The Balanced Scorecard 1

THE BALANCED SCORECARD

by Student’s Name

Code + Course Name

Professor’s Name

University Name

City, State

Date
 The Balanced Scorecard 2

Introduction

Since people began transacting, men and women globally have vowed to convey

goods and services however most have neglected to deliver. Reasons for such discrepancy is

referred to as over-promising and under-delivering (Hoque, 2012). Moreover, the reason as to

why most people fail to deliver despite the technology being a point of convergence in the

present business world is the way that numerous businesses and workers neglect to direct a

performance assessment. Disregarding performance measurement tends to be the reason as to

why there is no accountability, despite promises made. No consequences exist for promise

makers if they choose to finish and convey on the off chance that they realize that their

performance won't be estimated. Hence, the reason why workers need an ounce of

performance as Mae West states, and this is achieved when there is a balanced scorecard in

the workplace. With this in mind, the development of this paper will succinctly focus on

balanced scorecard.

Background

Mae West in his volumes of the present business condition cites that, the truth of the present

business condition is that anybody in the business environment has once been tricked of

empty promises that lead to empty promises. Often, people focus on incentives in the

business environment through bonuses and rewards creating enormous incentives driving

people to under-deliver and overpromise (Dechow, 2012). The challenge isn’t on the absence

of conveyance, however absence of restorative activity, for example, performance

examination that pursues a fizzled endeavour. Hence, the failure of making corrective actions

is what leads to bad performance measures, and in-turn results in poor decision making

(Bessire & Baker, 2005).

Most analysts in the 1980s argued that organizational performance is mainly measured

through finances. Lucianetti (2010) quotes that profits measures are assessed through past
 The Balanced Scorecard 3

performance and long term key execution which need forward-looking measures. Aidemark

(2001) contends that figures achieved from bookkeeping frameworks don't bolster interest in

innovation, inside auxiliary structures and client centricity. Dr. Robert Kaplan from Harvard

University in 1990, raised a worry that financial estimates alone can't give enough insights

into a company’s potential of delivering consistent growth. Kaplan conducted a research

study to effectively determine the practices that can be used in showing performance

measurements by U.S corporations.

In 1992, Kaplan and Norton published “The Balance Scorecard-measures that drive

performance”. This study aimed to show how one can assess a balance scorecard activities

which are both tangible and intangible assets of a firm (Kaplan & Norton, pg.70).

Performance management that is based on internal financial information is denoted as

unresponsive and obsolete to activities done by an organization. The reasons behind the

balanced scorecard were to shift an organization's thought from the financial basis of

measurement to an encompassing methodology that coordinates the four viewpoints of an

organization's prosperity: nature of inside tasks, development, and learning, financial

checking, and clients. Additional time, the Balanced Scorecard has advanced from a multi-

point of view execution of estimation framework to a progressively mind-boggling technique

for the board and arrangement of control.

For the last 20 years, there has been a high transformation of execution estimation

structures, the Balanced Scorecard is viewed as the most well-known, Hoque & Kaplan

(2012) shows that more than 700 organizations in the U.S. are dynamic clients of this system.

A functioning client in this situation alludes to an organization that uses both financial related

and non-financial measures in the management of strategy and performance.

Methodology
 The Balanced Scorecard 4

The Balanced Scorecard is a strategy that has been used in the management of systems

that have been extensively used in businesses and industrial workings (Lucianetti, 2010). Its

primary aim has mainly been to align a business vision, mission, objectives and monitoring a

company’s performance against the whole comprehensive goal. BSC has been used to

transform a business goal and its strategies such that it becomes more attractive.

On the other side, it also has a crucial role in an organization such that it’s able to

attain success in a single form of activity. Primarily, the Balanced Scorecard is used in the

measurement of performance, thus it provides ways we view the whole organization strategy

as one. The utilization of BSC provides organizations with the chance of measuring their

employee attention to important matters, as it offers a common language of communication

(Lucianetti, 2010).

Findings

The Balanced Scorecard serves as a perfect approach in the measurement of

performance. In the past, there we many performance measurements, but the challenge that

emerged is that those tools never had a perfect solution. Traditional performance

measurement mostly failed and was costly and failed to provide exact results (Hoque, 2012).

Hence, the introduction of Balanced Scorecard which deals with these challenge in

management.

To explain this, perhaps developing a hypothetical example of an oil firm would be

good. Take the case of the oil firm considering to invest in offshore activity, but it knows

they will face a significance ecological consequence. Using technical analysis, the senior

managers would conduct a cost-benefit analysis of the impact it would have on the firm.

Similar to technical analysis, a social analysis would be necessary which will be based

information on the effect of investment and incentives. These two factors will play a crucial

role in senior managers before investing. In contrast, to explain the notion of BSC using
 The Balanced Scorecard 5

Mobil, (Kaplan 2001, pg. 29) never used social considerations such as how employees

reacted or interacted with the BSC framework. Hence, there is a critical need for assessing an

organization's technical and social analysis before utilizing the BSC framework in an

organization.

Discussion

As discussed earlier, Kaplan and Norton's aim when devising the Balance Scorecard

framework was to deal with the problem of performance management that is a core challenge

for most companies (Dechow, 2012). The framework tends to have some benefits to those

organizations utilizing it, they include; provision of ways that an organization can effectively

use it non-financial performance measures in combination with financial measures to create a

balanced perspective. Besides being viewed as a new framework, it doesn’t replace the

traditional strategies of management but instead adds value to them (Bessire & Baker, 2005).

It also creates a focal point that organizations use to focus on vital information that could

develop significant areas of business. BSC framework also creates a link between inputs,

processes, and output that are critical for effective management. Most scholars have indicated

that the biggest advantage that’s associated with the BSC framework is mainly versatility.

Other scholars have also stated that BSC plays a crucial role in IT evaluation function in an

organization, but it remains an area of discussion in the business arena.

Despite the many benefits of the BSC framework, similar to other frameworks it also

has limitations. For instance, the framework shares a common risk with SWOT analysis

known as SWAG (Scientific Wild-Ass Guess), which is returning poor results if the right

information is not availed (Cooper et al, 2017). Secondly, the BSC framework also tends to

be less effective in that the design is created in a way that provides equal weight to all four

core perspectives, while in practice. For instance, a non-profit organization would want to

have a strong customer perspective and a lower focus on financial outcomes, therefore failure
 The Balanced Scorecard 6

to adjust the BSC perspective such that it reflects priorities, the business might end up

lowering its effort towards the achievement of its objectives.

Recommendations

Studies associated with Balance Scorecard mainly indicate that interpretation and

understanding of the framework need to be done in different ways. Therefore, for effective

interpretation and understanding of how the framework can be implemented, Al Sawalqa et

al., (2011) states that the interpretation of the BSC framework is appealing for a large number

of users in a different context, however, the interpretation of the framework is dependent on

different factors such as background and specialization. Therefore, it is recommendable for

organizations to spin on BSC, such that they have a clear focus of divergent interpretation of

the framework being implemented as they gain exposure to different versions of the

framework.

On the other hand, when it comes to the adaptation of the Balanced Scorecard. It is

recommended that an organization develops its unique user’s situation and needs. A recent

review by (Hoque, 2012) shows that the customization and adaptation of the framework in an

organization need to be done in a variety of ways depending on the practice. Hence, the BSC

framework shouldn’t be observed as a “straight jacket” that’s being applied in a specific

manner.

Still, some scholars have further advanced the view of the BSC framework to the so-

called boundary object. Aidemark (2011) has a theoretical perspective which recommends

that BSC should be viewed as a plastic concept that contains particular primary elements that

are identified across several adaptation and translations. Typical elements that are found in

the BSC framework include; customer, learning growth, finance, and internal processes.

Hence, it’s recommendable for an organization to effectively interpret the unique situation

and specific issues before utilizing the Balanced Scorecard.

Conclusion

Based on the discussion, it’s evident that the Balance Scorecard plays a crucial role for

managers in decision making. Most literature has cited its significant role in strategic

management of systems, financial perspective associated with a company, customer

perspective, and internal business processes. It also has a critical role in business planning,

especially in cases that involve vision setting and financial goals. In the future, researchers

need to ask to gather more knowledge on perceived benefits and problems related to BSC

impact. The reason being, most studies have concentrated on challenges and failed

implementation, and just a few success stories have been reported in the literature. Still, there

is a need for studying the effect of the BSC concept if it’s stronger than other management

concepts? Are there ways in which BSC is contagious in management? Since the concept has

been denoted to reach maturity in life-cycle.

References

Abdel-Kader, M., Moufty, S. and Laitinen, E.K., 2011. Balanced Scorecard development: a

review of literature and directions for future research. In Review of management accounting

research (pp. 214-239). Palgrave Macmillan, London.

Aidemark, L.G., 2001. The meaning of balanced scorecards in the health care

organisation. Financial accountability & management, 17(1), pp.23-40.

Al Sawalqa, F., Holloway, D. and Alam, M., 2011. Balanced Scorecard implementation in

Jordan: An initial analysis. International Journal of Electronic Business Management, 9(3),

p.196.

Hoque, Z., Barnabè, F. and Busco, C., 2012. The causal relationships between performance

drivers and outcomes. Journal of Accounting & Organizational Change.

Bessire, D. and Baker, C.R., 2005. The French Tableau de bord and the American Balanced

Scorecard: a critical analysis. Critical Perspectives on Accounting, 16(6), pp.645-664.

Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea:

The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.

Dechow, N., 2012. The balanced scorecard: subjects, concept and objects–a

commentary. Journal of Accounting & Organizational Change, 8(4), pp.511-527.

Hoque, Z., 2012. 20th Anniversary of the balanced scorecard. Journal of Accounting &

Organizational Change, 8(4).

Kaplan, R.S. and Norton, D.P., 1992. The Balanced Scorecard-Measures that Drive

Performance/Harvard Business Review, January.

Hoque, Z. and Kaplan, R.S., 2012. The balanced scorecard: comments on balanced scorecard

commentaries. Journal of Accounting & Organizational Change.

Kaplan, R.S. and Norton, D.P., 2006. Alignment: Using the balanced scorecard to create

corporate synergies. Harvard Business Press.

Lucianetti, L., 2010. The impact of the strategy maps on balanced scorecard

performance. International Journal of Business Performance Management, 12(1), pp.21-36.

Niven, P.R., 2005. Balanced scorecard diagnostics: Maintaining maximum performance.

John Wiley & Sons.