Implementation of Balance Scorecard in Various Organizations

CRITICAL EVALUATION
OF DEVELOPMENT AND
ROLE OF BALANCED
SCORECARD IN
PRODUCTION AND
SERVICE
ORGANIZATIONS

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
ILLUSTRATION INDEX
Illustration 1: Rockwater’s Balanced Scorecard..............................................................................6
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INTRODUCTION
Balanced scorecard basically refers to as a strategic performance tool or strategic
planning and management system which is extensively used by every business and non-business
organization in order to align business activities with the vision and strategy of the organization.
Balance scorecard plays a vital role in an organization as it helps in strategic management and it
aids in aligning all the activities of an organization along with vision and strategy (Johanson and
et.al., 2006). This report has been emphasized on the development and role of balance scorecard
in a production as well as in service organization. Further, this report discuss the critical analysis
and argument of role and development of balance scorecard.
Development of Balance Scorecard
Balance scorecard which was developed by Robert Kaplan and David Norton in order to
deal with a problem, for instance, a firm reduce their customer service level so that current
earnings can be boosted but in future earning might get reduce due to reduction in customer
satisfaction. For that purpose, balance score card was developed. It is basically a strategic
performance management tool which is used by managers in order to keep track of the execution
of activities by employees and to monitor the consequences which will arise from their action
(Chavan, 2009). It measures financial data, customer satisfaction, business process and learning
measures. This translate the strategy of organization into four perspectives along with a balance
between the internal and external measures; between objective and subjective measures and
balance between performance results and the future results.
Balance scorecard is developed in a different manner in different organization depending
upon the nature of a company. In production firm it is developed in accordance with a operations
but it is altogether differently developed in a service sector company. Balance scorecard is
developed by following few steps such as firstly company has to build their purpose statement
which includes the information about how company will be different from its competitors and it
also includes objectives of a firm plus advantage plus scope of a company (Gurd and Gao, 2008).
It explains that what company is going to do, where the firm will win and where the organization
is going to do it. Second step is the designing of change agenda which states that change is an
ongoing process. This also states that what company needs so as to make it better for achieving
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the purpose of an organization. Thirdly, firm should make a map towards the destination in
which lots of wrong turn should be included while on the way to strategy execution. Cause and
effect should also be linked along with the strategic objective. Fourthly, after making a map the
next step is of creating great measures (Soderberg and et. al., 2011). Measures are created for
doing two things that is understanding what is not working in an organization and helps to
motivate. Company has to choose that measure which helps in driving the strategy. Then last
step is to set up some initiatives such as to focus on the strategy a company should stop doing
certain things which is less important. This initiatives has to be taken by firm in order to excel.
These were the few steps which is used in order to develop the balance scorecard.
The format of a BSC differs from company to company depending upon the data, nature
of the company that is manufacturing or service industry. However, some organization uses
spreadsheet and some uses a paragraph style in a word document. Many firms use a software for
the purpose of BSC development (Niven, 2010). Typically, balance scorecard is being used by
the company at the time of strategic planning and organizational change. Because this tool is
used to evaluate the performance of a firm and it helps in assessing the opportunities and threats
which is required to address while outlining the goals and objectives for the future.
Depth and coverage of practical issues and theory
BSC provides managers with a comprehensive framework which translates a strategic
objectives of a company into a consistent set of performance measures. Balance scorecard is not
only a management exercise but it is beyond it. It is a management system which can motivate
for the improvements in a critical areas such as product, process, customer and market
development. Many companies which desire to implement improvement programs such as
process re-engineering, total quality management and employee empowerment which lack a
sense of integration (Bischoff, 2013). At this time, BSC act as a focal point for the organization
in defining and communicating priorities to managers, employees and investors and even
customers. This scorecard is not a template which can be applied to all the businesses in general.
Different market situations, product category, competitive environment need different
scorecards. Every company devise customized scorecards in order to fit their mission, strategy,
technology and culture.
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