Analysis and Implication of Balance Scorecard in Management Accounting

This article analyzes the balance scorecard approach in management accounting and its implications. It discusses the four elements of the balance scorecard and their significance for the company. The article also evaluates the arguments for and against the statement 'What's measured is what matters'.

Management accounting

Table of Contents
Introduction......................................................................................................................................3
Analysis and implication of Balance scorecard...............................................................................3
Balance Scorecard.......................................................................................................................3
Line of Causation.........................................................................................................................3
The implication of Balance Scorecard.........................................................................................5
Critical Evaluation – arguments for and against the statement...................................................5
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

INTRODUCTION
Balance Scorecard model is developed by Robert Kaplan and David Norton, which measures the
strategic performance of the company (Kaplan, & Norton, 1992). The thesis is based on the
Evaluation of the statement
“What’s measured is what matters” and implication of the balance scorecard.
In this study, elements of balance scorecard will be analyzed. There are four elements, which
plays a significant role for the company, namely learning and growth perspective, internal
business process perspective, customer perspective, and financial perspective, are measured by
the company for evaluation of its performance. It assists the company in gaining a competitive
advantage as well as success in the long run period (Moore, Rowe, & Widener 2001). Further,
the critical evaluation for and against the statement is also described. The present report also
represents the manner in which balance Scorecard can be implemented by the company. The
argument against and in favour of the statement is reported in this study.
ANALYSIS AND IMPLICATION OF BALANCE SCORECARD
Balance Scorecard
The main objective of this approach is to convert the mission and vision of the company into the
actual performance. Thus, it is used by the management for the strategic planning and
communicating to the employees about their goals and objective of the company. It also assists
the company to balance the routine activities of employees according to their strategies and
evaluate and assess the performance in the direction of the strategic planning (Norreklit,
Jacobsen, & Mitchell, 2008). This approach is measured by the four crucial elements that have a
significant impact on the company. In the layman language, it can be said that Balance scorecard
measures the factors that build the value for the organization.
Line of Causation
The statement is what is measured is what matters; it means if X matters then it will be
measured. There are four elements such as learning and growth perspective, internal business

process perspective, customer perspective, and financial perspective, that matters for the
company therefore it is measured (Wouters et al., 2012).
Figure 1: General pattern of Causation
(Source: Wouters, 2012)
The fundamental reason for strategic success has to do with the person. It is recognized that long
term success of the company and competitive strength depend on the innovation by the creative
people of the company because any aspect of the activity can be copied by the others. Therefore
the company should recruit the right people and provide proper training and learning
opportunities (Mehralian, & et al. 2017). Customer satisfaction leads to the enhanced market
share and growth; therefore Balance scorecard measure this element as it creates the value to the
company. On the basis of the above analysis, it can be said that all the elements that make the
impact on the value of the company, are measured by the Balanced Scorecard approach. Thus the
core matters are described below -
Learning and Growth Perspective
Learning and growth perspective indicates the capability of the company in the continuous
enhancement or growth in the dynamic scenario. By this element, an organization can know
about their capability to remain in the industry by their strategy. It is a very substantial element
in terms of innovation and productivity; therefore it is measured by this approach (Anjomshoae
et al. 2017). For example, constant consideration of innovation by Apple Inc. in BSC is a clear
example of giving significance to learning and growth perspective.
Internal business process perspective
Improved business process assists the company towards good product and services. It added
value to the company and suggest about the activities which should be carried by the company,

so that objective can be achieved (Messeghem et al. 2018). This perspective assists the company
in its capability to satisfying their shareholders or customers. Nestle regular conducts the survey
from their customers and market participants to customize their products accordingly to
strengthen their BSC in terms of profit and customer satisfaction.
Customer perspective
Customer perspective plays a very important role in the success of the company. They make the
opinion about the company by considering the quality, services, price and many factors about the
company. By this perspective, the company can measure their brand image or position in the
market (Elbanna, Eid, and Kamel, 2015). Therefore, customer perspective makes the impact on
the company, and it is measured by this approach. On the basis of this aspect, Samsung includes
competitive reviews in their product analysis to improvise overall operational strategies.
Financial perspective
The quantification of the added value is the substantial element of the company. By this
approach, the company can ascertain about operational management and the implication of the
strategies and policies. Therefore it is measured by the balanced scorecard approach (Malagueño,
Lopez-Valeiras, and Gomez-Conde, 2017).
The management team of Volkswagen applies the balance scorecard approach after eight regular
years of financial loss. It assisted the company in applying the strategy to measure the financial
and project resources and to motivate and communicate the employees about the strategies and
planning.
The implication of Balance Scorecard
Any organization can implement the balanced scorecard approach; this includes the following
steps-
 The company should establish its vision, mission, and strategic objectives.
 Analysis and review the expectations of shareholders or customers by performing
stakeholder analysis (Hansen, and Schaltegger, 2016).
 Identify critical success factors.

 Convert the strategic planning into the goals.
 Measure the objective by defining the key performance indicator.
 Ascertain the values for the objectives that are to be obtained.
 Convert the objective into the operational activities (Bourne, Melnyk, and Bititci, 2018).
Critical Evaluation – arguments for and against the statement
Balance Scorecard is implemented by the company to measure its performance. It is the
performance management technique that assists the managers in reviewing the activities of the
workers and outcomes of the activities (Cooper, Ezzamel, and Qu, 2017). All the above four
perspectives such as learning and growth perspective, internal business process perspective,
customer perspective, and financial perspective, are significant for the company, are measured
by the balanced scorecard approach. This approach permits the company to identify the gap
between the mission of the company and the manner by which the mission can be converted into
the operational performance of the company (Maestrini & et al. 2018). It also supports the day to
day activities of the company and suggests, how the activities can contribute to the mission and
objectives of the company. Along with this, by this, the company can ascertain about its
excellence regarding product, quality, service and some other aspect which leads to the
satisfaction of the consumers. Thus, it can be said that the Balance Scorecard approach helps in
the identification and measurement of the significant elements that are a matter to the company.
However, this approach is very subjective. It cannot be quantified except by the opinion of the
management and surveys. If the company, mandatorily make the policy for all the employees of
the company to meet the fixed training hours for learning and innovation, it does not necessarily
mean that every employee is attending the training in an effective manner. Further, by measuring
the four elements, the risk management and economic value of the company cannot be measured
accurately. Any goal and objective selected under the balanced scorecard approach, does not
consider the opportunity cost. Further, there are large numbers of variable considered by the
company to measure the elements, which is a very cumbersome and difficult task.
The things which are measured by the balanced scorecard approach is learning and growth
perspective, internal business process perspective, customer perspective, and financial
perspective. It cannot be said that everything that measured is a matter for the company. Since

the learning and growth aspect is connected with the employee of the company; it considers the
extent to which company can improve the manner of activities carried out by the employees
(Nielsen, Lund, and Thomsen, 2017), which supports its goal and objective. For this, the
company may start training to the employee, but it is not necessary that by training, knowledge
and skills of every employee can increase.
Further, there are some things that are important for the organization, which are not measured by
the balance scorecard approach. It mainly focuses on the internal aspect, but it does not consider
the external scenario of the company. It considers the consumers but does not take into account
the other key performance indicators such as any changes in the business environment or the
competitors are not considered by this approach. It may assist in more emphasis on the internal
performance and less focus on the external elements, by which the operational performance of
the company may get impacted (Lyu, Zhou, and Zhang, 2016).
Further, this can also be measured in the wrong way. This technique requires obtaining data from
the manager and will need them to assess other people. It also requires the building measures and
strategies of action, which is difficult. By which, the performance of the managers could be
impacted. Another problem is that there may be a possibility of false information. It is because,
high amount of information os required for the measurement; and there is no guarantee that the
information resultant will be correct which can falisified the measurement.
CONCLUSION
On the basis of the above analysis, it has been concluded that what is matter is measured by
BSC. Further, it has been evaluated that the Balance Scorecard approach can be implemented by
any company by establishing their vision, mission, and clarifying strategic objectives of the
company. Balance scorecard approach is an important technique for the performance
measurement, but it is a very subjective and cumbersome process.

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