Balanced Scorecard: A Strategic Management Tool
Balanced scorecard
A strategy management tool • Introduction Companies today are in the midst of a revolutionary transformation as Industrial age competition is shifting to Information age competition. The cut-throat competition that businesses faced in the last two decades has made them to look for improvement initiatives like Total Quality Management, Just-in-Time (JIT) systems, Employee empowerment and Re-engineering. Though these initiatives resulted in enhanced shareholder value, they were achieved merely by monitoring and controlling financial measures of past performance and focused on short-term goals. This collision between the irresistible force to build long-range competitive capabilities and the immovable object of the historical-cost financial accounting model has led to a new blend- the Balanced Scorecard.
The idea of BSC was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that included both financial and strategic non-financial performance measures to give managers and executives a more 'balanced ' view of organizational performance. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
• What is a Balanced Scorecard? The balanced scorecard (BSC) is a management system that transforms an organization’s strategic plan from an attractive but passive document into executable tasks for the organization on a daily basis. Kaplan and Norton (1992) described that the BSC includes the financial measures that tell the results of actions already taken. And it complements the financial measures with operational measures on customer satisfaction, internal processes and the organization’s innovation and improvement activities. The balanced scorecard is a way of: • measuring organizational, business unit or department success,
A strategy management tool • Introduction Companies today are in the midst of a revolutionary transformation as Industrial age competition is shifting to Information age competition. The cut-throat competition that businesses faced in the last two decades has made them to look for improvement initiatives like Total Quality Management, Just-in-Time (JIT) systems, Employee empowerment and Re-engineering. Though these initiatives resulted in enhanced shareholder value, they were achieved merely by monitoring and controlling financial measures of past performance and focused on short-term goals. This collision between the irresistible force to build long-range competitive capabilities and the immovable object of the historical-cost financial accounting model has led to a new blend- the Balanced Scorecard.
The idea of BSC was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that included both financial and strategic non-financial performance measures to give managers and executives a more 'balanced ' view of organizational performance. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
• What is a Balanced Scorecard? The balanced scorecard (BSC) is a management system that transforms an organization’s strategic plan from an attractive but passive document into executable tasks for the organization on a daily basis. Kaplan and Norton (1992) described that the BSC includes the financial measures that tell the results of actions already taken. And it complements the financial measures with operational measures on customer satisfaction, internal processes and the organization’s innovation and improvement activities. The balanced scorecard is a way of: • measuring organizational, business unit or department success,
References: 2) Official website of Balanced Scorecard Institute, a Strategy Management Group company. 2007 http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx.html.