emphasis on quality management systems was a reaction to the LEAN approach
The concepts of Balanced Scorecard was first conceived by Kaplan and Norton in 1992, it has been implemented in thousands of corporations, organizations, and government agencies worldwide and its functions have evolved as the number of organizations applying this methodology has increased.
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 to Scents & Things vision, mission, values, and SWOTT analysis.
Before the introduction of the balanced scorecard tool, only financial measures were used to determine the organi...
In this paper I critically reflect on five different self-assessments: locus of control (LOC), emotional intelligence (EI), listening self-inventory, team member type and conflict management. Throughout my discussion, I focus on their correlations and apply the gathered information to my work-life experiences. I will also provide a systematic assessment of each of these questionnaires. This evaluation will address any possible weaknesses I had found within the tests and prepare my final conclusions based upon those final educated results.
Stakeholders are those groups or individual in society that have a direct interest in the performance and activities of business. The main stakeholders are employees, shareholders, customers, suppliers, financiers and the local community. Stakeholders may not hold any formal authority over the organization, but theorists such as Professor Charles Handy believe that a firm’s best long-term interests are served by paying close attention to the needs of each of these stakeholders. The modern view is that a firm has responsibilities to all its stakeholders i.e. everyone with a legitimate interest in the company. These include shareholders, competitors, government, employees, directors, distributors, customers, sub-contractors, pressure groups and local community. Although a company’s directors owes a legal duty to the shareholders, they also have moral responsibilities to other stakeholder group’s objectives in their entirely. As a firm can’t meet all stakeholders’ objectives in their entirety, they have to compromise. A company should try to serve the needs of these groups or individuals, but whilst some needs are common, other needs conflict. By the development of this second runway, the public and stakeholders are affected in one or other way and it can be positive and negative.
Madaus, G. F., & O'Dwyer, L. M. (1999). Short history of performance assessment: Lessons learned. Phi Delta Kappan, 80(9), 688-689.
The first aspect of the balanced scorecard is the financial perspective, which is responsible for answering the following questions: “To succeed financially, how should we appear to our shareholders?” Our finance objective for Google is to increase net revenue. Google’s revenue has shown a steady growth over the years. Google’ s revenue in 2011 was 37,905,000 and in 2012 it was 50,175,000. In one year, Google manage to exceed its 2011 revenue by 12,270,000. Google, is currently in their fourth quarter of 2013. Each quarter’s revenue in 2013 is noticeably greater than the quarters in 2012. In the third quarter of 2013, Google generated total revenues of 14,893,000, compared to 2012 third quarter of 13,304,000
Performance management is a useful and powerful tool that can be used by managers to identify what areas of their organisation they need to improve to increase the organisation’s overall performance. The idea of a balanced scorecard enforces a sensible distribution of resources and effort across all aspect of performance an organisation is, or should be, concerned with.
At the same time a balance score card intergraded with Accounting Information System allows the companies to collect rightfull information, analyse the data and make evidence based decisions. (Marr, 2010).
...ement systems which combines both financial and non-financial measures which are considered more appropriate with the growing market. For instance, the two well-known performance measurements used by wide range of companies: Balanced Scorecard (BSC) and Performance Prism.