Question

How does the Balanced Scorecard approach differ from traditional approaches to performance measurement. What, if anything, distinguishes the balanced scorecard approach from a “measure everything, and you might get what you want” philosophy?

Answer 1

Ans.     The Balanced Scorecard approach allows a company to transfer their strategies, objectives and missions into performance measures. Its goal is to assist the organization complete and manage the strategies it has established. The scorecard focuses on four perspectives:

1. financial,
2. customer,
3. processes
4. learning and growth.

By doing this, the organization can focus on the measurement to ensure the entire group understands the information.

the Balanced Scorecard provides a map of a business’ strategic objectives. This is different from traditional approaches as they only focus on financial data. These traditional approaches will provide information about the past results of an organization, but they are not well suited to predict future performance or for implementing and controlling the organization’s strategic plan it has established.

In addition, the Balanced Scorecard also examines intangible assets such as customer loyalty and the skills of a staff. Traditional approaches are less capable of examining or reporting on the intangible assets. On the other hand, with such a system, like the Balanced Scorecard, in place, a company can determine whether it is building or destroying its capabilities for future growth and profitability.

Unlike the “measure everything, and you might get what you want” philosophy, the Balanced Scorecard measures organizational performance across those four perspectives. These perspectives are different and yet, on the other hand, linked as they are all derived from the organization’s mission, vision, and strategy. Without the measures being linked to each other, they provide little value to the leadership of a company. In addition, the Balanced Scorecard also provides important information and feedback for how well a company’s strategic plan is working for them. This allows for easier adjustments to be made in the future. Finally, by limiting the amount of variables, the company avoids information overload from occurring and creating more confusion.