Balanced Score Card Research Paper

Balanced Score Card

Balanced Score Card was first introduced by David Norton and Robert S. Kaplan in 1992 in a Harvard Business review article. This concept is based upon the idea of measuring the vision of the organizations and expressing it in numbers. The underlying belief is that if it cannot be measured then it cannot be improved. [1] Balance scorecard is a strategic management and planning tool used by both profit and non-profit organizations to align business activities to the vision and strategy of the organization. It provides the organization with feedback of both internal business processes and external outcomes which allows for continuous improvement of strategic performance and results obtained. Strategy

Bargaining power of customers – Consumers always demand the lowest price. Organizations should be able to provide their products or services at the competitive price to satisfy the customer without compromising the company’s profits. This can be further reduced with product differentiation.

5. Bargaining power of input suppliers – To reduce the cost of manufacturing, cost of input material and labor should be reduced. Various techniques can be used to reduce the cost of labor and input material. Every organization has both long term and short term goals. Balanced scorecard focuses on long term goals along with the short term goals. Short term goals generally focus on the financial targets such as quarterly earnings while long term goals on the product’s overall quality, customer satisfaction etc. This also emphasizes the non financial objectives of an organization that help in meeting its financial objectives. Balanced score card measures organizations performance in four perspectives:

• Financial -- This perspective will measure the profitability of the strategy and the value created for

• Learning and growth -- This perspective identifies the capabilities that the organization must excel at to achieve superior internal processes that in turn create value for customers and shareholders.

Fig 1: Balance scorecard [2] Balanced scorecard helps the organization in balancing both financial and non-financial measures by evaluating both short run and long run performances in a single report. This reduces the management concentration on short run financial performance and increases the concentration on long-run key, strategic, non-financial and operational indicators. In the for-profit organizations, the main use of balanced scorecard is to maintain long-run financial performance where non-financial measures serve as the indicators for financial performance. While measuring each of the four perspectives, there are four sub parts which need to be analyzed:

• Objectives

• Measures

• Targets

• Initiatives Objectives: What is the objective that has to be achieved in that perspective? Measures: How the progress of the objective is