Balanced Scorecard Balanced Scorecard Kaplan and Norton state that 'A company's ability to innovate, improve, and learn ties directly to the company's value.
Balanced scorecard The notion of the Balanced Scorecard was developed by Robert Kaplan and David Norton in which has already widely used by many companies in the world Helen Atkinson, The balanced scorecard not only focuses on the financial information but also nonfinancial information.
However, with the rapid development the value of intangible assets such as intelligence becomes more important. Because the traditional management performance system always focuses on financial aspect. We will write a custom essay sample on Balanced scorecard or any similar topic specifically for you Do Not Waste HIRE WRITER According to Martinsons, Davison and Tse, nowadays the modern companies should focus on market segments not only the financial measures and also need to improve the technology to develop the processes.
It means financial measures are not only method to do decision making. One problem is that the value of the intangible assets created by employees such as intellectual property and competitive advantage can not be fully reflected in the financial measures.
In addition, financial measure is suitable for managers to make short-term decisions rather than long-term decisions Kang and Fredin, To some extent, balanced scorecard can avoid these problems.
The balanced scorecard includes both financial and non financial information, it help managers to balances short-term and long-term interests when they make decisions Kang and Fredin, Balanced scorecard objectives and metrics are linked, this linkage includes not only the cause-and-effect relationship, but also including outcome measures and results in a measure of combined, ultimately reflected in the organizational strategy.
In fact, recently the balanced scorecard has been used by 60 percent of Fortune companies in the world Lipe and Salterio,p Financial measure is the important one in balanced scorecard; it define the long-term goals in decision making, and it also can reflect the corporate strategy, shareholder satisfaction, strategy implementation and enforcement which are to contribute to improving the profitability of company.
Financial measures are usually associated with profitability, operating income, return on capital, economic value added measure, or may be the rapid increase in sales and to create cash flow.
The customer perspective indicators usually include market and account share, customer satisfaction, customer retention, customer acquisition and customer profitability. Hence, the managers can throw these information to clarify the need of customers and market strategies, and then to create an excellent financial return.
In this perspective, managers should confirm the organization the key internal processes, these processes can help business units to provide value proposition to attract and retain customers in the target segment market, to complete the corporate financial objectives and to achieve shareholder expectations of excellent financial returns.
In fact, this strategy is always formulated after evaluating financial and customer perspectives. Hence, it is closely linked to customers.
It emphasizes that if the enterprise want to create long-term growth and improvement, they should establish the foundation of framework. It is a future key successful factor.
The another three perspectives of the balanced scorecard will generally reveal the actual ability of the enterprise with the necessary breakthrough performance gap between the ability, in order to bridge this gap, companies need to invest in improving employee technology, organizational procedures and the management system, these are the goals that balanced scorecard learning and growth perspective pursuit for, such as employee satisfaction, employee retention, employee training and skills, and the drivers of these indicators.
Balanced scorecard is an effective system to evaluate the performance. According to Shutibhinyop4companies usually use balanced scorecard to achieve their both short-term and long-term strategic goals, to communicate with the strategy to guarantee that employees has the same working objectives, and based on company strategy to align and integrate corporate planning.
It indicates that balanced scorecard reflects the balance between the financial and non-financial measure, the balance between long-term goals and short-term goals, the external and internal balance, the results and the process balance, the management performance and results of operations balance.
They reflect the organization operating conditions, contribute the performance evaluation tends to balance and complete, and it improve the long-term development, it is conducive to the development of organization.
In fact, many companies have been benefited from balanced scorecard. The result is rapid and dramatic.
Adverse cash flow changed dramatically and the investment rate returns to the top among the same industry. And we have a conversation. In the past we were a bunch of controllers sitting around talking about variances. What should we keep doing, what should we stop doing?
What resources do we need to get back on track, not explaining a negative variance due to some volume mix. The process enables me to see how the NBU managers think, plan, and execute. Another successful example is Chemical Retail Bank, the Balanced Scorecard was introduced in to help banks absorb and merge another bank, the introduction of an integrated financial service, to accelerate the use of electronic banking.
Balanced Scorecard emphasizes the causal relationship in performance evaluation system, by the completion of the financial perspective, customer perspective, internal business, and learning and growth assessment indicators to achieve the ultimate financial goals.
Here, balanced scorecard is used to associate the original objectives and the translation of management strategy Figge, Hahn, Schaltegger and Wagner,p Apart from this, the study by Davis and Albrightp pointed out that the balanced scorecard can improve the financial performance to some extent, they supposed that compared with the traditional management accounting system, it can improve the financial performance.The Balanced Scorecard 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.
It is used to align business activities to the vision and strategy of the organization, improve internal and external communications.
The balanced scorecard as strategic management system A problem that a lot of companies face is the inability to link a company's long-term strategy with short-term actions. When a company implements the balanced scorecard it not only lets them introduce different perspectives but also four new management processes.(Kaplan .
A role of balanced scorecard in strategic management accounting According to Figge, Hahn, Schaltegger and Wagner (, p), the balanced scorecard provides a valuable methods for managers, managers need a model which includes both financial and nonfinancial measures, with the cause relationship between customers, financial, .
A Balanced Scorecard can be defined as 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” (Wikipedia , ¶ 1). Performance Management and the Balanced Scorecard By Dr.
Howard Olsen Your company’s performance management system is not just about annual reviews and bonuses, it is essential to implementing your corporate strategy. The balanced scorecard is a system of strategic management and planning, which is widely used in different companies all over the world to adjust business performance to the strategy and vision of such organizations.