Balanced Score Card (hereinafter abbreviated as BSC) is the new performance measurement system. It is an extension of the traditional performance measurement system popularly known as “Rate of Return on Capital Employed” (ROCE) or Return on Investment (ROI) or its modified versions like Social Cost-benefit Analysis or Social Return. 

 

Traditionally the corporate plans were mere financial plans and, therefore, corporate performance indicators were also basically financial ratios. Companies used to operate in a supplier’s market where buyers were at the mercy of suppliers. They had no choice. Shortages and black-marketing, long waiting lists were the order of the day. Financial planning and control through financial tools of performance measurement were adequate to manage an organization. Inputs and outputs both were having supplier market conditions. Historically, the measurement system for business has seen financial aspect. Indeed, accounting has been known as language of business. Bookkeeping records of financial transactions can be traced back thousands of years, when they ware used by Egyptians, Phoenicians, and Sumerians to facilitate commercial transactions. After long back, the during the age of exploration, the activities of global trading companies were measured and monitored by accountants double-entry books of accounts. During the nineteenth century, spawned giant textile, railroad, steel, machine tools and retailing companies. Innovations in measuring the financial performance of these organizations played a vital role in growth &Development

 

The collision between the irresistible force to built long-range competitive capabilities and the immovable object of the historical -cost financial accounting model has created a new synthesis: the “Balanced Scorecard.” The balanced scorecard retains financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies of which investments in long-term capabilities and customers relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology and innovation. The Balanced Scorecard complements financial measures of past performance with measures of the drivers of future performance. The objectives and measures of the Scorecards are derived from an organization’s vision and strategy. The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success. Today, organizations are competing in complex environment so that an accurate understanding of their goods and the methods for attainting those goods is vital. The Balanced Scorecard enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth. 

 

Companies using the Balanced Scorecard as the cornerstone of a new strategic management system have two tasks (1) build up the scorecard and (2) use the scorecard. Many companies have performance measurement systems that incorporate financial and non-financial measures. The objectives and measures view organizational performance from four perspectives financial, customer internal business processes, and learning and growth. These four perspectives provide the framework fro the balanced scorecard. In these perspectives, each perspective identity generic measures that show up in most organization’s scorecards such as the following. 

 

The Four Viewpoint of Balanced Scorecard

1. Financial Perspective

The Balanced Scorecard retains the financial perspective since financial measures are valuable in summarizing the readily measurable economic consequences of action already taken. Financial performance measures indicate whether a company’s strategy implementation and execution are contributing to bottom – line improvement. Financial objectives basically relate to profitability – measured for example by operating in come, Return – on capital employed and economic value added. Alternative financial objectives can be rapid sales growth or generation of cash flow.

In the Balanced score card, financial measures play a vital role. They define the financial performances expected form the strategy and they serve as ultimate targets for the objectives and measures of all the other scorecard perspectives. The choice of the appropriate financial measures that company will in cooperation in its balanced scorecard also depends on the business’s life cycle and strategic theme.

Finally, in addition to increasing returns, most organizations are concerned with the risk of these returns. Therefore, when it is strategically important, this organization will want to incorporate explicit risk management objectives into their financial perspective. As a conclusion, it is important to remember that eventually, all objectives and measures in the other scorecard perspectives should be linked to achieving one or more objectives in the financial perspective.

2. Customer Viewpoint

These perspective aims at identifying the customer and market segments in which the business units will choose to compete. The managers should then determine the best measures of the business unit’s performance for these targeted. In this perspective, mangers must first determine core measures that will describe the successful outcomes of a well formulated and implemented strategy. These core measures include customer satisfaction, retention, new customer acquisition, customer profitability, and market and account share in each specific segment. However, these measures present some of the disadvantage of the financial measures: It reflects post performance and we the equivalent of driving by looking in the rear view mirror of your car. This perspective captures the ability of the organization to provide goods and service the effectiveness of all the facilities to customers, which are leads to higher satisfaction. Needs and desires of customers have to be attended properly because customer pay for the organization’s cost and provide for its profit.

3. Internal Business Process

In this perspective, the managers must identify the internal processes that are crucial to their organizations. Those crucial processes are also the ones that should help then deliver superior value to their customer and achieve financial target. This perspective is another example of the superiority of the Balance Scorecard upon traditional performance measures. The Balanced Scorecard go beyond the simple assessment of existing processes, it will usually identify new processes that the organization should implement in order to be successful. In this perspective, Balanced Scorecard should not only consider operations processes but also innovation processes. By incorporating innovation processes measured, the Balanced Scorecard provides a manager with a set of a tool that does not only reflect the short term, but also give in insight of about the long term.

This perspective also focuses on internal result that leads to financial success and satisfied customers. Key process is monitored to ensure that outcomes will be satisfactory.

4. Learning and Growth

This perspective works at the ability of employees, the quality of information systems, and the effects of organizational alignment in supporting accomplishment of organizational goal. Internal business processes will only succeed if adequately skilled and motivated employees, supplied with accurate and timely information, are driving them.

Finally, through the learning and growth perspective, managers identify the organizational infrastructure that would best fit strategic goals. While in the other three perspectives, the managers identify where the organization stands now and where it has to be in the future in order to be successful, this fourth perspective really tells them about how to get three. The learning and the growth perspective have three dimensions: people, system, and organization perspectives. With financial, customer and internal perspective, mangers were able to identify the gaps between existing organizational resources and the ones required being successful.

The only way to close gaps is for the organizational to judicial invest in employees and information technology and to design the most appropriate organizational structures that could support their strategy.

Troubles with Balanced Scorecards

The creation of Balanced Scorecards requires a considerable amount of time on the part of every one whose performance will be measured. Defining corporate strategies can involve substantial amount of time, but the activity that consume the most time is very likely the selection of appropriate measures for the four perspectives. This is simply due to the fact that there are large numbers potential goals and targets and even more ways to measure them. People are likely to disagree about which objectives to measures and how to measure those objectives, and it will take time before consensus is achieved.

The time factor before involved in designing a Balanced Scorecard can be considerable and one factor leading is that the process must involve a lot of people in the organization. Therefore, people have to want to participate so it will go smoother. Their commitment is important not only in building the Balanced Scorecards but a specially a implementing and using it. Although Balanced Scorecards may be well design, lack of participation and commitment on the part of staff will make the Scorecard useless.

Some of the objective selected may be objective and other measures may be subjective, by definition, involve somebody’s judgement and therefore, are more prove to error. Consequently, there is question whether subjective measure should be used and if so how can they make more reliable.

Winding up

The Balanced Scorecards is much more like as “NETWORK” of linked indicators. The strategy of an organization usually is articulated around a set of cause effect relationships. A well-built Scorecard should reflect the intrinsic connections between each aspect of strategy and each of the measures chosen to assess it. The Balanced Scorecard has the advantage that it provides managers with both leading indicators and lagging indicators about their companies. This explains the terms “BALANCED” Scorecard, it balances and links financial and non-financial indicators, tangible and intangible measures, internal and external aspects, performance driver and outcomes.

Print sources Benito 1969, p. 1-76: translation, composite text, commentary Bottéro and Kramer 1989, p. 188-198: translation, commentary Green 1975, p. 170-174: commentary Jacobsen 1987, p. 151-166: translation, commentary Klein 1997: commentary, translation Kramer and Maier 1989, p. 13-14, 31-37, 124, 132-133, 176: commentary, translation Lambert and Millard 1969, p. 42-70: commentary Pettinato 1971: commentary Römer 1993a, p. 386-401: translation, commentary Sauren 1993, p. 198-208: commentary, translation (ll. 4-46) Electronic sources Krecher 1996a: composite text, translation Cuneiform sources AO 7936 (TCL 16 71) BM 12845 (CT 42 28) CBS 2168 CBS 2202 CBS 11327 (all PBS 1/1 4; PBS 10/4 14) CBS 12738 CBS 13368 (SEM 116) N 1889 (photo Kramer SM pl. 17E, Sumerians pl. 16f.) N 2571 ?N 6385 The Electronic Text Corpus of Sumerian Literature (ETCSL) a project of the University of Oxford, comprises a selection of nearly 400 literary compositions recorded on sources which come from ancient Mesopotamia (modern Iraq) and date to the late third and early second millennia BCE. The corpus contains Sumerian texts in transliteration, English prose translations and bibliographical information for each composition. The transliterations and the translations can be searched, browsed and read online using the tools of the website. Funding for the ETCSL project came to an end in the summer of 2006 and no work is currently being done to this site or its contents.
Video Rating: 4 / 5

Find More Sumerians Tools Articles

Incoming search terms:

• balanced scorecard tool in strategic planning (1)
• Strategic planning and Balanced scorecards in Airport Industry (1)

You may also be interested in:

• THE CHALLENGES OF MARKETING INNOVATION FOR A BETTER SUSTAINABLE DEVELOPMENT
• Forty Six & 2 – Tool
• The history and development of Flash Games
• Free Sustainable Magnetic Power – How to Generate Cheap Electricity at Home
• China Abrasives Abrasive Industry Development Status And Trends Analysis
• SUBCONSCIOUS Mind and Thought Development
• TPOH – Consciousness Raising As a Social Tool
• SUMERIAN TOOL CITY
• Tarot a Magical Tool for Divination
• Survival Talents And Planning For Possible Disaster