Evaluate the Relevance and Adequacy of the Balanced Score Card as an Instrument for Perfomance Management.

Topics: Balanced scorecard, Strategic management, Management Pages: 7 (1982 words) Published: March 20, 2012

(a)Evaluate the relevance and adequacy of the Balanced Score Card as an instrument for perfomance management.


The Balanced Scorecard is a strategic performance management framework that has been designed to help an organisation monitor its performance and manage the execution of its strategy. Kaplan and Norton (1996a, 1996b) pointed out that the implementation of the Balance Score Card is to attain the following goals clarify and translate vision and strategy, communicate and link objectives and measures, plan, set targets, and align strategic initiatives; and enhance strategic feedback and learning.

A growing number of firms are replacing their financially-based performance measurement and compensation systems with a "balanced scorecard" incorporating multiple financial and nonfinancial indicators. Proponents of the balanced scorecard concept contend that this approach provides a powerful means for translating a firm's vision and strategy into a tool that effectively communicates strategic intent and motivates performance against established strategic goals (Kaplan and Norton, 1996).

Kaplan and Norton (1992, 1996) developed the balanced scorecard concept to address the perceived shortcomings in financially-oriented performance measurement systems. The balanced Score card approach supplements traditional financial measures with non-financial measures focused on at least three other perspectives--customers, internal business processes, and learning and growth. According to the Financial Gazette dates 24 July 2009, it pointed out that more and more organisations today are resorting to the balanced scorecard as a performance management system. This method of performance management allows performance to be measured across four different perspectives, where traditionally it was based on financial indicators alone. The four balanced scorecard perspectives are financial, customer, internal business processes and learning and growth. Through the use of the various perspectives, the Balance Score Card captures both leading and lagging performance measures, thereby providing a more “balanced” view of company performance. Leading indicators include measures, such as customer satisfaction, new product development, on-time delivery and employee competency development. Traditional lagging indicators include financial measures, such as revenue growth and profitability. The Balance Score Card performance management systems have been widely adopted globally, in part, because this approach enables organizations to align all levels of staff around a single strategy so that it can be executed more successfully.

The balanced scorecard’s relevance also lies as it lets executives see whether they have improved in one area at the expense of another .Essentially the balanced scorecard is a framework of the four most important aspects of an organization (financial, customer, learning and growth and internal business process) that enable predictions to be made about performance on a number of levels and this is shown below

Source: http://www.mastersforum.com/achives/Kaplan Precis htm

Financial Perspective

The balance Score Card is relevant to the organization in the sense that it gives the organization the ability to provide financial profitability and stability (private) or cost-efficiency/effectiveness (public).Also it is fully adequate in most organization and is adequately distributed. The companies are able to succeed financially and the share holders will be happy because of the cash flow within the organization. Managers are able to track financial success and shareholder value.

Customer perspective

Furthermore the balance score card enables the organization to have the ability to provide quality goods and services, delivery effectiveness, and customer satisfaction by offering after sales service, visiting customers to verify whether the product they sold are of...
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