Analysis: The Pioneer by Frederick McCubbin

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The BSC Framework why it has been introduced
Historically, to determine the success of the companies, people use financial worth. The higher the financial results such as profitability, the better the firm is said to be performing. The traditional financial measures such as earnings per share (EPS), return on assets (ROA), return on investments (ROI), and many others were vastly used in numerous organisations as their performance measurement system. However, these financial measures have been criticised as it is said that it only reflects the past data, encourages short-termism and may motivate manipulation of results. Chakravarthy, (1986) states that traditional measures only reflects past performances and for the long term benefit of the company, forward looking measures are required. Besides that, financial measures also do not take into account the other critical areas such as quality, flexibility and other areas that the company needs to excel in order to survive in the current competitive market. In recent years, many management frameworks have been introduced such as Lynch and Cross (1991) “performance pyramid”, Fitzgerald & Moon (1996) “building blocks of performance measurement system”; Neely et al., (2002) “performance prism”; Kaplan and Norton’s (1992) “balanced scorecard” framework;, “six sigma” and “value for money” to have a wider view on the company’s needs to compete in the market. Balanced Scorecard (hereafter known as BSC) is a performance measurement system that has been introduced to overcome the weaknesses of the traditional performance measurement systems. In the intense competition market, intangible assets of companies play a major role in creation of value for companies. (Nolan Norton Institute, 1991). Therefore, in order to improve the management of intangible assets, companies should incorporate measurement of intangible assets into the company’s performance measurement system (Kaplan, 2010). It was introduced as a performance measurement framework to assess both the tangible and intangible assets of the company as the traditional performance measurement system was described as obsolete and misleading (Kaplan and Norton, 1992). This is because traditional measures do not account for many of the critical success factors that the company needs in order to be successful in the current market. The BSC framework was created in 1987 at Analog Devices (Schneiderman, 1999). BSC became a popular strategic management tool after a work by Robert S. Kaplan & David P. Norton was published in the Harvard Business Review paper in 1992. Even though the BSC has been presented as a new innovation, other frameworks have been in existence long before the introduction of the BSC. BSC is said to be linked to the Tableau de Bord from France. Many of the concepts in the BSC are found in Tableau de Bord which was introduced in France in the 1930s (Malo, 1992, p. 923). Tableau de Bord was described as being similar to “dashboard”. It is used by the “pilots” which are the managers of organisations to guide the companies to their intended goals and destinations. Kaplan and Norton, who maintain that “the Balanced Scorecard is a new framework for integrating measures derived from strategy,” have also recognize that there is similarities between Tableau de Bord and the BSC framework ( Kaplan and Norton, 1997). Kaplan and Norton (2001) states that the BSC reflects the changes in technology and competitive advantage in the 20th century where intangible assets became more important as it became the major source of competitive advantage of the company. According to the Business Dictionary (online) intangible assets are long term resources of an organisation but they have no physical existence. This includes brand, intellectual capital such as knowledge and know how, reputation and customer loyalty. Managers would have to learn on how to manage these intangible assets which includes customer relationship, employee training, high...
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