Balanced Scorecard: Comprehensive Analysis of Performance Measurement

This report provides an in-depth analysis of the Balanced Scorecard, a strategic tool designed to measure the overall performance of an organization. Introduced by Kaplan and Norton, the Balanced Scorecard moves beyond traditional financial metrics to incorporate customer perspectives, internal processes, innovation and learning, and financial outlook. The report details the four key perspectives of the Balanced Scorecard: customer perspective, which focuses on customer views and expectations; internal processes, which assesses the effectiveness of organizational processes; innovation and learning perspective, which evaluates knowledge capture and employee learning; and the financial outlook, which examines profitability and growth. The report highlights the advantages of the Balanced Scorecard, such as its comprehensive measurement approach and its ability to prevent sub-optimization. The report also acknowledges the tool's limitations, including the investment required for implementation and its limited focus on external factors. References to relevant research articles are included to support the analysis.

Running head: BALANCED SCORECARD
Balanced Scorecard
Name of the Student
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Balanced Scorecard
The Balanced Scorecard is a strategic tool used in the measurement of the overall
performance of an organization. Dr. Robert Kaplan and Dr. David Norton initially introduced it
in 1992 through an article titled ‘The Balanced Scorecard – Measures That Drive Performance
(Kaplan & Norton, 1992). The key purpose of the Balanced Scorecard is to measure the impact
of all the necessary factors important in determining the overall performance of an organization.
Tools existing prior to the scorecard mostly focused on the financial aspects of the entity. Their
focus laid on improving the profitability of the firm by identifying areas where the financials
could be improved. However, they ignored other important aspects like stakeholders, efficiency
of the internal system and the learnings of a firm from its previous mistakes. The Balanced
Scorecard overcomes these limitations by providing information about a company as a whole
rather than simply focusing on a particular aspect. It aims to align the strategy of the business
with its objectives to identify the areas where value can be created for the business. There are
four major aspects of a Balanced Scorecard (Hoque, 2014). These include the customer
perspective, internal processes, innovation and learning perspective and the financials of the
entity. The customer perspective measures how the consumers view an entity and what are their
expectations from it. The internal process aspect measures the effectiveness of the processes
implemented by the organization. The internal business perspective tries to form objectives
based on the demands of the customers. This perspective tries to form policies and procedures
that are helpful in meeting the customer expectations. The learning and growth aspect measures
how well an entity is able to capture the knowledge from different sources and how effectively
the employees are able to use it. This is essential in an entity obtaining competitive advantage
over the remaining firms (Hakkak & Ghodsi, 2015). It is also useful in improving the internal

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procedures of an organization. The financial outlook is concerned with the business remaining
profitable while meeting the expectations of the customers and continuously growing through
innovation. The main advantage of the Balanced Scorecard is that it measures all the aspects that
are critical in the survival of an organization. It also prevents the concept of sub optimization
(Elbanna, Eid & Kamel, 2015). This means that it does not allow the managers to sacrifice one
aspect of the business to achieve another goal. Its emphasis always lies on ensuring that the
business maintains a healthy balance between all the crucial aspects of the business. The main
rationale of the balanced scorecard is that an entity is complex in nature and its performance
cannot be measured using limited information or by focusing on selected aspects. However, it
should also be noted that the implementing the balanced scorecard requires significant
investment and expertise. Hence, it becomes difficult for the small-scale organizations to
implement this tool in their business. The tool also lacks focus on the external factors that may
have an impact on the business.

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References
Elbanna, S., Eid, R., & Kamel, H. (2015). Measuring hotel performance using the balanced
scorecard: A theoretical construct development and its empirical validation. International
Journal of Hospitality Management, 51, 105-114.
Hakkak, M., & Ghodsi, M. (2015). Development of a sustainable competitive advantage model
based on balanced scorecard. International Journal of Asian Social Science, 5(5), 298-
308.
Hoque, Z. (2014). 20 years of studies on the balanced scorecard: trends, accomplishments, gaps
and opportunities for future research. The British accounting review, 46(1), 33-59.
Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard: measures that drive performance.