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Balance Scorecard Measurement

Balance Scorecard- An Introduction

The Balance scorecard is an approach to performance measurement that combines traditional financial measures with non-financial measures. The balanced scorecard, also known as the BSC, was created in 1987 at Analog Devices, a mid-sized semi-conductor company. However, the method came to the fore following the publication of an article by Robert S. Kaplan and David Norton, titled 'The balanced scorecard: measures that drive performance'.

(website : http://itgovernance.politicalinformation.com/bsc.htm)

Definition of Balance Scorecard

The balanced scorecard (BSC) is a strategic planning and management system used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals.

(Website: http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx)

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"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."

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• Financial perspective:-

In any business finance is one of the important parts of it. Without finance that is impossible to set up a business. For any business, industry, government sector or even in non profit organisation finance is playing major role. So in the Balance Scorecard support balanced finance means timely and accurate data of finance can provide information to the managers that how to plan and implement corporate data of finance in business.

• Customer perspective:-

Focus on customer's need and customer satisfaction is so important for any organisation in today's competitive market. If the customers are not satisfied then none business can be successful in this competitive market. So as a management of an organisation we have to find proper supplier to avoid poor quality and higher price.

• Learning and Growth perspective:-

This learning and growth prospective includes employee training and corporate culture attitudes related with both individual and corporate self improvement. Training to the employee is very important to achieve higher standard of service level. If your employees are not skilled and lake knowledge about company's product or service how can they provide good service or quality product to the customers.

• Internal Business Processes perspective:-

This internal business processes perspective allows managers to know how the business is going and how is the customer satisfaction factor in organisation. So this perspective infect give roomer to manager to get information about the organisation.

Advantages of the Balanced Scorecard

There are several benefits of using the Balanced scorecard and those benefits are as follows.

• Improve organisational alignment:-

Balanced Scorecard improves organisational alignment that means it makes people to work to gather to achieve goals and that does create team spirit in organisation. As we all know that team spirit in organisation is must. So here balance scorecard help organisation to improve organisation alignment.

• Focus on strategy and result:-

Balance scorecard is the best for organisation to focus on strategy and outcomes so here with the help of balance scorecard organisation can be very conscious about goal and way to goal means strategy to achieve goal and result.

• Improve organisational performance by measuring what matters:-

Here balance scorecard is useful to organisation to measuring organisational performance by division wise and by activity wise as well. With this help organisation can get the idea that till now what they achieved and what was the performance of managers, divisions, activities etc.,

• Improve communication of organisation's vision and strategy:-

Communication is one of the important activities in any type of organisation. With the effective communication people in organisation can know the changes and future plan of organisation. So the balanced scorecard is so effective to setup an effective communication in organisation. And also it communicates strategy and goal to people in organisation.

• Focus on the drivers of future performance:-

The balanced scorecard is the effective to focus on the drivers of future performance. Most of the organisation always looking forward to have good future performance. The balanced scorecard focuses more on the drivers and factors which can be effectible to the future performance of organisation.

Disadvantage of Balanced Scorecard

1. Critical approach to Balanced scorecard:-

The “Balanced scorecard“ approach is not a quick fix; it takes considerable thought to develop an appropriate scorecard. As a disadvantages of balanced scorecard we can say that its not easy to adopt balance scorecard so it has critical approach.

2. Short period of time to implementation of Balanced scorecard:-

To implement the Balanced scorecard there is a short period of time to communicate information to the employee and while that period of time balanced scorecard should be staged.

Implementation of Balanced Scorecard:-

Organisation need to have plan to implement balanced scorecard. Organisation has to work from top management to down management to implement Balanced scorecard in organisation. If the management is not supporting implementation of balanced scorecard then it will not succeed. There are some factors which can affect successful implementation of balanced scorecard in organisation which are as follows (at http:/www.qpr.com and Paul Niven & QPR software, Plc.)

• Premature links to the top management can be one of the major factors affecting implementation of the balanced scorecard.

• Lack of cascading is not a problem for all organisations but some organisation can face this problem while implementing BSC.

• One of the important problems is no new measures means taking existing group to measure and placing them into conveniently pre-defined perspectives does not balanced scorecard make.

• Consistent management practices need to be taken place in organisation to implement balance scorecard otherwise that will not be successful.

• Timing is one of the considerable factors in any implementation. Both short term and long term timing for measurement of scorecard. So it is depend upon the type of business and willingness of management to measure scorecard at some time duration.

• Lack of guiding objectives for implementation of the balanced scorecard. As some organisation adopt balanced scorecard without any objectives, that's right to adopt BSC but what problem will be solved after adopting balanced scorecard? So sometime organisations don't have any objective to adopt balanced scorecard.

• It is not possible to set up any strategy in management without formatting any strategy. Some organisations don't make any strategy to implement BSC in management and that can affect successful implementation of balanced scorecard.

• Lack of balanced scorecard education and training to the management can be having worst effect on implementation of balanced scorecard.

Conclusion

According to my opinion Balance scorecard is the one of the best option for organisation to adopt an effective measurement in organisation to measure financial, consumer, learning and growth and internal business perspectives in effective way. So we can say that BSC is the one of the best option to asses how the organisation is performing?

Meanwhile organisations also have to find out that if any non financial measures are available then organisation has to communicate their strategy to the all employee by giving them measurable goals to achieve. I think I like the one thing most in implementation of BSC is that it involves whole organisation to make implementation successful. The top management has to communicate goals to the down to all employees to achieve that. Proper planning can make successful implementation of BSC in any organisation.

• Top management needs to make strategy and goals then share them to within organisation.

• Measurement for goals should be defined short term or long term.

• Management need to communicate all the people in organisation about implementation of BSC so that they can take part to make implementation successful.

• Keep motivate employee to complete BSC process as it take long time to achieve desired goals.

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REFERNCES

Kaplan, R and Norton, D. (January - February 1992).The balance scorecard - measures that drive performance Harvard Business Review.

Kaplan, R and Norton, D. (January - February 1996). Using the balance scorecard as a strategic management system. Harvard Business Review.

Kaplan, R and Norton, D. (March - 2001). Transforming the balanced scorecard from performance measurement to strategic management Part-1

Kaplan, R and Norton, D. (March - 2001). Transforming the balanced scorecard from performance measurement to strategic management Part-2

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