Balanced Scorecard Analysis: Organizational and Managerial Performance

This report provides a detailed analysis of the Balanced Scorecard, a strategic performance management tool developed by Kaplan and Norton. It begins by introducing the concept and its aim to translate a company's vision and mission into actionable strategies, emphasizing its importance in today's complex business environment where knowledge-based assets are critical. The discussion section covers the advantages and disadvantages of the Balanced Scorecard, highlighting its ability to provide a balanced view of a company's performance but also pointing out potential issues with its application. The report then explores the need for measuring organizational and managerial performance, differentiating between motivational and informational measurements, and contrasting traditional financial performance measures with the Balanced Scorecard's approach. The core of the report is the examination of the Balanced Scorecard as a performance measurement tool, explaining its four perspectives: financial, customer, learning and growth, and internal processes. Each perspective is discussed, with examples of relevant metrics. The report concludes by emphasizing the interdependent relationship between these perspectives and the Balanced Scorecard's ability to link short-term actions with long-term goals, making it a valuable tool for organizations aiming to succeed in a dynamic environment. This report is a valuable resource for students looking to understand this topic.

Running Head: BALANCED SCORECARD
BALANCED SCORECARD
Name of the Student
Name of the University
Author Note

1BALANCED SCORECARD
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Balance scorecard...................................................................................................................2
Need for Measurement of Organizational and Managerial Performance..............................3
Traditional PerformanceMeasures.........................................................................................5
Theory of Balance scorecard as Performance Measurement.................................................6
Balance scorecard as Performance Measurement..................................................................8
Conclusion..................................................................................................................................9
Reference..................................................................................................................................11

2BALANCED SCORECARD
Introduction
The increasingly complexity of the business environment, dependency on only the
financial measures is no longer adequate to manage the organizations particularly where the
knowledge based assets as well as intellectual capital are critical for the success. Hence, the
concept of balancescorecard has been developed.It is the strategic model of performance
measurement that is developed by the Robert Kaplan as well as David Norton. It aims for
translating the vision and mission of the company into the actual actions. It is one of the most
important metric used by the organization to identify as well as improve the various
businesses internal functions as well as its resulting external outcomes (Muda, Erlina and AA
2018). Hence, under this assignment, discussion will be done on the advantages as well as
disadvantages of the balance scorecard. Moreover, explanation will be done on the need for
the measurement of the organizational and managerial performance will be discussed. Lastly,
balance scorecard as the performancemeasurement will be discussed.
Discussion
Balance scorecard
Balance scorecard of Kaplan & Norton was developed in early 1990 as the attempt for
helping the firms for measuring the business organizations performance with the help of the
financial as well as non-financial data. Balance scorecard has the aim for aligning the
activities of the business to the strategy and vision of the business, improving the internal as
well as external communication and monitoring the performance of the business against the
strategic goals. The four perspectives of balance scorecard include financial perspective,
customer perspectives, organizational capacity perspectives and internal processes
(Awadallah and Allam 2015).
Advantages

3BALANCED SCORECARD
 This method has the advantage that by looking the four aspects of the performance of
the company, balanced view of the company’s performance can be known.
 This helps in giving the full picture about the company that whether it is able to meets
its objectives or not.
Disadvantages
 It is not just thetool that is usedfor solving the problem rather it recommends for
holding the meeting for planning about the goals that company would be making in
reaching in four areas.
 Some organizations use this metrics, which are not applicable to their business
situations. The metric would be meaningless if this metric does not apply to the needs
of the business organization (Kalender and Vayvay 2016).
Need for Measurement of Organizational and Managerial Performance
Measuring the performance is the vital part of organization’s monitoring progress. It
includes measuring the outcomes of the actual performance of the organization against their
intended goals. This requires the approach of top-down for setting the criteria of performance
against the bottom-top approaches, which often occurs in many companies. The strategic plan
helps in providing the organization’s performance targets by setting the direction of corporate
(Boscia and McAfee 2014). The performance measurement endorses the process perspective
that focusses on the internal process for quantifying efficiency and effectiveness of the action
with the set of metrics. This indicators as well as measures acts as the proxies and surrogates
for the phenomena of organizations. The measurement of the performance helps in
representing the management and the system of control, which produces the information that
has to be produced with the internal as well as external users. It helps in encompassing all the
aspects of the cycle of the business management. The model of performance measurement

4BALANCED SCORECARD
constitutes the process for deploying as well as developing the direction of performance
(Senarath and Patabendige 2015). The measurement of performance helps in contributing to
the formulation as well as implementation of the strategy by revealing links between the
strategy, lag and lead indicators, strategy, goals as well as subsequently operationalizes and
communicates the strategic priorities. The role of the measurement of the performance
evolves from the simple component of planning as well as control cycle to the independent
process, which assumes the function of monitoring.Measuring as well as managing the
performance of the employee is important because it helps in giving the ability for properly
gauge the efficiency of the worker, identifying which employee is working hard and which is
not, determining how properly compensating the workforce as well as improving the overall
productivity of the workforce (Koesomowidjojo 2017).
The need for the measurement of the organizational as well as managerial
performance is divided into categories such as motivational measurements as well as
informational measurements. Motivational measurementsare intended explicitly for affecting
the people that are being measured for provoking the greater expenditure of the effort in the
pursuit of the organizational goals. Moreover, the informational measurements are primarily
valued for status, logistical as well as research information conveyed that provides the
insights and it allows for better short-term management and the long-term improvements of
the process of organizations. Both of the measurement types are important, whether the
measurements are intended for motivating or for providing the information.However, in some
of the situation, both of the categories of the measurement become incompatible and any
attempts made for forcing the compatibility causes dysfunctionality (Osati and Manouchehr
2016).

5BALANCED SCORECARD
Traditional PerformanceMeasures
The system of traditional performance measurement helps in tracking only financial
performance of the company such as earning of profit from selling to the required capital.
This system only focuses on the financial measures, which are based on the accounting
reports that are internal such as return on assets, revenue, profitability, earnings per share,
cash flows and so on. These measures only reflects the data of past and it represents the
historical performances, which is known to be the lag indicators. Apart from the fact that
these metrics of quantitative performance is able for controlling as well as reflecting the
organizational internal performances, in the long-term, these measures may results into
incorrect decision making (Malgwi and Dahiru 2014).
Relying solely upon the financial metrics motivates the managers for making the
decisions. However, it sacrifices the benefit of the short-term performances over the value
creation of long term, such as reduction of cost may results into the increases the level of
profit of the company in short-run but it will be at the expenses of quality losses, expertise
losses and customer-base losses that all have impacts of long-term. Around 50 years ago,
during the industrial age, the majority of the companies were based on the mass-production
having equipment, plant, property. In these cases, the financial performances are based on the
historical data that was sufficient for the purposes of decision making. Although, the business
environment of modern business has moved to the knowledge based era from the industrial
era that was based on production. Moreover, the measures of the traditional performances are
not linked with the strategy of organizations. The focus of traditional performance system is
on the short-term financial performances those results in the disconnecting between the long-
term strategies as well its short-term strategy of the organizations (Dhir, Mital and Chaurasia
2014).

6BALANCED SCORECARD
In the dynamic as well as changing working environment, solely on the measures of
financial performances are not that much appropriate. It is adequate to focus just on the
financial measures because performance metric of one type would not be able to capture
realistically, the performances of the entire organization. The organizations are required for
linking the performance measurement to the strategy that means it should include the
financial measures as well as non-financial measures for getting complete snapshot of the
organization’s performance in order for succeeding in the dynamic environment of the
modern era. The system of performance measurement that links short-term actions with the
goals of the long-term such as organizations and employee capabilities as well as relationship
with the customers is important and critical for the success (Lesáková and Dubcová 2016).
Theory of Balance scorecard as Performance Measurement
The balance scorecard is considered as the system of the performance measurement,
which helps in addressing the shortcomings of the systems of the traditional performance
measurement. This approach has added the metrics of the strategic non-financial
performances to that of traditional financial metrics; therefore providing the balanced view of
the organizational performance. Balance scorecard helps in reflecting the changes in the
modern competitive business environment with the help of considering intangible assets,
which has become the major sources of the competitive advantages. Balance scorecard is the
integrated system of the strategic management, which aligns the activities of business with
the organizational strategy by linking the measurement of the performance with the strategic
objectives of the organization. It helps in providing the framework for translating
organizational strategy into the specific quantifiable objectives of the performances, which
can be measured (Dewangan and Godse 2014). The measurements of the performance
objective are done by using four inter-connected perspectives that are as follows:

7BALANCED SCORECARD
 Financial Perspective: The focus of this perspective is generally on the
organization’s financial objectives. This perspective helps in monitoring as well as
tracking of the financial success as well as the way organization is looks to
shareholders. The financial measures used are return on capital employed, sales
growth, profitability, sales growth and revenue (Akkermans and Van Oorschot 2018).
 Customer Perspective: This perspective helps in dealing with the fact that how
customers are seeing the company. It focuses on the satisfaction of the customer as
the satisfaction as well as retention of the customer is linked primarily with the
survival and long-term growth of the organization. The perspective of the customer
helps in the planning of long-term. The objective of this perspective is for measuring
the value that is delivered to customers with the help of meeting the demands as well
as needs of the customers. The measures that are selected for this particular
perspective includes satisfaction rate of customer, retention rate of customer,
performance of delivery and so on (Behrouzi, Shaharoun and Ma’aram 2014).
 Learning and Growth Perspective: This perspective helps in primarily focusing on
the intangible drivers of the growth of future such as operational capital and human
capital. The learning and growth perspective helps in dealing with the objectives such
as company’s capability for continuing for growing, improving as well as creating the
value. In the modern business environment that is full of dynamic as well as intensely
competitive environment.
 Internal Business Processes Perspective: The focus of this perspective primarily is
into the areas of the objectives of internal, which should be achieved by the company
for surviving. This particular perspective provide the understanding of whether the
organization is performing well or not and it helps for determining what are the
activities that are meeting the customer’s real needs (Shen, Chen and Wang 2016).

8BALANCED SCORECARD
The organization should be excel in the necessary key processes for delivering the
needs of the customers such as producing the products as well as services that are
value added and improving the asset utilization as well as internal resources. The
measures, which are being used for assessing the perspectives of internal business
processes includes the levels of efficiency, analysis of the value of unit costs as well
as processes alignment (Wu and Liao 2014).
The performance of the company are analyzed by the balance scorecard from these
perspectives in which the metrics of performances are analyzed, collected as well as designed
in relation to each of the four perspectives. There exists interdependent relationship between
these four perspectives measurements. The perspectives of the learning and the growth helps
in delivering the high quality processes of the internal businesses as the employees of the
company would be able for developing the right competencies. If there are processes of
internal business then the organization would be meeting the customers’ needs as well as
gaining the loyalty of customer and market share for the future businesses (Melnyk et al.
2014). The financial performances of the company would be improved with the higher
satisfaction of the customers. The objectives are inter-linked in all the four perspectives.
Hence, if the company excels all perspectives of balance scorecard, they would be having
better financial success in the long-term (Vij and Bedi 2016). It measures the performances of
the organization with the help of balancing between the financial as well as non-financial
measures. The progresses are made measured with the help of traditional financial measures
such as satisfaction of customer, retention of employee, market shares, intellectual capital as
well as brand equity (Parida et al. 2015).
Balance scorecard as Performance Measurement
The BSC helps in providing the strategic managers with the deep insights into the
organization as a whole. It helps in assisting them for making the informed decisions about

9BALANCED SCORECARD
the financial and operational performances, internal and external performances as well as
long term as well as short-term performances. It helps the managers for aligning the strategy
with the organization’s overall vision and the mission as well as articulating as well as
monitoring the activities of the organization for promoting, supporting as well as enhancing
the achievements of the strategies (Soltes and Gavurova 2015). The balance scorecard is quite
useful for the strategic management for coordinating the wide ranges of the processes of the
management such as resource allocation, setting of goal, learning and development of
employee and their appraisal of performances. Moreover, one of the most common uses of
the balance scorecard is the project management. The important aspects of the balance
scorecard is for the project managers for tracking the progresses of the execution of the
projects, identifying the tasks, which are behind the schedules, tasks which requires more
skills, resources as well as knowledge for carrying out the tasks. It also helps in providing
more comprehensive picture of the projects that are outside the traditional cost, time, safety,
risks objectives (Rabbani et al. 2014).
Conclusion
Hence, the analysis on the balance scorecard gives the insights that the organizations
requires for linking the measurement of the performance with the strategy. At different levels
of the managerial activity, strategic decisions take place. Hence, it is very crucial for linking
the performance measurement system of the organization with the business objectives. It has
been analyzed that the system of the traditional performance system are no longer appropriate
for the changing as well as dynamic environment as they are does not reflects the strategy of
the organization, neither the competitive environment uncertainty nor they addresses the
capabilities as well as improvements of the organizations. Hence, linking of the performance
measurement of the organization to the strategy as well as measuring the performance would
encourage the positive results for the future as well as replicate the past positive

10BALANCED SCORECARD
performances. Moreover, balance scorecard is that integrated system of strategic management
that helps in overcoming traditional system of performance measurements. This provides the
balanced view of the overall performances of the company by aligning the activities of the
organization with the strategy and vision of company. Moreover, it can be said that the
balance scorecard includes both the lag indicators as well as lead indicators in all its four
perspectives and it helps in linking the strategic objectives of the organization to the
manager’s day-to-day actions. Hence, balance scorecard aids the managers for looking at the
organizational long-term view by promoting the managers for thinking about future and not
focusing on past.

11BALANCED SCORECARD
Reference
Akkermans, H.A. and Van Oorschot, K.E., 2018. Relevance assumed: a case study of
balanced scorecard development using system dynamics. In System Dynamics (pp. 107-132).
Palgrave Macmillan, London.
Awadallah, E.A. and Allam, A., 2015. A critique of the balanced scorecard as a performance
measurement tool. International Journal of Business and Social Science, 6(7), pp.91-99.
Behrouzi, F., Shaharoun, A.M. and Ma’aram, A., 2014. Applications of the balanced
scorecard for strategic management and performance measurement in the health
sector. Australian Health Review, 38(2), pp.208-217.
Boscia, M.W. and McAfee, R.B., 2014, January. Using the balance scorecard approach: A
group exercise. In Developments in Business Simulation and Experiential Learning:
Proceedings of the Annual ABSEL conference (Vol. 35).
Dewangan, V. and Godse, M., 2014. Towards a holistic enterprise innovation performance
measurement system. Technovation, 34(9), pp.536-545.
Dhir, S., Mital, A. and Chaurasia, S., 2014. Balanced scorecard on top performing Indian
firms. International Journal of Indian Culture and Business Management, 9(1), pp.89-100.
Kalender, Z.T. and Vayvay, Ö., 2016. The fifth pillar of the balanced scorecard:
Sustainability. Procedia-Social and Behavioral Sciences, 235, pp.76-83.
Koesomowidjojo, S.R., 2017. Balance Scorecard. Raih Asa sukses.
Lesáková, Ľ. and Dubcová, K., 2016. Knowledge and use of the balanced scorecard method
in the businesses in the Slovak Republic. Procedia-Social and Behavioral Sciences, 230,
pp.39-48.