Performance Measurement Using Balanced Scorecard

This assignment delves into the concept of the Balanced Scorecard as a performance measurement tool. It examines how organizations utilize this framework to evaluate their performance across various dimensions like financial, customer, internal processes, and learning & growth. The assignment analyzes the strengths and weaknesses of the Balanced Scorecard approach and explores its applicability in diverse organizational contexts.

Running head: STRATEGIC PERFORMANCE MANAGEMENT SYSTEM
STRATEGIC PERFORMANCE MANAGEMENT SYSTEM
Name of the Student
Name of the University
Authors Note

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Executive summary
This report focuses on the importance of advanced management accounting techniques in the
current business environment. Through strategic performance measurement systems (SPMS) the
organizational performance is evaluated. The balance scorecards approach is used in the recent times by
the managers to develop competitive strategies. Moreover, through SPSM the managers ascertain the
performance measures that may be financial and non- financial in nature of the business firm. By
adoption of the balance scorecard (BSC) it is evident that it has very crucial impact on the organization.
Furthermore, the financial and non-financial measures have major effect of Strategic Performance of the
business. In the given report, the SPMS of the middle size supermarket chain is ascertained.

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Table of Contents
Introduction.................................................................................................................................................3
Strategic Performance Management System..............................................................................................3
Balance Scorecard:......................................................................................................................................5
Performance Measures:..............................................................................................................................6
SPMS outcomes:..........................................................................................................................................8
SPMS impact on business performance:.....................................................................................................9
Conclusion:................................................................................................................................................10
References.................................................................................................................................................11

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Introduction
In the recent times, the modern business environment has evolved and changed drastically in
short period of time. The business environment is now known as modern business environment as it is it
characterized by advanced technology, globalization, intense competition, social responsibility. Though
the basic methods or procedures have changed but the purpose of accounting still remains the same.
The owner uses various accounting techniques for measuring the financial performance of the business
and making appropriate decisions (Nørreklit & Mitchell, 2014). Modern accounting is the vital aspect in
the current business scenario. Management accounting is related with information present within the
organizationto help people in improving the efficiency and effectiveness of the present business
operations and making better decisions. It is completely different from the previous traditional financial
accounting.
Moreover, management accounting is the study of accounting related to management
functions. This advanced accounting functions shows how they can be modified to suit the managerial
activity framework. The vital function related to accounting of modern management is the redesigning
of the entire accounting system to serve the firm’s operational needs. It provides definite accounting
information that may be used as a basis for the management action that can be used in present and
future (Tan, Zhang &Khodaverdi, 2017). moreover, the financial data are highly devised as well as
systematically development so this becomes a unique tool for executing the management decisions.
Strategic Performance Management System
The Strategic Performance Management system (SPMS) is a process, which relates the efficiency
of the employees with theperformance of overall organizational to increase the productivity for the
management compensation system (Tizroo et al., 2017). This ensures that the employees attain their
goals that have been set by the company and on the other hand, the organization achieves their
objective that has been set as their strategic plan. Improvement in the organizational or individual
performance is incomplete until the management getsadequate feedback of the performance. This
provides the ultimate result of the task provided to the employee or the firm. Performance measures
helps in creating link between the individual own behavior and the objectives of the organization (Cao et
al., 2015. Moreover, for the organization, performance measurement acts as a link between the

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organizational goals and decisions. It is important to examine the existing condition of the surrounding
and anynegative consequences if present should be analyzed before adopting performance measures.
Types of performance measures:
The performance measures for the organization shall generally be classified into two major
types as the ones relating tofirm’s overall output or outcomes like financial performance and
competitiveness. On the other hand, those focusing on result determinants, the inputs like, flexibility,
quality, innovation and resource utilization (Jali, Abas& Ariffin, 2017).
SPMS basic elements are as follows:
 Goals which are related to organizational priorities.
 Systems that are outcome and output oriented.
 Team approach for performance management.
 Communication plan, and
 Information system supporting monitoring and evaluation.
The strategic performance measurement system would help in assisting the supermarket by
developing competitive strategies by the following ways:
Performance planning: in this stage, the indicators for success are determined. The success indicators
are generally the measures indicating the performance targets (Chiarini & Vagnoni, 2015). It serves as
base in individual and office’s employee preparation for the performance rating and contract form.
Performance monitoring: the performance of the employees as wellas the overall organization is
monitored at different levels. Evaluating and monitoring mechanisms enables to track that appropriate
and timely steps is taken and the goals and objectives are further evaluated in an efficient manner.
Performance evaluation: this help in assessing both the individual and organizational employees
performance level that is based on both the organizational and individual’s employee performance
(Buckingham & Goodall, 2015). the assessment mainly focuses on the competency related gaps,
strengths and the opportunities for addressing the career paths, gaps and alternatives.
Performance rewarding:The results for the performance assessment and evaluation serves as major
inputs for the organizational HR plan that includes identification for provision of interventions and
rewards conferment.

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Balance Scorecard:
According to Turco (2014), the balance scorecard helps in identifying and improving the
different internal function for business and its resulting external outcomes. This is a performance metric,
which is applied in the management practices to measure and helps in providing feedback to the
company. It is used to obtain efficient organizational behaviors in the organization by analyzing the
business processes, growth, finance and customers. This approach is used in attaining measurements,
objectives, goals and initiatives, which results in the major primary function of the organization. a
company uses balance scorecard technique to develop strategic initiatives and the objectives of the
strategy. The organization uses balanced scorecard helps in implementing the strategy mapping to
obtain the value added in the organization (Melnyk et al., 2014). This system helps in providing an
inclusive view of firm to the managers by ascertaining the measures that helps in evaluating
performance. This BSC approach is used in the following ways:
 To bring the organizational strategy to life: the company can apply this strategy that would help
in making major decisions.
 To communicate with the strategies present in the organization.
 Balance scorecard is further used to evaluate the strategic performance.
The balanced scorecard techniques help in evaluating the performance from four major
perspectives that are as follows:
Financial analysis: this includes the measures like thereturn on investment, operating income and sales
growth.
Customer analysis: this includes the satisfaction level and retention of customers in the supermarket.
Internal analysis: this shows how the business processes are related with the organizations strategic
goals.
Learning and growth analysis: this helps in assessing the employee retention and satisfaction besides
information system performance (Jain & Gautam, 2016).
These major four perspectives are hierarchical and interdependent in form. The growth of the
organization is ascertained through the continuous innovation and learning that further accelerates the
internal processes refinement. The BSC approach facilitates improvement of internal processes, which

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provides in raising the operating outcome that further leads to an increase in financial performance as
well as maximum customer satisfaction.
As per Shannak (2015), balance scorecard approach has been redefined to be applied in the
strategic management in the following ways:
 Translating and clarifying the vision into strategy: this approach helps in identifying the
organizational strategic objectives and further retaining them in a strategic map.
 Communicating the various strategic objectives and measuring as well as linking it to the
operations: This involves establishing an efficient communication with the organizational
stakeholders to initiate dialogues for refine processes and promoting feedback.
 Setting targets and planning to achieve strategic initiatives: this includes identifying the targets
for each of the objectives that is to be measured by the Key performance indicators (Treven,
2015). The individual targets that are set for obtaining the strategic objectives of the
organization.
 Enhancing learning and strategic feedback: this generally involves the learning techniques from
performance information. Further the findings obtained from balance scorecard are used to
refine the decision-making.
Performance Measures:
The complete contribution of manager is difficult to measure due to the three vital reasons.
Firstly, the actions and strategies that is implemented by manager is difficult to observe directly,
therefore the manager cannot compensate the inputs directly into the organization. Secondly, the major
consequences related to manager action are difficult to observe in major parts because the impacts of
these actions are beyond the manager’s time. Finally, the unavoidable circumstance often have an
impact on the results that should be evaluated, as per Patrick, Blessing & Gloria (2015). It becomes quiet
difficult to measure the contribution of the managersso various performance measures techniques are
utilized to ascertain the firm’s performance. An efficientmeasures would reflect the organization or
firm’s value that includes both externalities related to the business units and major dynamic effect of
the existing actions in long-run.
There are various types of performance measures, which a company uses. The Balanced
scorecard approach is one of them. Generally, the balanced scorecard consists of different perspectives

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that include two types of measures as the financial performance measures and non-financial measures.
The financial performance measures are classified as the performance measure that is related to
accounting. These are measures such as earning per share, total shareholders return or sales growth and
firms profit. The major limitation of using this this financial performance measures is that it can lead to
accrual manipulation. On the other hand non- financial performance measures helps in evaluating the
non-financial determinants of the firm. The instances of non-financial measures include the manpower
development, level of customer satisfactions, product quality, innovation measure, market share
productivity, and efficiency and employee satisfaction. The non-financial performance measures have
more important advantages than the financial performance measures (Jamei, 2016).
Strategic performance measurement system (SPMS) should beimplemented in various forms in
the supermarket with the following characteristics:
 This includes the financial measures, which focuses on short term effect on manager related
decisions involving matters like income growth, cash flows as well as assets utilization.
 This supplement financial measures with the organization non-financial measures indicating
operational achievement to drive the financial performance in future.
 They design to fulfill the various purposes leading from cost determination to value creation.
In the study, according to Roussas & McCaskill (2015), the influence on the outcomes of the
SPMS from the above characteristics is evaluated. The SPMS is expected to directly or indirectly
determine the information quality, and the intensity to which the balance scorecard is adopted. These
resulted in contributing for the increased performance of the organization through their impact on
practices of human resources and through improved business results.
Use of financial measures:financial measures of the organizational performance are important for the
head managers in providing short-term feedback to the outcomes of past initiatives that aims in
increasing the value of the shareholders. According to the authors, Singh & Sohani(2014), through BSC
framework the measures help in addressing the important question like, how to look at the
shareholders on being successful. In the diverse set of companies this measure is generally the most
popular. This involves measures for output like revenue and growth, for measuring profitability like the
earnings before interest and taxes EBIT, earnings per share or EPS, gross margin for the comprehensive
measures of profit through asset utilization like economic value added, return on investment that
includes the cash flows as the popular liquidity measures.

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Use of non-financial measures: the performance measures that are non- financial in nature are required
to improve the various limitations that are inherent within the financial measures . The short-term
partiality that makes the senior managers to cut down the expenses for employee’s training on
research and development for achieving the profitability targets. The performance measures of
customer satisfaction helps in promoting long term focus by providing the strategic priorities details at
all levels for the managers that is based on the factors which they can control. This helps in driving
future performance. The non-financial measures of the supermarket are shown in the three
perspectives of the BSC frameworks that include the customer perspectives thatare how the
supermarket achieves their vision, by looking for their customers. The internal perspectives are to satisfy
their customers and the processes adopted by the organization through which it can be evaluated.
Finally the learning and growth perspectives, ascertains how the supermarket can achieve their vision
and furthermore, how the supermarkets learn and improve in future (Wahid et al., 2017).
Non-financial performance measures are often utilized for the firm’s performance and
productivity evaluation. The non-financial measures help in reducing the risks through its costless
performance measures techniques. The non-financial measures of performance includes the quality of
product, rate of customer satisfaction as well as employee turnover are relevant more in situations,
where market- based performances measures showing the firm overall value is not included. Usually,
the non-financial measures facilitate no intrinsic value to their director. According to Schwieger (2015),
the non-financial measures are the leading indicator for financial results in future. The leading indicators
are necessary for managerial compensation and performance measurement . The current managerial
actions in the organization generally influence the financial return in long-term but it is not reflected in
the accounting measures.
SPMS outcomes:
Through SPMS implementation, several desirable outcomes for the supermarket can be evaluated, like
the information quality, system effectiveness and the intensity of Balance Scorecard.
 Information quality:
The information should be well-defined and relative importance or usefulness is attributed by
the users. Information quality is positively related with the success of the information system. In most

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of the measures for the performance, the quality is proved to be much lower than the significance of the
measures (Tizroo et al., 2017).
 Effectiveness:
SPMS effectiveness is linked with the information quality as higher is the quality of data, more is
theeffectiveness of system. This includes the increase utilization of information of data, level of
satisfactionof the user and their impact on the supermarkets as well as their employees. In the
performance measurement method, the BSC system is the most effective when the worker are
motivated and could control and influence the performance measures and they can further earn various
recognition.
 Degree of BSC adoption:
The organization has measured the accounting based business performance, shareholders value,
investments and accounting based performance of the business (Tan, Zhang&Khodaverdi, 2017).
Through the combination of process and customer measures that is still the key performance indicators.
The intensity of BSC adoption is defined to the extent in which SPMS captures their cause and effect
relation from the different sources of value calculation.
SPMS impact on business performance:
The effect of SPMS system has not only influence the business performance but also the cause
and effect relationship. The overall performance of the organization is improved through cause-and-
effect relationship. This can be evaluated through two ways:
Impact on human resources:Strategic performance management system impacts the human resource of
the supermarket chains through different ways, like, organizational structure, leadership and control
practices. The major focus is given on the HR initiatives to make sure that the organization possesses all
the required skills to implement the vital strategies like, training, recruitment and turnover. The SPMS
requires organizational structures as well as control practice by developing new planning and assigning
new responsibilities.
Impact on business result: The SPMS effect on the supermarkets efficiency can be reflected by the
variations in organizational process is through product and service innovation, research and
development, process improvement. Customer value and financial results, like productivity and revenue

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growth that culminate in re-evaluation of the business strategy. According toNørreklit & Mitchell (2014),
the value creation process in the organization by adopting BSC that is useful in evaluating the overall
performance of the organization.
Conclusion:
Therefore it can be concluded that SPMS is gaining popularity in the organization over the few
decades. They are helpful in providing the manager with the various financial and non-financial
measures that covers various perspectives and providing ways of executing the strategy to various
coherent set of the performance measures. BSC method is known as the best practice in
theorganizational world. This approach is beneficial for the management more than the cost
management techniques. SPMS implementation has a very crucial impact on the business performance
of the organization.In the medium size industry of supermarket , the SPMS implementation would help
in evaluating both the information and accounting system which as result influences SPMS outcomes
and thus affecting the organizational performance. The owner or director of the organization uses non-
financial data and accounting based for management compensation and performance evaluation.
Moreover, BSC adoption helps in evaluating the performance effects through multidimensional
approach by ascertaining the impact on human resources and business performance of the supermarket
chain by ascertaining both the financial as well as operational research.

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