Question

The Balanced Scorecard

1. Why might measures used in a balanced scorecard differ from company to company?

2. Why does the balanced scorecard include financial performance measures as well as measures of how well internal business processes are doing?

3. If you were at a company and were being reviewed on an annual basis for promotions, increases in salary, etc - would you prefer to be evaluated with a balanced scorecard approach? Some other assessment method? Why?

Answer 1

(1): Measures used in a balanced score card will differ from company to company mainly because in each company the management implements its strategic initiatives in a different manner. This difference leads to difference in the manner in which each company’s strategy is translated into tangible performance measures. This leads to different performance measures for different companies mainly due to the difference in the strategy being pursued by them. As such the measures used in a balanced score card will differ from company to company.

(2): The balanced scorecard includes financial performance measures as well as measures of how well internal business processes are doing because a business has different goals and objectives. The financial performance measures is necessary to determine the achievement of financial goals of a company like creating value for its stockholders, generating certain required profits etc. A company, besides these quantitative and financial goals, has certain qualitative goals as well like satisfaction of the customers. For these goals strategies are formulated and measures are recorded in the internal business performance metrics for a company. The financial performance measures help a company to answer the question how attractive we are as a company from the point of view of shareholders? On the other hand the internal perspective help a company to answer the question what must we excel at so that our goals and objectives are achieved?

(3): I will certainly prefer being reviewed and evaluated with a balanced scorecard approach. This is because the balanced scorecard approach will ensure that my evaluation is systematic as well as objective. Using the measures that has driven my performance the balanced scorecard approach will ensure that my performance is evaluated in a holistic manner by using an appropriate and well rounded evaluation framework.