Question

importance of balance scorecard as a tool for directing and evaluating performance

Answer 1

Balance scorecard involves a tool that is used for the management of business performance.It involves a strategic framework that is used for implementing and managing strategy.It helps in balancing the financial measures with the performance measures and with other objectives which are associated to other parts of an entity.It breaks down the goals of an entity in terms of specific goals based on which an entity's performance is assessed and monitored.

It helps in balancing the needs of shareholders and customers by improvements. Balance scorecard holds importance for the purpose of directing and evaluating performance of a business from various perspectives:

Customer:It involves the measures and objectives that are related to the entity's customer and focuses on customer satisfaction.It helps in analyzing the needs of customers and their expectations.

Financial: It helps in the evaluation of financial objectives of the company like maximization of stockholder's wealth.

Internal processes: It aims at evaluating the internal processes which determine how well the business is performing , whether the customers are being satisfied or not. The changing needs of the customers must be taken into account and the internal processes should be improved.

Organization capacity:It helps in evaluating the skills, ability, knowledge of the employees, it aims at creating value and improving the skills, knowledge base etc.

The balance scorecard acts as a tool that provides direction and evaluates the performance from various perspectives of an entity based on the specific goals determined.