Question

(1) Description and definition of the concept

(2) the main benefits and limitations

(3) the role in strategic management and decision making.

About : Balanced Scorecard

Answer 1

1.

Description and Definition:

Balanced Scorecard was originally developed by Dr. Robert Kaplan and Dr. David Norton and first published their concept of the Balanced Scorecard in 1992 in the Harvard Business Review, and their first book followed in 1996. Balanced Scorecard is a business framework used for tracking and managing an organization’s strategy. With the help of Balanced Scorecard management can describe the strategy, measure the strategy and track the actions which are required to be taken to improve the results obtained. This framework is based on the balance between leading and lagging indicators, which can be considered as  drivers and outcomes of your company goals. Using these key indicators in Balanced Scorecard tells about acomplishment of goals and tells about that management is working on right track or not.

It is a strategic planning and management system that is used by an organisation to communicate what they are trying to accomplish, segregating the daily routine activities that should be done by everyone with strategy. By using Balanced Scorecard, management can keep track of the execution of the activities by the staff within their control and measure and monitor the consequences of the actions taken .

2.

Main benefits of Balanced Scorecard:

a. Balanced Scorecard keeps a track on strategic performance by reports.

b. It links individuals to the strategy and show them how they contribute to the organization’s goals.

c. Management can communicate the strategy across the organization through balanced scorecard.

d.The Balanced Scorecard can guide the design of performance reports and dashboards.

e. It aligns organisational processes such as budgeting, risk management and analytics with the strategic priorities and create a truly strategy focused organisation.

Limitations :

a. Balanced scorecard systems require a significant investment in managing its system actively and constantly, which increases its financial costs.

b. There is need to train users so that they understand when and how to measure and analyze data ony then they can spot these indicators and then implement an appropriate strategy themselves.

c. All employees should buy into a balanced scorecard system to work effectively and in case employees don't understand how the system works or cannot see its benefits, they may not show their interest in it.

d. Balanced scorecard systems pays no attention on External Factors and Competitors.

3.

Role in strategic management and decision making:

Balanced scorecard plays a vital role in strategic management and decision making as it is considered as strategic management performance metric that is used to identify and improve various internal business functions and their resulting external outcomes. It measures and provides feedback to organizations. An organization may use the balanced scorecard model to implement strategy mapping to see where value is added within an organization. company also uses a balanced scorecard to develop strategic initiatives and strategic objectives.

Balanced Scorecard can be used to guide the design of performance reports and dashboards which leads to higher quality management information and better decision-making. It's wide perimeter of application, promptly demonstrating the tangible and intangible benefits of reconciling financial and non-financial criteria makes decision making process more effectively.