Tactical Decisions

Topics: Strategic management, Balanced scorecard, Management Pages: 16 (4923 words) Published: January 19, 2013

The purpose of this report is to critically evaluate Balanced Scorecard (BSC) as a performance measurement tool available to Management Accountants. In conducting this study, classical and modern literature on BSC as well as its real world applications in a potentially global company was reviewed. It was found that BSC provides valuable information that supports managers in taking strategic as well as tactical decisions. In addition, BSC appears to be positively associated with profitability and managers’ job satisfaction. In terms of real world application, BSC was found to be widely applied among businesses. It is used mainly as a tool of ‘Strategic Decision Making’ but exerts greatest influence on ‘Business Actions’.

Contents Page
1. Introduction 6
2. The Need for Performance Evaluation Systems7
2.1 Performance measurement as a tool7
3. Origins of Balanced Score Card (BSC)8
3.1 Customer Domain9
3.2 Financial Domain10
3.3 Internal – Business – Process Domain10
3.4 Learning and Growth Domain10
4. The Merits Balanced Score Card11
4.1. The Relationship between Balanced Scorecard Characteristics and Manager's Job Satisfaction 12
4.1.1. Perspective framework12
4.2. BSC and Strategy13
4.3. Managers’ job satisfaction14
5. Demerits of Balanced Score Card15
6. Case Studies16
6.1. Zenith Systems16
6.2. Health Care Industry17
7. Balanced Scorecard Business Survey18
7.1 Uses of Balanced Scorecard18
7.2. Influence of BSC on Processes19
7.3. Reporting Frequency19
8. Conclusion20
9. Recommendation20
10. References 21-22

List of figures Page
Table 1 8
Figure 1
Figure 2
Figure 3


Performance measurement is as a management tool used by organizations, to evaluate whether their targets have been accomplished or not (Eccles, 1991). Organizations, whether manufacturing or service, set internal targets which aggregate into their strategic goals. The main thrust of performance evaluation therefore is, at the tactical and operational levels, to monitor, budget, encourage, understand and recognize (Behn, 2003). Balanced Score Card (BSC) is one of the widely applied performance measuring tools in the business world. BSC has been described as: “A strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals” (Ebnerason, Yavarian, and Azodi, 2009, 43). Previously performance measurement had been done mainly through financial and quantitative tools like accounting ratios (i.e. return on assets ROA and return on sales ROS). Norton and Kaplan (1996) created BSC and proposed that it measures along four domains which are; Financial, Customer, Internal Business Process as well as Learning and Growth. A key contribution of BSC, therefore, was that it highlighted the importance of non-financial events in organizational performance thus highlighting the necessity of factoring them along with financial measures when evaluating performance (Ittner, Larcker, and Meyer, 2003). Ittner (2003) has suggested that BSC might be subjective because of its inclusion of qualitative measures.

This report is structured as follows. It continues in section two with a justification of the need for performance measurement. Section three examines the origins of Balanced Scorecard. In section four the merits...
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