In: Accounting
Select one of the tools mentioned in the textbook reading this
week, such as balanced scorecards, responsibility accounting, or
graphs. Discuss how it can be used to provide information to
managers for decision-making purposes. Provide examples to justify
your response.
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Hi, I’m sure many of us will be selecting the balanced scorecard for our discussion since it looks like it’s an essential tool for today’s business. I liked the following quote that I saw in one of my readings: “Building a scorecard can help managers link today’s actions with tomorrow’s goals” (Kaplan & Norton, 1996).
The balanced scorecard is a set of performance targets and results that show an organization’s performance in meeting its objectives to its stakeholders. It is therefore a responsibility tool towards the different stakeholder groups, such as employees, suppliers, customers, business partners, the community, and shareholders. Often different stakeholders have different needs or desires that the managers of the organization must balance. The concept of a balanced scorecard is to measure how well the organization is doing in view of those competing stakeholder concerns.
Traditionally, business organizations have focused on financial results, which mainly have reflected the shareholders’ interests. In recent years, organizations have shifted attention to customer issues, such as quality and service, to employees, and to the community. For example, Ben & Jerry’s Ice Cream measures its social performance along with financial performance and presents a social audit in its annual report next to its financial audit.Johnson & Johnson’s code of conduct makes it clear that the company has a responsibility to several competing stakeholders.
The balanced scorecard has been developed and used in many companies. It primarily has been used at the top management level to support the organization’s development of strategies. For example, Kaplan and Norton describe the development of the balanced scorecard at an insurance company as follows: