Question

Discuss the Balanced Scorecard (BSC) and its key elements; support your discussion by a diagram. Elaborate on the advantages that nonfinancial performance measures have over financial performance measures. 350 words

Answer 1

Balance Scorecard

The Balance scorecard is a method which displays organisation’s performance into our dimensions namely, financial, customer, internal and innovation. The four dimensions acknowledge the interest of shareholders, customers and employees taking into account of both long term and short term goals.

Key elements:

1. Financial

2. customer

3. Internal business

4. Learning and growth

1. Financial:

Financial performance measures indicate whether the company’s strategy implementation and execution are contributing to its revenue and earnings.

The financial objective chosen at the onset of the balance scorecard implemented should serve two purposes:

1.To provide a focus for objective and appropriate measures in each of other three prospective.

2. To provide definite performance that was expected at the time of strategic decisions.

2. Customer :

In this stage company identify customers and market segments in which they compete and also the means by which they provide value to customers and markets. Managers identify the lead indicators which make a particular business unit or product different from that of others. Lead indicator may vary from customers to customers or market segments. By delivering quality as per the customer demand and need, business units can improve outcome measures such as customer satisfaction, retention, acquisitions and loyalty.

3. Internal business:

In this stage companies identify processes and activities which are necessary to achieve the objectives as identified at financial perspective and customer perspective stage. These objectives may be achieved by reassessing the value chain and making necessary changes to the existing operating activities. If maintaining net earnings is the financial objective of a company and after sales service can increase customer retention, then internal business perspective needs to improve after sales services to satisfy customer requirements to maintain earnings.

4. Learning and growth:

Companies, determine the activities and infrastructure that the company must build to create long term growth, which are necessary to achieve the objectives set in the previous three prospective. Organisational learning and growth comes from three principal sources:

Organisational procedure that means motivation, alignment and empowerment

Systems that means informational system capabilities

People that means employee capabilities

Advantages:

· Clear picture: Proponents for the software of the Balanced Scorecard posit that this is a systematic and methodological tool. As such, it is capable to furnish visible potential of how the dreams of the company are being met and the design of motion crucial to gain these goals.

· Company Performance : supporters of Balanced Scorecard say that if it is used correctly, managers will be in a position to reveal overall performance of personnel and create a sketch of motion whilst the corporation will in a position to song the success of the business enterprise in phrases of price range.

· Structure to your strategy : The Balanced Scorecard is a logical, structured way to assist the leaders of your employer make certain that all areas of the employer are protected in an easy-to-understand way.

· Make communication easier: Communication throughout team individuals and departments will become simpler when absolutely everyone is talking the identical language.

Disadvantages:

· Complicated: The framework itself of balanced scorecards takes some time and dedication to understand. There are endless sources and case research to examine from and it’s convenient to get bogged down with the many distinct approaches of the usage of this method.

· Require lot of data: Most of the time balanced scorecards require managers and team participants to record information, which capability logging data.

· Require strong leadership: You might also be having bother with your Balance scorecard due to the fact new management isn’t satisfied that Balance Scorecard is a attainable option—or your current management absolutely may additionally now not like or apprehend the shape.