Understanding The Efficacy Of Balance Scorecard In Organizational Performance

Introduction to Balance Scorecard

Balance scorecard can be considered as a specific system of management that mainly aims at translating strategic goals of a corporation into a set of performance goals. The identified performance goals necessarily are enumerated, monitored and altered if necessary to make certain that organizational objectives are satisfied. The current segment intends to analytically evaluate efficacies of a balance scorecard in enumerating performance of an organization. Essentially, the balance scorecard has four different areas of measurement or perspectives of measurement namely the financial perspective, business procedures, specific aspects of learning as well s growth along with customer perspectives.

It ensures that it indicates of day-to-day alignment of operations with the strategic plan of the business (Friedagand Schmidt2015). The method balance score card is a very useful tool for prioritizing the products, projects and other kinds of services and it also helps in the measurement of the progress of the company performance with respect to the strategic targets of the company.

Balance Scorecard refers to the methods that measure the organisations performance thatare used in the process of strategic management. It helps in improving and identifying of the internal function of the organisation (Rampersadand Hussain2014). Dr. Robert Kaplan first introduced the concept of Balance Scorecard in a business journal of Harvard.  The measurement is done based on the four-segregated areas of the balance scorecard. The balanced scorecard appears as one of the crucial tools in multidimensional aspects, especially in the cases of  strategic management planning of the commercial institutions across the global framework.

Balance Scorecard is a used as a technique thatreflects the relationship between the strategic elements of the company including that of the mission and vision, elements of operations and other core segments of the business, the tool being effectively and widely utilized in the public agencies and non-government firms. At present a research has been conducted, according to which it has been showed that the balance scorecard is one of the five among the top ten tools of management (Fooladvand, Yarmohammadianand Shahtalebi2015). It is a flourishing concept that is used by the organizations for the measurement of performance and plan of strategies.

The balance scorecard use is applied for the implementation of strategies that is according to the business goals of the various organizations (Bosciaand McAfee2014). The various areas of the balance scorecard are broadly known to be the four legs of the same. The four legs of balance scorecard are: learning and growth, processes of the business, finance and the consumers. Based on the four areas identified, the various components of the balance scorecard can be discussed as follows:

1. Perspective of finance: The financial perspective includes the various company information like the revenues, expenditures and sales. Net profits and other data related to finance are also included in this perspective (Hamid2018). The balance score card is used to analyze the resources and the income targets the variances of budget that the organization use to find out the company financial metrics.

1. Business Procedures: The second aspect of Balance scorecard is helpful in finding outthe accuracy of the technique of the manufacture for products. The aspect is helpful in the analysis of thedelays and gaps which the company management faces (Orlovaand Afonin2015). This perspective focuses on all the processes and the activities that the company performs in order to provide the customers of the company with the quality products that the consumer anticipate.
2. Customer’s perspective: The perspective of the customers helps in the measurement of the consumer level of satisfaction that are included in the price, quality and supply of the commodity (Keyes2016). The collection of data in the perspective of the consumers is done through feedback collection from the customers regarding the commodity that are manufactured.
3. Growth and Learning arenas: The concerned areaof the balance scorecard deals with accuracy of the importation that are arranged and it shows the way the staffs use the information in order to gain a competitive edge over the rival counterparts in the market. The growth and learning aspect of balance scorecard is concerned with the assets of the business that are intangible (Broccardo2015). It takes in hand the skills that are internal and the capabilities of the organization that can provide assistance in creating the internal processes. The leg of the balance scorecard focuses on the human capital and the various issues that the individual faces. The technological issues and issues of the firms work quality and climate are taken care by them.

Different Areas of Balance Scorecard

The discussion deals with how the different types of capital can be represented with the help of the balance scoreboard.  The different types of capital include:

1. Natural capital: Natural capital refers to the flow of stock or energy and materials thatproduces goods and services. It includes the various renewable and non-renewable recourses that help in the production process. The balance scorecard in here helps to analyze the resources that are used in the production process. The companyensures thatthere is an optimumutilization of the resources and the nonrenewable resources are well preserved.
2. Human capital:It includes the health, knowledge, skills of the human resources. Without the human capital that is the labor, productive work is not possible. The balance score card measures that the skill knowledge and efforts of the human resources are used efficiently.

• Social capital:It consists of the institutions that help in the maintenance and development of human capital in partnership with other, examples of socials capital are, families, communities, unions and voluntary organizations. The balance scorecard plays the role of making the company strategies with the use of the social capital.

1. Manufactured capital:Manufactured capital comprises of the fixed assets and the material good that contribute to the production process rather than being the output. With the help of balance scorecard, the strategies are implemented. The balance score card help in balancing the both financial andnon-financial resources to get the maximum output.
2. Financial capital:The financial capital plays an important role in the economy of the country, this enables the other types of capital to be owned and traded ( Kang et al. 2015). The balance scorecard calculates the amount of capital that are to be invested in order to generate the business.The financial resources are measured with the help of balance scorecard and the amount  of productivity with that resource is assessed.

At present, the businesses and the organizations are implementing the trending tool of balance scorecard to improve the total operations and the efficiency of the firms. It is used to measure the strategic process of planning as well. There is a rise in the trend of using this tool. The various advantages, which are associated with the introduction and implementation of Balance Scorecard, are discussed below:

The adaptation of the strategic management can be done by the variety of different approaches in management. The application of the same can provide a more structured and logical way to ensure that the plans of the strategies in the areas are covered (Hansen, and Schaltegger2016). It can be said the balance scores card is a tailor made tool to meet the requirement of the organization.The making of the strategy plan and communication of the same has become easier with the help of balance scorecard. In order to attain a high level in the business the tool of balance scorecard can be followed.

The independent use of the balance scorecard if done efficiently, it helps in the alignment of the strategy management of all the department and divisions. In addition to it, the tool can be used to link up the various goals of the parent company with its subsidiaries and the partners (Senarath and Patabendige 2015). It also helps in ensuring that the organization is carrying on the common goals and objectives of the business.The balance scorecard allows the different plans of strategies of the firm to be actively get involved in all the planning of the various decisions in the organization. The implementation of the balance scorecard also helps in ensuring that the management is following the regular strategic plan or not (Danaei,  Hemmati and Mardani 2014). It also ensures the plans are reviewed regularly and therefore, it can be ensured that the organization is in the correct track or not. The organization always puts the strategic plan at the centre of the process of decision making and reporting of the company.

While determining the limitation of the balance scorecard, it can be said that it is too rigid and the organization requires a leadership process that is smooth and effective in order to measure the company performance.

Conclusion

According to the above discussion, it can be concluded that with the implementation and a proper review of the various aspects of the Balance Scorecard, the firm can be reassured that the strategy of plans and the performance measures are done effectively.  The balance scorecard can be used as a method for affecting the overall management of the company management. With the help of the balance scorecard, different kind of information can be arranged that can be related to the various perspective of the balance scorecard like the financial perspective, internal business, business and customers. It also helps in the application of the formulation of the effective strategies that the company market needs to obtain a competitive edge.

Reference

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