Putting Balance Scorecard to Work- Critical Analysis
In this article Kaplan and Norton have talked about implementation of Balanced Scorecard as a management tool which provides executives with a comprehensive framework translating company's strategic objectives into a coherent set of performance measures. They argued that by only looking at the financial returns the managers will fail to get overall strategic view of the company. The balanced scorecard helps in understanding organization's strategic objectives and operational processes. The different perspectives which balance scorecard looks at are:
1. Financial Perspective – How does firm look to the shareholders?
2. Customer Perspective – It addresses what the customers expect.
3. Internal business perspective – It help the organisation to identify processes at which they need to excel
4. Learning/innovation perspective – It addresses what the organisation needs to improve to create value in the future.
They argued that Balance scorecard can act as a benchmark against which all projects and businesses can be evaluated. Further, it is mentioned that balance scorecard is not a template that can be applied to each and every model of business. Different market situations, product strategies, and competitive environments require building up different scorecards.
Setting up the Balanced Scorecard
Kaplan and Norton highlight that the visions of the company should be linked with the strategy of the company and same can be tangibalized through realistic performance measures related to four perspectives highlighted above in a Balance Scorecard. The general goals which the company looks for in four perspectives of BSC are:
Financial: survival of company, success or growth, prosperity which they look by measuring ROCE, cash flow, revenue growth etc.
Customer perspective: Common goals are customer acquisition and retention, which are generally measured by market share, loyalty of customers & transaction cost ratios.
Internal business process
1. Financial Perspective – How does firm look to the shareholders?
2. Customer Perspective – It addresses what the customers expect.
3. Internal business perspective – It help the organisation to identify processes at which they need to excel
4. Learning/innovation perspective – It addresses what the organisation needs to improve to create value in the future.
They argued that Balance scorecard can act as a benchmark against which all projects and businesses can be evaluated. Further, it is mentioned that balance scorecard is not a template that can be applied to each and every model of business. Different market situations, product strategies, and competitive environments require building up different scorecards.
Setting up the Balanced Scorecard
Kaplan and Norton highlight that the visions of the company should be linked with the strategy of the company and same can be tangibalized through realistic performance measures related to four perspectives highlighted above in a Balance Scorecard. The general goals which the company looks for in four perspectives of BSC are:
Financial: survival of company, success or growth, prosperity which they look by measuring ROCE, cash flow, revenue growth etc.
Customer perspective: Common goals are customer acquisition and retention, which are generally measured by market share, loyalty of customers & transaction cost ratios.
Internal business process