What is Balanced Scorecard?
In the early 1990s, Balanced Scorecard was developed as a new approach to performance measurement due to troubles of short-termism and past orientation in management accounting (Kaplan and Norton 1992). Balanced scorecard is a strategic planning and management system that is widely used in business and industry, government, and nonprofit organizations to side with business activities to improve internal and external communications and monitor organization performance against strategic goals (Balanced Scorecard Basics n.d)
The balanced scorecard has changed from its simple performance measurement structure to a full strategic planning and management system. The ...view middle of the document...
Examples of the indicators are the measures of supremacy, the number of employees’ suggestions, staff training, employees’ attitudes and inspiration (Kasperskaya 2006).
Internal Business Processes Perspectives
This perspective focuses on the internal business results that lead to financial success and satisfied customers. Organizations must identify the key business processes in order to stand out in meeting organizational objectives and customers’ expectations. Key processes are examined to make sure that outcome will be pleasing. Internal business processes are the instruments throughout which performance expectations are achieved (Hopt et al n.d).
This perspective evaluates the profitability of the strategy such as Improve returns, broaden revenue mix, reduce cost structure return on are used to specify whether the company's strategy implementation are contributing to improvements in the bottom line (Goliath 2004).
This perspective identifies market segments, targeted customer, and determining the company’s success (Horngren et al 2009). The aim is to increase customer satisfaction with the company’s products and people as well as to increase satisfaction ‘after the sale’ (Norreklit 2000).
Benefits of implementing balanced scorecard
Recognizing some of the disadvantages and indistinctness of previous management approaches. In order to balance the financial perspective, the balanced scorecard provides a clear recommendation as to what companies should measure. Balanced scorecard is not only a management system, it is also measurement system that allows organizations to illuminate their vision and strategy and then translate them into action. It provides opinion around both the internal and external business outcomes in order to improve strategic performance and results (Balanced Scorecard Basics n.d) According to Kaplan and Norton (1996), they describe the innovation of the balanced scorecard as follows: "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer 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”.
Obstacles and key factors of implementing balanced scorecard
The organization adopts too many indicators
The company will lose focal point and wouldn’t be able to find any linkage between indicators. The key factor is to obtain only the indicators that replicate strategy (Kaplan and Norton 2001).
Lack of senior management commitment
The most common reason that causes failure are the allocation of the plan to middle management and defining the plan as...