Submitted by saifulhafez on January 6, 2010
•Category: Business and Economics
•Words: 2706 | Pages: 11
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This assignment will discuss on how balanced scorecard is used to evaluate the performance of a company in particular a business unit. Prior to evaluate the company’s performance, I will first explain the term balanced scorecard and also the rationale of the objectives chosen for each perspective so as to ensure that the assessment of the company’s performance is quantifiable as well as reliable and comparable to other companies in the same industry.
1.1 Balanced Scorecard as a Measurement Tool
From a general overview, balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government as well as non-profit organization worldwide. Amongst benefits of balanced scorecard is to align business activities to the vision and strategy of the organization, improve internal and external communications and to monitor organization performance.
Balanced scorecard is a broad-based measurement approach which incorporates financial and non-financial measures in an integrated system that links performance measurement and a company’s strategic goal. It is a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics that gives a more ‘balanced’ view of organizational performance.
The idea of balanced scorecard was coined in the early 1990’s and originated by Dr. Robert S. Kaplan of Harvard Business School and Dr. David P. Norton. They also regard balanced scorecard as a management system that enables organizations to clarify their vision and strategy and translate them into action.
1.2 Hallmarks of Balanced Scorecard
The balanced scorecard evaluates company performance from a series of four perspectives where metrics will be developed, data will be collected and analyzed relative to each of the four perspectives. The four most commonly employed perspectives are as follows :-
1.2.1 The Financial Perspective
The objective set from this perspective will examine if the company’s implementation and execution of its strategy. The financial perspective will also represent long term strategic objective and incorporates the tangible outcomes of the strategy in traditional financial terms. Among the common financial measures that are incorporated in the financial perspective are revenue growth, costs, profit margins, cash flow, net operating income etc.
1.2.2 The Customer Perspective
This perspective evaluates how well the company is performing from the viewpoint of the customers and defines the value proposition that the organization will apply in order to satisfy customers. The measures selected for this perspective may involve time, quality, performance, service as well as cost. In developing metrics for satisfaction, customers should be analyzed in terms of types of customers and processes involved in providing products and services to the customers.
1.2.3 The Internal Process Perspective
Also referred as the business process perspective, this perspective evaluates the internal operating processes critical to success. Metrics based on this perspective will allow us to understand how the business is running and whether the products and services conform to customer requirements. Among the measures that can be employed to assess the internal process perspective are operations management, customer management, innovation and regulatory and social.
1.2.4 The Learning and Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. Metrics can be put into place to guide managers in focusing training funds as learning and growth constitute the essential foundation for success of any...