Business Used A Balanced Scorecard To Build Strategy ✓ Solved

Business Used A Balance Scorecard To Build Strategy Create Planning

Business used a balance scorecard to build strategy, create planning, and manage communication, optimize and monitor procedures, create alignment on a day to day basis, and predict future opportunities (Marcu, Gheorghe, 2020). A company uses a Balanced Scorecard’s two indicators - one is a leading indicator and another one is a lagging indicator, to identify the driving components and potential outcomes of a business’s goal (Senarath, S.A.C.L., Patabendige, S.S.J. b, 2015). With these indicators, companies can measure success, track performance, and accomplish their objectives. It is a great business framework that helps a company to connect resources and information across various business components.

For example, a finance analyst can use a balanced scorecard to understand what business sources are connected to a project, what strategic approaches a company has, what kinds of metrics to measure success, the big picture and long-term goal of a company, a company’s mission statement, and a vision. To create and build business objectives, a company usually uses four major perspectives of a balanced scorecard.

Four Perspectives of a Balanced Scorecard

Financial / Stewardship: Uncover insights into a company's financial performance and identify financial goals. For example, how much revenue to generate or costs to be saved that can help a company increase competitive advantage and create greater financial impact.

Customers & Stakeholders: Identify demands of customers and stakeholders. For example, what products or services our customers want? What offerings could we provide to create a bigger impact on the company’s financial position?

Internal Process: Identify internal processes that can help a company satisfy customers or stakeholders and achieve financial goals. For example, how do operations and marketing processes look, and how can cross-functional departments follow processes to align actions and achieve shared objectives?

Organizational Capacity / Learning and Growth: Identify the institutional capacity to build and follow processes to increase customer satisfaction and achieve financial goals. For example, what kinds of employee training programs, company culture, and human resources does a company have to fulfill customer demands and accomplish financial objectives?

Many different types of organizations, such as tech companies, non-profits, marketing agencies, healthcare firms, and manufacturers, utilize balanced scorecards. The primary purpose of a balanced scorecard is to serve as a performance measurement tool that helps organizations improve internal functions, monitor performance, and provide strategic feedback.

This methodology begins with identifying relevant financial and non-financial measures aligned with strategic priorities. Subsequently, organizations analyze these measures and set targets for improvement (Lim, Sandra 2019). The balanced scorecard is widely adopted across industries and government sectors to ensure that organizational efforts are aligned with strategic objectives.

Perspectives in Detail

The financial perspective focuses on how the organization manages its financial resources, including revenue generation and cost management. Customer satisfaction perspective evaluates how well the organization meets customer expectations and stakeholder demands, with emphasis on customer perception and experience. The internal process perspective assesses the efficiency and quality of operational processes that deliver products or services, aiming for continuous improvement and innovation.

The organizational capacity perspective emphasizes the performance of the company's employees, infrastructure, technological capabilities, organizational culture, and leadership. It recognizes that these internal factors are crucial for sustained performance and strategic success. For example, organizations invest in employee training, foster positive culture, and leverage technology to enhance productivity and meet strategic goals.

Particularly in the last few decades, information technology (IT) organizations have extensively employed the balanced scorecard to align IT strategies with broader business objectives. This alignment ensures that IT initiatives support organizational goals, improve service delivery, and optimize resource utilization. As such, the balanced scorecard offers a comprehensive framework for strategic planning, organizational performance measurement, and continuous improvement.

The Impact and Benefits of Using a Balanced Scorecard

The balanced scorecard enables organizations to balance financial and non-financial measures, providing a holistic view of performance. It facilitates communication across departments, fosters aligned strategy execution, and improves decision-making. By tracking critical metrics in multiple perspectives, companies can identify weak links, innovate processes, and enhance overall efficiency. This approach is especially beneficial in dynamic environments where organizations need to adapt quickly and strategically.

Furthermore, the balanced scorecard promotes a culture of strategic thinking and accountability, ensuring that all levels of the organization understand and contribute to overarching objectives. Its flexibility allows customization for various sectors and organizational sizes, making it a versatile and valuable strategic management tool.

Conclusion

In conclusion, the balanced scorecard remains a vital framework for strategic management, offering comprehensive insights into organizational performance across financial, customer, internal process, and organizational capacity perspectives. Its integration into organizational processes supports sustainable growth, enhances strategic alignment, and fosters continuous improvement. As organizations navigate increasingly complex markets, adopting the balanced scorecard methodology can provide a competitive edge by aligning resources, tracking progress, and predicting future opportunities.

References

• Marcu, Gheorghe. (2020). The strategic role of balanced scorecards in modern business management. Journal of Business Strategy, 41(2), 45-55.
• Senarath, S. A. C. L., & Patabendige, S. S. J. (2015). The effectiveness of balanced scorecard implementation in Sri Lankan companies. International Journal of Business Management, 10(12), 112-125.
• Lim, Sandra. (2019). Strategic Performance Management Using Balanced Scorecard. Journal of Management Studies, 56(4), 754-771.
• Kaplan, Robert S., & Norton, David P. (1992). The Balanced Scorecard—Measures That Drive Performance. Harvard Business Review, 70(1), 71-79.
• Kaplan, Robert S., & Norton, David P. (1996). Using the Balanced Scorecard as a Strategic Management System. Harvard Business Review, 74(1), 75-85.
• Niven, Paul R. (2006). Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. Wiley.
• Hough, J. R., & White, M. A. (2004). An Introduction to Strategic Management. South Western College Publishing.
• Kaplan, Robert S., & Norton, David P. (2000). The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Harvard Business School Press.
• Boyd, Bill. (2003). The Balanced Scorecard: The Impact of Strategic Alignment on Business Success. Journal of Business Strategy, 24(3), 45-52.
• Mooraj, S., Oyon, D., & Steel, P. (1999). The Balanced Scorecard: judgmental effects of performance measures and targets. The British Accounting Review, 31(2), 243-253.