The balanced scorecard not only focuses on the financial information but also nonfinancial information. However, with the rapid development the value of intangible assets such as intelligence becomes more important. Because the traditional management performance system always focuses on financial aspect. According to Martinsons, Davison and Tse, nowadays the modern companies should focus on market segments not only the financial measures and also need to improve the technology to develop the processes.
It means financial measures are not only method to do decision making. One problem is that the value of the intangible assets created by employees such as intellectual property and competitive advantage can not be fully reflected in the financial measures.
In addition, financial measure is suitable for managers to make short-term decisions rather than long-term decisions Kang and Fredin, To some extent, balanced scorecard can avoid these problems.
The balanced scorecard includes both financial and non financial information, it help managers to balances short-term and long-term interests when they make decisions Kang and Fredin, Balanced scorecard objectives and metrics are linked, this linkage includes not only the cause-and-effect relationship, but also including outcome measures and results in a measure of combined, ultimately reflected in the organizational strategy. In fact, recently the balanced scorecard has been used by 60 percent of Fortune companies in the world Lipe and Salterio, , p Financial measure is the important one in balanced scorecard; it define the long-term goals in decision making, and it also can reflect the corporate strategy, shareholder satisfaction, strategy implementation and enforcement which are to contribute to improving the profitability of company.
Financial measures are usually associated with profitability, operating income, return on capital, economic value added measure, or may be the rapid increase in sales and to create cash flow.
The customer perspective indicators usually include market and account share, customer satisfaction, customer retention, customer acquisition and customer profitability. Hence, the managers can throw these information to clarify the need of customers and market strategies, and then to create an excellent financial return.
In this perspective, managers should confirm the organization the key internal processes, these processes can help business units to provide value proposition to attract and retain customers in the target segment market, to complete the corporate financial objectives and to achieve shareholder expectations of excellent financial returns. In fact, this strategy is always formulated after evaluating financial and customer perspectives. Hence, it is closely linked to customers.
It emphasizes that if the enterprise want to create long-term growth and improvement, they should establish the foundation of framework. It is a future key successful factor.
The another three perspectives of the balanced scorecard will generally reveal the actual ability of the enterprise with the necessary breakthrough performance gap between the ability, in order to bridge this gap, companies need to invest in improving employee technology, organizational procedures and the management system, these are the goals that balanced scorecard learning and growth perspective pursuit for, such as employee satisfaction, employee retention, employee training and skills, and the drivers of these indicators.
Balanced scorecard is an effective system to evaluate the performance. According to Shutibhinyo , p4 , companies usually use balanced scorecard to achieve their both short-term and long-term strategic goals, to communicate with the strategy to guarantee that employees has the same working objectives, and based on company strategy to align and integrate corporate planning.
It indicates that balanced scorecard reflects the balance between the financial and non-financial measure, the balance between long-term goals and short-term goals, the external and internal balance, the results and the process balance, the management performance and results of operations balance.
They reflect the organization operating conditions, contribute the performance evaluation tends to balance and complete, and it improve the long-term development, it is conducive to the development of organization.
In fact, many companies have been benefited from balanced scorecard. The result is rapid and dramatic. Adverse cash flow changed dramatically and the investment rate returns to the top among the same industry. And we have a conversation.
In the past we were a bunch of controllers sitting around talking about variances. What should we keep doing, what should we stop doing? What resources do we need to get back on track, not explaining a negative variance due to some volume mix. The process enables me to see how the NBU managers think, plan, and execute.
Another successful example is Chemical Retail Bank, the Balanced Scorecard was introduced in to help banks absorb and merge another bank, the introduction of an integrated financial service, to accelerate the use of electronic banking.
Balanced Scorecard emphasizes the causal relationship in performance evaluation system, by the completion of the financial perspective, customer perspective, internal business, and learning and growth assessment indicators to achieve the ultimate financial goals.
Here, balanced scorecard is used to associate the original objectives and the translation of management strategy Figge, Hahn, Schaltegger and Wagner, , p Apart from this, the study by Davis and Albright , p pointed out that the balanced scorecard can improve the financial performance to some extent, they supposed that compared with the traditional management accounting system, it can improve the financial performance. That means even in financial perspective the balanced scorecard performance system is still better compared with the traditional system which only focus on financial information, so in fact, because balanced scorecard have four perspectives which were connected with each effectively, to some extent it will improve not only financial performance of organization but also another performance.
It is obviously that balanced scorecard have many beneficial perspectives in organization performance system, but how it work effectively with organization strategic management system? A role of balanced scorecard in strategic management accounting According to Figge, Hahn, Schaltegger and Wagner , p , the balanced scorecard provides a valuable methods for managers, managers need a model which includes both financial and nonfinancial measures, with the cause relationship between customers, financial, internal business process, and capabilities.
That supported that balanced scorecard is an effective system for many companies, but in fact it is not suitable for every companies. Through the literature review, balanced scorecard is suitable for these organizations: Lack of effective employee performance management system. The company which hope to achieve breakthrough performance. The firm hopes to achieve long-term development and to create a famous brand. The company needs standardized management; improve the overall management level and improve organizational strategic management capacity.
The firm which want a faster response with the market. Implementation difficulties and solution. There is no doubt that balanced scorecard is a successful performance evaluation system, but in fact how to use balanced scorecard efficiently is hard to do. In fact, sometimes balanced scorecard may not be a suitable for some companies, because balanced scorecard is not easy to implement.
According to Norreklitt , p , he address an example, if now is a raining weather, the floor will be wet, but conversely, it can not be concluded that if the floor is wet, the weather must be raining, it may be snowy or just sprinkled by automatic sprinkler. There will be a lot of restructuring within the company. The question to be answered is: How can Holland Flower Market function better? The question will be answered by making and applying the Balanced Scorecard.
First there will be a literature review about the balanced scorecard. What is the balanced scorecard and what does it consist out of? The next section will discuss Holland Flower Market. This chapter will tell the background story of Holland Flower Market, the will depict the finances of the company and the views of the staff and customers. This will be followed by the application of the balanced scorecard for Holland Flower Market. And the last section will give the conclusion.
The origins of the balanced scorecard can be traced back to when the Nolan Norton institute started researching other ways to measure performance. Till then most companies reviewed their companies performance solely on financial measures. The study was started because there was a believe that performance measures based solely on finances were becoming obsolete. The study participants believed that focusing entirely on financial measures hindered companies' ability to create future economic value.
Two of the participants of the research were David Norton and Robert Kaplan and with the study the concept of the balanced scorecard was born. This led to the article: Measures that drive performance , where the duo published their findings. And this was followed by their book: Translating Strategy Into Action The balanced scorecard consists out of four perspectives, namely: An organization has to translate its mission and strategy into one of these perspectives.
By defining the organizations mission and vision into all of these perspectives a clear day-to-day plan in how to achieve these missions and visions will commence. In addition, the BSC extradite a cause-and-effect relationship between all the perspectives. The perspectives have a hierarchical order Bryant, Jones and Widener, It will start with the learning and growth perspective, followed by the internal business process perspective then comes the Customer perspective and finished with the financial perspective.
The outcome of a lower-level perspective may be an indicator or predictor of a higher-level perspective. The main question that has to be answered for the learning and growth perspective is: Can we continue to improve and create value? The objectives in the learning and growth perspective is to enable ambitious projects to be achieved in the other perspectives. It offers an infrastructure for the other three perspectives and that is why it is the first perspective in the hierarchy.
In this perspective managers need to define the employee capabilities and skills, technology and corporate climate needed to support a strategy Kaplan and Norton, , The three main categories for the learning and growth perspective are therefor: Kaplan and Norton, Managers must base their objectives in these categories. To better the company in this perspective significant investments in people, systems and organizational alignment are necessary. The main question to be answered here is: Where do we must excel at?
This perspective consists out of a generic view of the value chain in the internal business process. The value chain includes, innovation, customer management, operational, and regulatory and environmental processes. It has to make objectives to better new products and services and further market penetration. The value chain has to be made more efficient.
The outcome of the Internal Business Process Perspective provides a base for the customer perspective. By making products and services better and make the whole process more efficient, customers will be more satisfied. How do customers see us? Is the essential question to be answered. This perspective offers the company to align their core customer outcome measures, satisfaction, loyalty, retention, acquisition and profitability. And by knowing this information the organization knows which customers and market segments to target.
It is important for a company to be aware of its target customers and market segment to align its products and services to the demand. Companies that do not recognize this see themselves fall behind their competitors.
Managers must also choose which value propositions to achieve for their targeted customer segment. Managers can select objectives in three classes of attributes, and when they satisfy these objectives it will enable the business to retain and expand.
The three classes of attributes are: Product and service attributes, customer relationships and image and reputation. When managers keep these attributes in mind, and make objectives across them they can maximize the value of their targeted customer segments. The last part of the BSC hierarchy is the financial perspective and also the most important.
Traditionally companies solely based their performance revues on how they did financially. The main question to be answered is: How do we look to shareholders? The financial perspectives has two purposes, on the one hand it gives a financial view on how a certain strategy works out.
And on the other hand it measures how well the other goals from the other perspectives do.
The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The "new" balanced scorecard transforms an organization's strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis.
The balanced Scorecard is a report consisting not only out of financial measures but also consists out of non-financial measures. The balanced scorecard consists out of four different perspectives; financial perspectives, customer perspective, innovating and learning perspective and internal business perspective(Kaplan and Norton, ).
Balanced Scorecard of Shari’s Beauty Line Business - Introduction The balanced scorecard can be defined as the system that manage the strategic planning of the organization and assist the . A role of balanced scorecard in strategic management accounting According to Figge, Hahn, Schaltegger and Wagner (, p), the balanced scorecard provides a valuable methods for managers, managers need a model which includes both financial and nonfinancial measures, with the cause relationship between customers, financial, internal business process, and capabilities.
Custom Balanced Scorecard Essay Writing Service || Balanced Scorecard Essay samples, help Introduction of the spark plug in the United States has brought a great impact on the automotive manufacturing industry. Balanced scorecard is strategic planning and management system used for business and industry, government, non profit organizations worldwide. it is used for business activities like vision and strategy of organization to improve internal and external communication to monitor .