Question

Prior to beginning work on this discussion, please read about the Economic Value Added® (EVA®) and the Balanced Scorecard management systems on the websites of Corporate Finance Institute (ارتباطات إلى موقع خارجي.)ارتباطات إلى موقع خارجي. (CFI) and the Balanced Scorecard Institute  (ارتباطات إلى موقع خارجي.)ارتباطات إلى موقع خارجي.(BSI) respectively.

The consulting firm Stern Value Management designed the EVA® and the Palladium Group designed the Balanced Scorecard as breakthrough performance measures to rank ordering processes for investments and help clients create value.

Prepare in an initial post of at least 200 words a report describing the Balanced Scorecard and the Economic Value Added and their claimed advantages. Then compare these two systems to corporate and divisional performance measurement.

Answer 1

Balanced scorecard, also known as BSC, is a strategic tool, which is adopted by business with the objective of comprehensively evaluating its overall performance. The strategy as well as performance of the business is evaluated 4 perspectives.

• The learning and growth perspective: The various intangibles pertaining to the company, are focused upon, which have the potential to be of considerable influence on overall business.
• The financial perspective: The revenue, finances and profits generated by business is concentrated upon in this perspective.
• The customer perspective: This perspective evaluates how effectively, the business needs are fulfilling the customer needs
• The internal process perspective: The strengths and weaknesses of the internal procedures and processes of business are highlighted so as to evaluate overall effectiveness

Advantages of using BSC:

• Effective strategic planning gets facilitated
• Strategy can be communicated effectively across business and various stakeholders
• Company information can be managed effectively
• Organization and process alignment gets facilitated

Economic Value added (EVA) is a metric used by the company to evaluate the financial performance and standing of the company. It is also known as economic profit of the company and reflects the actual profit or gain pertaining to a business process or overall business. If EVA is negative, then it indicates that the company is not indulging in any kind of value or wealth creation. If EVA is positive, then there is indication that the project is doing good and business is getting facilitated.

Advantages of EVA:

• The value of EVA keeps the managers focused about the shareholder’s wealth maximization objective
• It helps in evaluating the goodwill as well as shares of the company
• Investors use the value of EVA for making investment decisions

The primary differences between BSC and EVA are as follows:

• BSC is business strategy oriented while EVA is business value oriented
• BSC depicts the cause and effect relationships in business while EVA describes the actual gains of the company by indulging in various business strategies