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Balanced Scorecard Case Study

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3. The Evolution of the Balanced Scorecard
The Balanced Scorecard began with the idea that managers should be measuring more than just the financial results of the company when determining the success of the organization. The term was first coined by Robert S. Kaplan, a Harvard Business School accounting professor, and David P. Norton, a business consultant, when they wrote an article published in the Jan/Feb 1992 issue of the Harvard Business Review entitled, “The Balanced Scorecard – Measures that Drive Performance.” (http://www.bptrends.com/publicationfiles/5-03%20TB%20Evol%20of%20Balanced%20Scorecard.pdf). “The balanced scorecard has been adopted successfully in all types of organizations, including both large and small, manufacturing
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Kaplan and Norton began by arguing that “what you measure is what you get” and that “An organization’s measurement system strongly affects the behavior of managers and employees. They went on to say that “Traditional financial accounting measures like return-on-investment and earnings-per-share can give misleading signals for continuous improvement and innovation…” To counter the tendency to rely too heavily on financial accounting measures, Kaplan and Norton argues that senior executives should establish a scorecard that takes multiple measures into account. In particular, they proposed that a Balanced Scorecard should consider four types of measures: Financial measures, Customer Measures, Internal Process Measures, and Innovation and Learning…show more content…
We typically measure this by reviewing general accounting records such as operating income, return on assets, sales growth, and cash flow from operations. The balanced scorecard uses financial performance measures, such as net income and return on investment, because all for-profit organizations use them. Financial performance measures provide a universal measure for analyzing and comparing companies. Financial institutions and shareholders, rely heavily on these financial performance measures when deciding whether to lend or invest funds in a company. When analyzing the financial data from a company it is important to not only consider the current performance of the company, but also the historical and future data as well. For example, when we analyze historical data we can compare net profit for the current year versus last year, the sales revenue this year versus last year, and the average stock price this month versus last month. These are all measures of corporate performance that are based on history. And we can sometimes use that historical data as we look to the future. For example, we may want to evaluate whether there was any significant growth in sales from a particular geographic region or a particular industry which may lead us to planning for future growth into new or emerging markets. In turn, this may affect our future financial
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