Wait a second!
More handpicked essays just for you.
More handpicked essays just for you.
Critical analysis of Balanced Scorecard as a performance measurement tool: an overview
Strengths and weaknesses of the Balanced scorecard
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Introduction
Traditionally, companies collect information regarding past transactions. These are then converted to statements which are used for analysis and regulatory requirements. Financial accounting has been revolving around these financial transactions and ignoring qualitative factors that may contribute to a company’s profit. Nowadays, managers recognize the impact of such qualitative factors since these contribute to the company’s future performance.
There are numerous methods today that measure both financial and nonfinancial factors of a company. For this case, we will be focusing on the Balance Scorecard (BSC) since this is the proposed method of Chris Billing to improve performance evaluation at Tri-Cities Community Bank (TCCB).
…show more content…
Given the responses of some branch representatives, it is evident that there is still some room for improvement in the implementation. However, the root cause of problems faced in some branches has yet to be identified. With this in mind, we decided to formulate assumptions and provide an alternative in each assumption for Chris to improve the implementation of a balanced scorecard in the bank. It is emphasized that assumptions were made, as it was not clear in the case where did the implementation go wrong.
For the first alternative, we assume that employees were not involved in formulating performance measures. We deemed that the current measures were inadequate to capture all non-financial measures. Nonetheless, this can be improved if some scorecard measures can be added and the bank can give employees the power to provide inputs in deciding which measures to use.
Next alternative is to improve communication between the top management and employees regarding the purpose of the balanced scorecard and how it works. In this alternative, it is assumed that the scorecard measures are adequate and would not be changed since the assumption is that the employees just did not fully understand the details about the balanced scored. It is important for the management to clearly explain the purpose of the scorecard and help them understand how to achieve their goals to avoid any conflict and minimize resistance to
…show more content…
An important performance measure for this perspective is process time. However, in the bank’s list of performance measures, there is no measure related to process time. Therefore, it would be beneficial for the bank to include process time as one of its scorecard measures. Examples of process times include the amount of time for bank tellers to be able to serve customers and the amount of time to process loan applications. Aside from process time, there is also no measure for loan quality in the list of measures. Simply increasing the number of loan applications and the loan balances is not enough; the quality of the borrower and the loan should also be ensured. A good measure to include in the list would be the percentage of non-performing loans in the loan portfolio of the
The Balanced Scorecard is a business strategic planning system used by management to make decisions based on information provided about the business from four different perspectives. The first of the four perspectives is the financial perspective. Which means that we evaluate our business and conduct research from the shareholders perspective. Next is the internal business perspective, which is an internal evaluation of what the business must be good at to excel. Next is the innovation and learning perspective which is an evaluation of the firm’s ability to continue to improve and create value. The final perspective is the customer perspective, which is looking at the business activities from the customers
Introduction A balance score board is mainly focus on gathering and reporting info to the company’s management system. Thus includes the company’s financial view, method of internal and external operations, learning and growth and the customer’s perspective. In this paper I am going to focus on this four areas to achieve the extreme accomplishment in our products. Financial Views Sally’s Beauty Supply is a company that have been in business for a while that has gone internationally, by not having a strategy and shortage of economic funding could lead to an unsuccessful industry.
This part of the assignment will discuss balanced scorecard that has been implemented by UK National Health Service (NHS), how it has influenced and impacted upon the performance measures of this organisation.
Smith & Brown currently use Budgets and review meetings to measure performance and short-term financial targets to drive performance. Budgets use conventional performance measures which are focused on financial aspects where it seeks to explain the financial consequences of actions and decisions through the use of variance analysis, but it can not identify the causes or the source of bad financial performance. However, non-financial information has proven to address this problem, and has been incorporated in the balanced scorecard to help businesses measure its performance more effectively by providing management with information about what could be causing inefficiency in the production cycle and what could be the source of bad performance
The balanced score card (BSC) is tool that is widely implemented by the various strategic levels of management of organizations with the aim of aligning business activities with the vision, mission, and values of the organization (Averson, 1998). BSC is used to provide a frame work that enables the strategic management to measure the performance of the organization involved. It also helps the management to identify the necessary courses of action needed to implement its strategies. BSC has four quadrants namely; the financial perspective, the customer perspective, the internal business processes, and the organizational learning and growth perspective. The priority given to these quadrants when mapping a BSC is different between
The Balanced Scorecard is a management tool used for strategic planning in business and industries to align activities with a vision and strategy. The tool is used in the organizational setting to improve communications (USAID,
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 2009, ¶ 1). Scents & Things will need to develop a balanced scorecard that will assist in meeting and help define the company’s values, mission, vision, and SWOT analysis. The balance scorecard is made up of four perspectives; financial, customer, learning and growing, and internal process. This paper will define each of the four perspectives objectives, performance measures, targets, and initiatives. The paper will also show how the perspectives relate to Scents & Things vision, mission, values, and SWOTT analysis.
The balanced scorecard is a strategic planning and management tool that is used extensively in businesses to align business activities to the vision and strategy of the organization performance, improve internal and external communications, and monitor organization performance against strategic goals.
Financial and Managerial accounting are used for making sound financial decisions about an organization. They provide information of past quantitative financial activities and are useful in making future economic decisions. (Albrecht, Stice, Stice, & Skousen, 2002) The same financial data is used to derive reports for each accounting process yet they differ in some ways. Financial accounting primarily provides external reports for external users such as stock holders, creditors, regulating authority and others. (Garrison, Noreen, & Brewer, 2010) On the other hand Managerial accounting is concern with providing information that deals with the internal viability of the organization and is tailored to meet the needs of an individual organization. (Albrecht, Stice, Stice, & Skousen, 2002)
The first aspect of the balanced scorecard is the financial perspective, which is responsible for answering the following questions: “To succeed financially, how should we appear to our shareholders?” Our finance objective for Google is to increase net revenue. Google’s revenue has shown a steady growth over the years. Google’ s revenue in 2011 was 37,905,000 and in 2012 it was 50,175,000. In one year, Google manage to exceed its 2011 revenue by 12,270,000. Google, is currently in their fourth quarter of 2013. Each quarter’s revenue in 2013 is noticeably greater than the quarters in 2012. In the third quarter of 2013, Google generated total revenues of 14,893,000, compared to 2012 third quarter of 13,304,000
The balanced scorecard was introduced by Robert Kaplan, a professor at Harvard University, and David Norton in 1990. The concept was later adopted for a study on new methods to measure performance involving multiple organizations. The balanced scorecard enables organizations to measure performance by providing balance to the financial perspective. Organizations used to measure performance by measuring only the financial measurements and this did not reflect the true performance of the organization. The BSC methodology includes information about the operational measures which gives the management a clearer picture that makes it easier for organizations to plan for short and long term goals.
Performance management is a useful and powerful tool that can be used by managers to identify what areas of their organisation they need to improve to increase the organisation’s overall performance. The idea of a balanced scorecard enforces a sensible distribution of resources and effort across all aspect of performance an organisation is, or should be, concerned with.
Firstly I realize that it is very important for people to understand their company’s strategy in order to work as a team because teamwork is the main key to success in any business. Secondly, I found that implementing scorecard can be both positive and negative. The positive aspect is that it gives you a clear idea about how to link between your objectives and predict outcomes. The negative aspect is about the difficulty of developing a balanced scorecard. This difficulty is about developing it from scratch or making a change in the strategic objectives or even prioritizing among set of corporate strategies. In fact, I found that implementing a scorecard takes more time and puts more pressure on the top management
At the same time a balance score card intergraded with Accounting Information System allows the companies to collect rightfull information, analyse the data and make evidence based decisions. (Marr, 2010).
In conclusion, despite gaining widespread popularity in recent years, we have to understand that there are pros and cons to performance measurement and should be managed carefully. Organizations need to understand that there is no fixed template for performance measurement systems. As mentioned by Manzoni and Micheli (2010), what might be effective for one organization might not be suitable for another. As such, it is of utmost importance that organizations look out for suitable performance measures for themselves and continually reassess the relevance of these measures.