The Balanced Scorecard Article Review Essay

Published: 2019-10-13 10:40:25
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The balanced scorecard is a financial and operational tool devised by Robert Kaplan and David Norton in the 1980s. Kaplan and Norton recommend four parameters that track both financial and operational metrics and allow executives to see if improvements in one area are coming at the expense of other areas. The balanced scorecard puts strategy and vision at the center and allows mangers to not have to choose between financial or operational measures; but rather give a balanced presentation of all the measures.

The scorecard brings together in a single report the disparate elements of a companys competitive agenda and guards against sub-optimization. The balanced scorecard has four measures: customer perspective, internal business perspective, innovation and learning perspective, and financial perspective. The customer perspective forces the company to see themselves through the customers perspective. Goals for time, quality, performance, service, and cost of products are translated into specific measures.

The internal business perspective allows the company to identify and measure core competencies such as cycle time, quality, employee skills, and productivity. This perspective will identify operational issues that need to be addressed. The innovation and learning perspective allows the company to directly link company value to ability to innovate, improve, and learn. Improving operational efficiencies and penetrating new markets increase revenue and margins; therefore increasing shareholder value.

The financial perspective indicates if the companys strategy, implementation, and execution are contributing to bottom-line improvement. Goals of the financial perspective are to increase profitability, growth, and shareholder value. The main concerns with the balanced scorecard are: do short-term financial goals really indicate operational success; and is the information system used timely enough? Despite these concerns, the balance scorecard does an excellent job keeping companys looking and moving forward in todays business world.

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