Importance of Balanced Scorecard and Decentralized Decision-Making Authority in Business Organizations

Accounting & Finance
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Introduction
The present essay is undertaken to analyse and examine the importance of balanced
scorecard and decentralized decision-making authority within the business organizations. The
contribution of these strategic tools in promoting the long-term growth of a business organization
is discussed in the essay.
Answer 1
Balance Scorecard refers to the performance metrics that is used by the business for the
purpose of strategic management decision. The main purpose of the balance scorecard is to
identify and improve the internal business functions so that resultant outcomes come in favor to
the organization. It is the strategic planning and management tool that is used by the
management for communicating about their missions and objective in the concise manner, align
the business activities with the business strategies, align the projects, products and services
according to priority and lastly measure & monitor the business progress towards the strategic
targets (API, 2010). The balance scorecard helps the organization to focus on what has to be
achieved in order to create the breakthrough performance. It acts as an integration device in order
to solve various corporate programs. It helps in making the business strategy operational through
translating them into the different measures and targets. It breaks down the objectives at top level
into the smaller one so that each department can understand what exactly they have to do to
achieve the desirable goals. Balance scorecard is the complex process yet it is easy to understand
and implement in the organization. It has some limitations that make it unfavorable in some
cases. It provides so many performance indicators that create issue for the management as well
employees to align them with the business strategies (Kaplan and Norton, 2011). It is not easy to
maintain the balance between the four perspectives of the balance scorecard. Implementation of
the balance scorecard requires huge flow of money at the initial stage. In order to make the
balance scorecard successful there is need to update it regularly (Balanced Scorecard Institute,
2010).
Balance scorecard aims to use the business mission and strategies in order to translate
them in the operational objectives and other performance measures of four different perspectives.
In this context the four different perspectives of the balance scorecard are as follows:
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 Financial Perspectives: A financial perspective is the main perspective of the balance
scorecard and management has most focus on the financial perspective of the
organization. Financial perspective helps the company to evaluate the financial
performance of the company using various tools of financial management such as ratio
analysis, trend analysis, variance analysis, and share market performance. All these
financial indicators tell growth of the company and tell the actions that need to be taken
to achieve the desired growth in the future period. All the stakeholders of the business are
interested to know the financial performance of the business in order to take the
important decisions. It is important to include the historical, current and future financial
performance results in the balance scorecard (Bardy, 2011).
 Customer perspectives: The customer perspective of the balance scorecard focuses on the
people who buy the product or services of the company. As per this performance
customer satisfaction must be the main goal of the business in order to achieve the
maximum revenue. The main of the customer perspective is to identify the main
customers and business segments in which organization will compete and measures its
business performance. The measures applied in this perspective are customer satisfaction,
customer retention, acquiring new market and thing about the customer profitability.
 Internal Business Process: This perspective of the balance scorecard helps the
management to deliver the value propositions that in return helps to attract and retain
customers in target market segments. This perspective also provides the management the
ways to satisfy the shareholders expectations through providing the excellent financial
results (Kaplan and Norton, 2009).
 Learning and growth perspective: This perspective looks at the overall corporate culture
of the organization and provides the information to the management about new ideas and
technology (Eisenberg, 2016).
Multinational companies focus on the core competencies of the business and use many
tools to measure the performance. The traditional management control system does not help to
implement the global strategies as very traditional system only some of information to measure
the performance and ignore some of important information that balance scorecard successfully
implied in the system (Drury, 2011).
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