The Balanced Scorecard
| By manish abraham
This essay presents an analysis of the way in which Tesco implement the balanced scorecard. The strengths and hindrances associated with this approach have also been outlined with respect to this particular case study. The 4 perspectives of the balanced scorecard are examined in detail, the conclusions of which are later divulged.
Table of Contents
Introduction – Balance Scorecard
Introduction – Tesco
Internal Business Processes Perspective
Learning & Growth Perspective
Introduction to the Balanced Scorecard
The Balanced Scorecard was first developed in the early 1990s by two researchers: Kaplan and Norton (2001). The researchers Marr and Adam (2004) found that the balanced scorecard was designed to be used as a strategic performance measurement and management framework. Kaplan and Norton (1996) describe the originality of the balanced scorecard as: “The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation" (p.7). In recent years, balanced scorecards have been proposed and widely used to measure organisational performance from four different perspectives that help companies focus on their critical areas, and to translate their strategy into action (Seraphim, 2006). The balanced scorecard proposes that the organization is viewed from four perspectives, and metrics, that it should collect information and examine it in relation to each of these perspectives; Kaplan and Norton (2001) urged people to view the organisation from four perspectives (the financial perspective, the customer perspective, the internal business process perspective, and the learning and growth perspective). “These perspectives are interlinked and layered: so that financial results are determined by customer satisfaction, which are in turn determined by internal processes and, underneath these three layers, is the foundation of the learning and growth perspective”(Marr and Adams 2004). The causal relationship between these perspectives can then be visualised in strategy maps (Marr and Adams 2004) p.18. However, according to Marr and Adams (2004) a major weakness in the balanced scorecard is the learning and growth perspective. The researchers Marr and Adams (2004) believe that this latest attempt to evolve the balanced scorecard by Kaplan and Norton might have had an adverse effect. Marr and Adams outline how Kaplan and Norton failed to acknowledge the large body of writing on intangible assets and, therefore, produced an inconsistent, incomplete, and potentially very confusing classification of intangible assets. However, in my opinion the balanced scorecard also has other weaknesses, which mean that the balanced scorecard will not always guarantee success. Many companies fail to put the required measurements in place to make the balanced scorecard a success. Two reasons for this may be: (a) Time
The balanced scorecard takes time to implement and many companies may not have the time or the sufficient resources to properly invest in this performance measurement. (b) Fee
It can be costly to implement the balanced scorecard. The organizational will have to ensure that all employees are sufficiently trained and if they are not they will have to send them on training courses which is costly. They may also have to improve their production processes...
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