Introduction to Balanced Scorecard
The Balanced scorecard is a strategic tool businesses use to enhance their internal operations and external outcomes. It gives a framework for organizations to focus on the aligned process that supports achieving objectives in the financial sector. Basically, the balanced scorecard incorporates four key principles and contributes to adding value to the organization. Those principles, such as financial performance, internal business process, customer focus, and learning and development. With the help of these areas, the balanced scorecard helps to evaluate the performance indicators in the financial performance and provides a vital role in the success of the organization.
Characteristics of Balanced Scorecard
The balanced scorecard model analysis and gathers the data from different areas of business.
1. Financial performance
The financial performance of the business includes data such as cost, sales, and profits to analyze and assess the financial health of the business and organization. The financial indicators involved in the figures, such as profit margin, change, revenue, income, and discrepancies (Tarver, 2024). This involves financial goals and values. There is also tracking of financial indicators that are profitability, revenue, and return on investment.
2. Perspective of the customer
To evaluate the satisfaction of the customer about the product, pricing, quality, and availability, the feedback is collected. It supports in measuring how well the company is meeting the expectations of customers. The important elements such as customer satisfaction, quality of service, and satisfaction are measured in the competitive market. Accordingly, the satisfaction surveys reveal how much the customer is satisfied with the product and enhance the brand reputation.
3. Internal business process
This aspect looks at how efficiently a company produces the services and goods. It includes the operations to identify the factors such as delays, issues, and inefficiencies regarding the business. The issues related to wastage, shortage, and bottlenecks (Al-Kaabi, Chehab, & Selim, 2019). This also includes the key performance indicators such as quality, turnover, and cycle time of products.
4. Learning and growth
This learning and growth examine the effectiveness of training of employees and the availability of required knowledgeable resources. As a major focus on how well the organization captures and utilizes the information. At this point, it measures the utilization of employees’ knowledge to gain the competitiveness in the market. Therefore, there should be a culture with continuous improvements and skill developments to enhance the success in the organizations.
Balanced Scorecard
Benefits of Balanced Scorecard
1. Strategic alignment
The major advantage of the balanced scorecard is the ability to manage and align the efforts of the organization and strategic goals. It acts as a bridge to ensure the company’s mission and vision are reached with the involvement of departments and various employees (Boyle, 2011) Moreover, this allows to set the objectives to everyone and understand how it supports the company’s long-term success. Enables communication across different levels in the organization to contribute towards success and overall execution of strategies.
2. Performance measurement
The balanced scorecard provides a well-grounded approach to incorporate both financial and non-financial metrics to better understand the performance of the organization. Moreover, It helps to assess the performance across 4 principles by measuring the indicators (Ali & Sumaira, 2024). Also, the indicators provide an opportunity to make necessary adjustments regarding complex problems. For example, it involves customer satisfaction for any product and results in challenges such as low productivity.
3. Improved decision making
One of the main advantages of the balanced scorecard is enhancement in decision-making. Earlier, in the traditional systems, there was involvement of return on investments and profits. However, the balanced scorecard analysis provides performance and enhanced decisions. Includes nonfinancial metrics such as efficiency, training of employees, and satisfaction of customers. It measures the levels of customer satisfaction to enhance the quality of the product and finally attain long-term success.
4. Enhanced communication
The effective communication provides a common performance measurement to all the employees. It ensures that everyone is in line with the company strategies. Particularly, transparency fosters the accountability and alignment of employees in the work of the organization. It also sets the standardized performance metrics to collaborate and put more efforts in achieving the common goals (Yawson & Paros, 2023). Communication leads to better problem solving and quick decision making.
5. Customer Focus
It is very important to focus particularly on the priority of customers in the market position. The Balanced scorecard helps the organization to maintain retention and customer satisfaction with a customer-centric approach. This also enables feedback from customers about the quality of the product and issues regarding the satisfaction. Moreover, this helps the organization to meet the expectations in the business and enables a long-lasting relationship with customers.
Balanced Scorecard Strategies
Use case of implementation of BSC
Apple Inc
There is a great competition in innovation. Apple has used a balanced scorecard aligned to the development of products. Simultaneously, it followed customer needs and met financial goals. It prioritized parameters such as the satisfaction of the customer, employee learning, and internal processes. Subsequently, this improved the quality of the Apple product. Also, it has maintained its competitiveness in the market.
Ford Motor Company
Ford is a major company with a balanced scorecard application and operations. Focused elements such as, financial metrics, customer feedback, and employee development. Thus, this approach helped operational excellence and led to financial success.
Conclusion
The Balance scorecard provides performance measurements towards financial and non-financial metrics. In summary, there are four key areas such as financial performance, customer perspective, internal business processes, and learning and growth. It provides operational success and guides for a better future. This leads to more focused financial metrics such as cost, profits, and revenues. Especially, enhanced communication is one of the major benefits to implement standardized metrics. Both the companies Apple and Ford company successfully implemented a balance scorecard to enhance operational excellence in the market. With all things considered, this supports companies to stay competitive in the fast-changing business environment and drives towards success.
References
Ali, A., & Sumaira, D. (2024). Balanced Scorecard as a Strategic Tool for Performance Measurement in the. International Journey of Multidisciplinary Research, 2(11), 848-858. Retrieved from https://www.researchgate.net/publication/387185563_Balanced_Scorecard_as_a_Strategic_Tool_for_Performance_Measurement_in_the_FMCG_Sector_A_Conceptual_Analysis
Al-Kaabi, S. K., Chehab, M. A., & Selim, N. (2019). The Balanced Scorecard as a Performance Management Tool in the Healthcare Sector – The Case of the Medical Commission Department at the Ministry of Public Health, Qatar. National Library of Medicine, 11(7), 1-10. Retrieved from https://pmc.ncbi.nlm.nih.gov/articles/PMC6764650/
Boyle, I. O. (2011). PERFORMANCE MANAGEMENT AND THE BALANCED SCORECARD IN THE MODERN NON-PROFIT ORGANISATION. Corporate Board: Role, Duties & Composition, 7(1), 48-56. Retrieved from https://www.researchgate.net/publication/311579898_Performance_management_and_the_balanced_scorecard_in_the_modern_non-profit_organisation
Tarver, E. (2024, Nov 13). What Is a Balanced Scorecard (BSC): Examples and Uses. Retrieved from Investopedia: https://www.investopedia.com/terms/b/balancedscorecard.asp
Yawson, R. M., & Paros, A. K. (2023). Systems Perspective of the Use of the Balanced Scorecard for Organization Development and Change. Sage Journals, 13(4), 1-10. Retrieved from https://journals.sagepub.com/doi/epub/10.1177/21582440231218064
Keywords
Balanced Scorecard, Financial metrics, Performance Management, Internal business process, Strategic tool
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