Question

Discuss the motivation and architecture of the balanced scorecard. Explain how the balanced scorecard is seen in some in some quarters as a conceptually superior performance measurement and appraisal tool over “managing by numbers”.

Answer 1

The primary motivation and objective of balanced scorecard is the long-term flexibility and survival of an organization and making the organization more capable to be prepared for the future. An organization becomes more flexible through the balanced scorecard tool by mapping its strategic objectives into performance metrics. The architecture of balanced scorecards is based on four main perspectives – financial, internal processes, customers and learning and growth. The first architectural aspect of the balanced scorecard is financial and it uses financial data like sales, expenditure and income to understand the financial performance of a company. The internal aspect of the balanced scorecard involves evaluation of business processes to track any gaps, delays and wastages. The customer aspect of the tool makes use of information to gauge level of customer satisfaction in terms of attributes like quality, price, and availability of the products. Learning and growth leg of the balanced scorecard investigates the training and knowledge resources of an organization so that sustainable competitive advantage is created.

Balanced scorecard is seen in some quarters as a conceptually superior performance measurement and appraisal tool over “managing by numbers”. This is because managing by numbers merely looks at the financial side of running a business. It fails to look at qualitative aspects like quality performance aspects for customers, process alignment within the organization, level of personnel proficiency etc. Thus balanced scorecard is seen in some quarters as a conceptually superior performance measurement and appraisal tool over “managing by numbers” because of the fact that balanced scorecard is a holistic strategy performance management tool which the ‘managing by numbers’ is not.