Balanced Scorecard

Organization Theory > Balanced Scorecard

Norton and Kaplan developed the balanced scorecard concept to address the perceived shortcomings in financially oritented performance measurement systems. The balanced scorecard approach supplements traditioal financial measures with non-financial measures focused on at least three other pespectives: customers, internal business processes, and learning and growth. Norton and Kaplan content that “balanced scorecard” concept provides a powerful means for translating a firm’s visioon and strategy into a tool that effectively communicates strategic intent and motivates performance against estabglished strategic goals. Balanced Scorecard has four perspectives.

  1. Financial perspective includes short-term and long-term financial returns such as Return on investment and net income.
  2. Customer perspective shows an increasing realization of the importance of customer focus and customer satisfaction
  3. Business process perspective focus on production and operating statistics.
  4. Learning and Growth prespective focuses on how well resources and human capital are being managed for the company’s future. Like introduction of new products.

Norton and Kaplan argues that development of a BSC provides a number of mechanisms for linking long-term strategic objectives with short-term actions:

1-      BSC forces managers to develop consensus around the firm’s vision and strategy

2-      BSC allows managers to communicate the firm’s strategy throughout the organization

3-      BSC helps firms to allocate resources and set priorities considerng long-term strategic objectives

4-      BSC provides strategic feedback and promotes learning through monitorng short-term strategic results, thereby allowing the firms to modify objectives or strategies before financial measures are down.

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