Impact of Balanced Scorecard on Firm Performance

This assignment requires a systematic review of scholarly articles focusing on the influence of Balanced Scorecards on a company's overall performance. It draws upon various sources, including journal publications and conference proceedings, to analyze the relationship between Balanced Scorecard adoption and improved business outcomes.

MANAGEMENT
ACCOUNTING
PERFORMANCE
EVALUATION

Table of Contents
INTRODUCTION......................................................................................................................1
TASK 1 .....................................................................................................................................1
Explaining the use of balance scorecards for performance evaluation in ITS......................1
TASK 2......................................................................................................................................5
Creating Balanced Scorecard for Integrated Technology Services (UK)..............................5
TASK 3......................................................................................................................................7
TASK 4......................................................................................................................................9
TASK 5......................................................................................................................................9
Review of the use of Integrated Technological Service share scheme whether it helps to . .9
motivate employees to work towards achieving the goals or not..........................................9
CONCLUSION........................................................................................................................10
REFERENCES.........................................................................................................................11
Index of Tables
Table 1: Balanced Scorecards of Integrated Technology Services Ltd......................................9

INTRODUCTION
In the present age, management plays an crucial role in the company's success as they
make business planning, controlling, coordinating the functions and take strategic decisions
in order to perform better in future. Present market is highly competitive in which every
business organization need to use advanced technology to compete effectively in the market.
Integrated Technology Services (ITS) is a UK based organization who is responsible to
provide best quality of information technological products and services to large number of
consumers. It was established in the year 1995 and highly dedicated to fulfil customer needs
through serving them qualitative products. Present project report will discuss the range of
financial as well as non-financial performance measurement tools that can be use by ITS for
performance evaluation. Balance scorecards is one of the significant tools that can be use by
ITS's management to evaluate and examine and examine their performance so that managing
director can take efficient quality of decision. It will lead to improve future performance of
the company to a great extent.
TASK 1
Explaining the use of balance scorecards for performance evaluation in ITS
ITS (UK) Ltd, is a providing wide range of communication services that includes
telephone services, Local Area Network (LAN)/Wide Area Network (WAN) , Video
conferencing, Video Surveillance, Access Control, Networking Services and other data
security services to large number of users. The aim of ITS is to serve customers with
exceptional services and at cost effective prices. ITS uses six selection criteria to achieve this
objective that are quality, reliability, ease of use, cost effectiveness, continuous evolution and
market commitment. All these factors lead to fulfil customer demand effectively.

As per the scenario, Group Managing Director of ITS faced a declined in net profit by
6%. It indicates that ITS's financial performance in terms of profitability has been reduced.
Now, directors are wishing to identify the reasons behind this adverse business performance.
Balance scorecards (BSC) is an effective tool available for this purpose. It is a strategic
planning and performance management tool that is highly using in the present market. It
helps to measure ITS's financial as well as non-financial performance to a great extent
(Grigoroudis, Orfanoudaki and Zopounidis, 2012). It is a tool that assist managing directors
to keep track of execution of all the operating activities by the staff within their control and
monitor these functions on a regular basis. Some of the most important characteristics of BSC
is given below:
 It highlight the strategy of the company through focusing on cause and effect
relationship among different elements. In context to Integrated Technology Services,
it can use BSC which pinpoint about its objectives and strategic goals. In other words,
BSC will help to focus on the strategic agenda of ITS (Giannopoulos and et.al., 2013).
 It helps to communicate formulated business strategy to all the members of Integrated
Technology Services. This in turn, all the associated members will do their work
accordingly to it and take decisions that will contribute to accomplish ITS's targets in
a great manner.
 In ITS, BSC system will help to give strong emphasis on its financial as well as non-
financial objectives. Under the financial performance, it helps to analyse revenues,

cost and business profitability of ITS (Machado, 2013). While, other non-financial
performance indicators includes learning and growth, customer satisfaction and
business process perspective.
 It focuses management attention to the key factors while formulating the business
strategy. So that, each and every elements that can contribute to achieve success can
be covered in managerial planning of Integrated Technology Services.
 There are four perspectives of balance scorecards, that are given hereunder:
Illustration 1: Balanced Scorecard Model
(Source: )
Learning and Growth perspective: This dimension of BSC includes worker's training
and ITS's cultural attitude towards both the individual employees and self improvement. In
the present market, workers plays an significant role in ITS's success as they provide services
to customers and handling their problems as well. It primarily focuses on improving workers
skills, their knowledge, increase staff turnover and reduce absence rates. This in turn, workers
will be more able to provide best value to the customers and fulfil their need to a great extent.
Business process perspective: As already said earlier, that ITS mainly aims at
providing world class technological products as per consumer demand. In this perspective,
Group Managing Director of ITS can evaluate the quality of offered products and services to

analyse its non-financial performance. In the current climate of rapid technological change,
ITS is fulfilling customer need through providing innovated and advanced products (Larsson,
Säfsten and Syberfeldt, 2015). Henceforth, quality is the most significant factor that can
contribute to the business success or failure as well. In context to ITS, company is regularly
trying to offer value added and qualitative products which satisfy large consumers demand.
Customer perspective: In the present competitive age, all the organizations are
competing with each other to increase their customer base so as to attain high growth and
success. This dimension says that ITS cannot achieve this mission without satisfying their
customers. Therefore, this perspective helps to assess the level of consumer satisfaction
through using ITS's products and services. Moreover, it includes the analysis of ITS's market
share, consumer retention, delivery of consumer orders and their complaints. This in turn,
Group Managing Director can evaluate their non-financial performance in the market.
Financial perspective: Along with all above mentioned non-financial performance
indicators, it is also important for ITS to analyse their financial performance. As per financial
perspective, Integrated Technology Services Ltd, need to determine its revenues, growth in
revenues, change in costs and profitability to identify its financial performance (Chee and
et.al., 2006). Rising trend of revenues and profitability is a good sign of ITS's financial
performance and vice versa.
 It is a organization's strategic map that assist businesses to accomplish their target
goals and mission. It helps to fulfil short-term as well as long-term business
objectives. Moreover, implementation of formulated strategic planning effectively
helps to improve potential performance and enjoy high growth and success
(Humphreys, Gary and Trotman, 2015).
On the basis of above benefits, it has became clear that ITS can make use of BSC to
carry out an in-depth evaluation of business performance. Group Managing Directors of ITS
can construct an BSC through considering all the four perspective. BSC must demonstrates
ITS's primary and secondary objectives to drive high success in future period. MD has to
group a set of different performance measurements indicators in each perspective to make
detailed evaluation of ITS performance.

TASK 2
Creating Balanced Scorecard for Integrated Technology Services (UK)
BSC has been constructed here for ITS through which Group Managing Director will
be highly able to evaluate their performance. The scorecards will give assistance to ITS to
make strategic planning and communicate this plan to all the users such as managers,
employees and analysts.
BSC requires an in-depth planning in which each and every element that can cntribute
towards ITS success must be covered. There are some requisites that must be keep in mind
while making BSC, described below: Focus on primary objective: Integrated Technological Services Ltd is a profit seeking
organization henceforth, it primary objective is to get maximum revenues and
profitability as well. Therefore, it becomes necessary that BSC focuses on business
goals for which ITS has been established. In context to ITS, increase shareholders
wealth and profitability are its objectives. Relationship between business process and its contribution to achieve target: There
after, ITS need to be develop a relationship between business operations and its
contribution to achieve target goals. For instance, ITS's business process that is
concerned about offering qualitative and technological products and services helps to
drive large revenues and profits (Allan, n.d).
 Developing secondary business objectives: This is the most challenging step in
construction of BSC for ITS. This task relates to the investment in various functions
to achieve desired outcomes. For instance, this task will answer that how much funds
will need to be invest in ITS's training and development programme, quality
improvement and customer satisfaction so that business performance can be
improved.
 Develop different measurement to monitor performance: It is the conventional
concept in which ITS need to set different measurement for performance analysis. For
instance, under the customer perspective. ITS need to set some measurement to
analyse the level of consumer satisfaction (Dudin, 2015). However, under the learning
and growth perspective, ITS need to set out some elements that evaluate employees
motivation, skills and their knowledge. On contrary to it, quality measurement

indicators helps to evaluate internal business process. All this factors contribute to
achieve growth in the future period.
Table 1: Balanced Scorecards of Integrated Technology Services Ltd.
Customer perspective Financial persepctive
 Reduce customer waiting time
 Increase number of customers
 Increase customer retntion
 Improve customer satisfaction level
 Market share
 Improve assets utilization
 Total manufacturing cost
 Increased revenues
 Increased profitability
 Return on investment
Internal business process perspective
 Innovative and qualitative products
 Reduce product cycle
timeIncreaseoperational efficiency
 Machine productivity
 Desgining new products
 Best IT services and Tech support
Learning and Growth Perspectives
 Employee competencies
 Improve employee's skills and
knowledge through organizing a
training programe
 Employee turnover
 Employee retention
 Emplyee's safety measures
 Employee satisfaction
Thus, on the basis of above information, it has became clear that ITS need to reduce
customer waiting time through timely reducing product cycle time. Another, introducing new
products, increase operational efficiency, machine productivity and innovative products helps
to satisfy consumer need and attract new customer also with high retention rate. Furthermore,
investment in training and development program will assist to increase worker's skill and
their productivity results in high employee turnover, retention and satisfaction. All this
factors will lead to drive success in terms of growth in revenues and profitability as well.
Henceforth, it can be said that constructed BSC will help Group Managing Director to
achieve high growth in future period.
TASK 3
Recommendation to ITS's Board whether they should recruit another accountant in their team
or not
Vision
and
Mission

Accounting is the major part of all the business functions and Accountant plays an
significant role in it. With reference to Integrated Technology Services (UK) Ltd, there are
following benefits to recruit additional accountant in company, listed below:
 ITS need to maintain proper records of all the financial and operational affairs in an
appropriate way. Accountant is the person who has duty to keep detailed records of
each and every accounting transaction (Keršulienė and Turskis, 2014). If, it does not
happen that outsourcing may impose more cost than hiring a new accountant. In
relation to ITS, if present accountant does not fulfilling his duty efficiently and does
not maintaining adequate records of all the business affairs than it must be
recommended that ITS should recruit another accountant in the business.
 If ITS hire another accountant with the existed ones than the business is freely to set
the tasks which he need to be perform. However, in case of finding any mistakes in
the accounting statements, than ITS has to take outsourcing services which may
impose greater cost with a high package. However, it might be possible that ITS can
not bear this cost henceforth, it will be more suitable to appoint new accountant in
ITS.
 An outside accountants will have other clients also with ITS. This in turn, ITS's
sensitive information can be shared with the others and create adverse impact on the
business. Therefore, through hiring a new accountant, ITS does not need to get
external accountant services and ensure confidentiality of the information.
 Through recruiting other accountant, ITS can choose the way that how work will be
done in the business. However, in case of appointing external accountants, his
working practices may be unfit for ITS (Mosher and Rudebeck, 2015). Thus, it is also
the benefits of hiring new accountant with the existed ones.
 Appointing another accountant helps to get correct and authentic results of business
performance. It is because accountant will prepare all the financial statement in an
appropriate manner through combining all the operational functions. This in turn,
performance can be determined correctly.
 Proper accounting of all the transactions will lead to reduce loss of embezzlement. It
is because in most of the organization, workers use business property and cash for
their own purpose and contribute to increase business cost (Barbera and Hasso, 2013).

Therefore, good financial reporting will assure that business assets and resources are
using for business purpose only resulted in lower cost and high profitability.
 It is a way of in-house accounting services rather than taking services of external
accountants. Therefore, it will lead to reduce need of hiring outsider accountant for
many purpose such as for the preparation of tax return.
 In case, when all the transactions are recorded appropriately, than bank reconciliation
statement can be prepared easily. Otherwise, it is very difficult task to determine the
difference between the cash book and bank's pass book. Moreover, incorrect financial
statement will lead to analyse performance incorrectly and take harmful decisions
(Cooper and Dart, 2013). However. If financial statements are prepared accurately
than managers can analyse performance correctly and take qualitative decisions as
well.
Hence, it became clear that ITS should recruit new accountant in the organization.
TASK 4
Utilising target costing at ITS UK and review how 20% gross margin is not enough to
achieve the 6% rate of required net margin
Target costing: It is a pricing method and cost management technique used by
companies to manage their products cost. Target costing is a system in which ITS can pre-
plan for the product cost so as to achieve desired profit margin (Omar and et.al., 2015).
ITS can use this costing method in their business to manage cost of their products and
services. At the primary stage, designing team will conduct research to identify the features
that are demanding by the consumers. There after, they will forecast the product cost which
will be incur in future period. After that, engineering and procurement team will design the
product to meet set target so that ITS will be highly able to earn desired profit percentage
(Baumöl and et.al., 2015). It will provide huge assistance to ITS to maintain its competitive
strength. It is because in the fierce level of competition, only the organization who are
producing their products at lower cost can survive effectively. Reduction in product cost will
contribute to get high profitability and vice versa. Thus, it can be said that ITS can use target
costing to reduce overall product cost over its entire production cycle such as production,
engineering and research and design.
Reasons why 20% Gross margin is not enough to get 6% Net margin

 High administration expenditures such as worker's salary, high number of workers,
postage, office rent, building insurance, printing and stationery and so on.
 High selling and distribution expenses also will lead to increase operational
expenditures and lowering the net margin as well.
 Excessive uses of debt funds also will lead to impose greater financial cost in terms of
regular interest charges results in declining net profitability (Avenir, n.d).
 High rate of income tax is also the another reason for lowering net margin. It is
because increasing tax rate will impose high tax obligations resulte4d in lower profits
and vice versa.
TASK 5
Review of the use of Integrated Technological Service share scheme whether it helps to
motivate employees to work towards achieving the goals or not
Employee stock option scheme (ESOS) is the option that ITS granted to its employees
as part of their remuneration package. It is a benefit plan in which some proportion of
business stock is transferred to their employees. In other words, it makes employees owners
of stock in ITS. ITS using this option plan in their share scheme to reward and retain their
workforce in the business (Chang and et.al., 2015). This plan is highly suitable in IT
companies in which workers are the essential part of the organization. As already said earlier,
ITS is a IT based company henceforth, manpower is the main assets in the business. It is
extensively used scheme to rewarding the employees so that efficient and able workforce can
not be retained in the business. Thus, the tool is greatly helps to motivate ITS staff to put their
best efforts in their work (Barth, Hodder and Stubben, 2013). This in turn, ITS can enjoy
success of high employee turnover through retaining its highly talented employees who will
provide best services to the customers. It is because by having some ownership in the
business, employee will think that company is giving in return for their efforts so that they
will be highly motivated and perform better (Long and Musibau, 2013). It will ultimately lead
to enhance employee satisfaction and ITS performance as well.
Another share scheme plan is bonus shares scheme in which ITS will allot its share
free of cost. In this plan, at the time when ITS have large amount of profits than it can
distribute some of the profits as bonus shares rather than cash dividends. In context to ITS,
when company will issue bonus shares to its employees that having ownership in business
equity than employee will be highly motivated. It is because employees does not need to

make any payment for the receipts of bonus shares (Venkataraman and Kumar, 2015).
Moreover, they will receive dividend and earnings on their bonus shares. It will lead to
enhance their profits in turn, employee will believe that their performance are appreciating by
ITS. This in turn, workers will be highly motivated and motivated staff perform much better
than unmotivated worker. Henceforth, ITS can get services of efficient., able and skilled
workforce and attain high success in future period.
CONCLUSION
On the basis of above information, it can be concluded that BSC is a strategic tool that
can be use by ITS to analyse its financial and non-financial performance. Under the NFPI,
designed BSC will assist ITS to evaluate customer satisfaction, employee satisfaction, their
skills, workers turnover, customer retention, market share, production cycle time, new
product development and so on. On the other hand, its financial perspective will provide
assistance to evaluate ITS's revenues, cost and business profits. Thus, the overall performance
evaluation will help ITS management to take some strategic decision to improve future
performance. Along with this, the report advised that ITS should recruit new accountant in
the business due to huge benefits. Further, target costing is an effective method that can be
used by ITS to reduce overall product cost and get high profits. In addition to it, ESOS and
bonus plan are share schemes that motivate ITS's workforce so that company can retain their
talented pool and achieve greater success.

REFERENCES
Books and Journals
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Online
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