1. Balance Scorecard
1. What is Balance Scorecard? What is the process of implementation and difficulties in implementation? The Balanced Scorecard (BSC) is a performance management tool which began as a concept for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.
By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests.
Organizations were encouraged to measure—in addition to financial outputs—what influenced such financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on.
The underlying rationale is that organizations cannot directly influence financial outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations should instead also measure those areas where direct management intervention is (objective,measure,target,initiative) possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of "balance" in selection of performance measures. In practice, early Scorecards achieved this balance by encouraging managers to select measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth."
The balance scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:
The learning and growth perspective: “To achieve our vision, how will we sustain our ability to change and improve?”
The business process perspective: “To satisfy our shareholders and customers what business processes must we excel at?”
The customer perspective: “To achieve our vision, how should we appear to our customer?”
The financial perspective: “To succeed financially, how should we appear to our shareholders?”
Implementing a Balanced Scorecard
We can summarize the implantation of a balanced scorecard in four general steps; 1.
Define measure of strategy.
Integrate measures into the management system.
Review measures and result frequently.
Each of these steps is iterative, requiring the participation of senior executive and employees throughout the organization
The balance scorecard builds a link between strategy and operational action. As a result it is necessary to begin the process of defining a balanced scorecard by defining the organization goals are explicit and what that targets have been developed.
Define Measures of Strategy
The next step is to develop measures in support of the particulate strategy. It is imperative that the organization focuses on a few critical measures at this point; otherwise management will be overloaded with measures. Also, it is important that the individual measures be linked with each other in a cause effect manner
Integrated Measures into the management system
The balanced scorecard must be integrated with the organization formal and informal structure, its culture, and its human resources practice. While the balanced Scorecard gives some means for balancing measures, the measures can still become unbalanced by others system in the organization such as compensation policies that compensate the manager strictly based on financial performance.
Review Measures and result Frequently
Once the balance scorecard is up and running it must be consistently reviewed by senior management. The organization should be looking for the following
How do the outcome measures say the organization is doing? *
How do the...
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