Question

Student Instructions: Write an essay of at least 2 pages long no more than 4 pages, in font Times New Roman, font size 12, and 2 spacing, explaining the following topics about a Balance Scorecard. Submit your essay as an attached WORD document.

1.How a Balanced Scorecard improves financial performance on business.

2.How a Balanced Scorecard aligns business strategy

3.How a Balanced Scorecard convert an organization's values into a defined metric.

4.How a Balance Scorecard is related to the stakeholders.

Answer 1

The balanced scorecard (BSC) is an organisational framework used to manage and monitor performance against strategic goals. It combines strategic (non-financial) performance measures to the traditional P&L – to provide businesses with a balanced view of their performance.

Put simply, it is a strategic system used to track and measure performance, to help businesses manage future growth. The BSC includes traditional financial measures to indicate past performances and complements them with operational measures. Managers can create a balanced scorecard by translating their company’s strategy and mission statements into specific goals and measures.

Typically, a balanced scorecard will focus on the following areas:

Finances: How do factors such as revenue, expenditure and ROI impact on your financial performance and how are you tracking these against your financial targets?

People: What are the key drivers and barriers to staff performance and how are they measured? Are they measured often enough; i.e. can you demonstrate growth if these drivers or barriers are enhanced/removed?

Processes: What internal operations could be improved? How do you measure improvement to create more effective and efficient processes?

Market/Customers: How can you learn and improve your products, processes, systems and people based on your market/customers? How can this influence your overall performance and increase your market share?

[source:https://www.thehrdirector.com/features/health-and-wellbeing/balanced-scorecards/]

1 Balanced Scorecard improves financial performance of business:-

The Balanced Scorecard can be used to guide the design of performance reports and dashboards. This ensures that the management reporting focuses on the most important strategic issues and helps companies monitor the execution of their plan. When applied and operated correctly the Balanced Scorecard has according to many researches been proved to improve the operational performance of organisations. the use of multi-criteria performance measures positively affect future accounting financial performance. The adoption of BSC allows firms to supplement financial metrics with a diverse mix of non-financial performance measures that can be used as leading indicators of financial performance.

2. Balanced Scorecard aligns business strategy:-

Strategic alignment is a topic which has received considerable attention over the last decades. There are many reasons why organisations have performed strategic alignment, but perhaps the most critical one is that it can help them improve performance and competitive advantage in the organisations when properly applied. Managers should be capable of interpreting the external business environment in order to capitalise the opportunities, and deal with threats. The Balanced Scorecard approach (BSC) recognises the rise of intangible assets in value creation strategies and the limitations of traditional financial measurements for this type of assets. Balanced Scorecard translates an organisation's mission and strategy into a comprehensive set of performance measures by providing a framework for the strategic alignment between an organisation's strategy and its business units. BSC uses a balanced mix of financial and non-financial measures to evaluate performance through four perspectives, based on a cause-and-effect logic. This paper highlights the importance of adopting this type of frameworks in line with the organisation's strategic alignment and its focus on implementing its mission and strategic objectives at all organisation levels.

3. Balanced Scorecard convert an organisation's values into a defined metric:-

The balanced scorecard suggests that we view the organisation from four perspectives, and that we collect data relevant to each of these perspectives:

1. user;
2. finance;
3. Internal processes; and,
4. learning and the future.

Four to eight measurements, or metrics, are selected for each perspective. Each metric has a specific and unambiguous target or set of targets. At the end of the measurement period there should be no question as to whether the organisation has successfully met the target.

The balanced scorecard is an attempt to get control of our statistical operation. By limiting the number of scorecard metrics, it forces us to decide what is important. Which tallies are we going to pay attention to? Which counts really count?

4. Balance Scorecard is related to the stakeholders:-

Traditionally, business organisations have focused on financial results, which mainly have reflected the shareholders’ interests. In recent years, organisations have shifted attention to customer issues, such as quality and service, to employees, and to the community. The balanced scorecard is a set of performance targets and results that show an organisation’s performance in meeting its objectives to its stakeholders. It is a management tool that recognises organisational responsibility to different stakeholder groups, such as employees, suppliers, customers, business partners, the community, and shareholders. Often different stakeholders have different needs or desires that the managers of the organisation must balance. The concept of a balanced scorecard is to measure how well the organisation is doing in view of those competing stakeholder concerns.  It clear that the company has a responsibility to several competing stakeholders.