You are on page 1of 6

1

The balanced scorecard is a “performance metric used in strategic management to
identify and improve various internal functions and their resulting external outcomes” (Balanced
Scorecard 201!" The balanced scorecard attempts to help managers plan# control# and execute
company goals by providing feedbac$ to %hile implementing ne% strategies# goals# and
ob&ectives" The balanced scorecard is a system used by management that %hen implemented
allo%s management to ma$e their company's vision and mission clear# sho%s %hat %ill be
measured# and helps managers devise a plan of action to meet their goals" (fter the plan of action
is established# they are implemented and measured through four perspectives) the customer
perspective# the business process perspective# the learning and gro%th perspective# and the
financial perspective" (Balanced Scorecard Basics 201!
The customer perspective sho%s the importance of the recent trend for businesses to
concentrate on customer focus and satisfaction" *f a customer is unhappy %ith the products or
services they receive from a business then they %ill loo$ for a different company to purchase
from" To develop measurements# managers need to focus on customer feedbac$ in order to
devise strategies that improve customer experiences" This %ill allo% the company to gain ne%
customers and retain them for years to come" +oncentration should be placed on a business'
target mar$ets and the means by %hich %e are providing products and services to these
customers" The business process perspective# as it implies# pertains to the inside procedures of a
company" ,easurements based on internal procedures allo% managers to see if their products are
meeting customer standards as %ell as examine ho% efficient the company's operations are"
-bviously# if there are issues management %ill need to ma$e some changes in order to improve
products and processes of the business" The learning and gro%th perspective implies that people
are the company's only source of information and that it is vital# %ith the advances in technology#
2
to train# gro%# and empo%er employees" *mplementing this strategy %ill utili.e the organi.ation's
main asset) people# as %ell as develop a positive %or$ing environment that %ill consist of a team
effort and company pride %hile increasing productivity" /mployees ma$e the difference bet%een
a company having a competitive advantage or not having one" The financial perspective loo$s at
a company's finances such as) revenues# earnings# cash flo%s# and return on capital" (ll
businesses use financial data to prepare internal and external financial statements and reports"
The thought process %ith the balanced scorecard is that if only financial information is
considered# the situation of the company ends up unbalanced and that is %hy the other
perspectives are of vital importance to $eep the company balanced" (Balanced Scorecard Basics
201!
*mplementing a balanced scorecard management system assists managers in focusing on
customers# operations# financials# and employees to combine them in the best %ay possible to
carry out the company's mission by developing both short and long term goals# devising a plan
of action# and monitoring the progress to reach these goals %hile ad&usting as necessary" *n order
for the balanced scorecard management system to be successful# the measurements and re%ard
systems must be accepted company%ide so everyone $no%s their distinct roles in implementing
the system" 0ata must be collected and analy.ed in order to compare actual performance %ith
anticipated performance so any necessary actions may be ta$en to reach company goals"
(s //+'s financial analyst * %ould most definitely recommend that //+ adopt the
balanced scorecard management system" This system %ill help improve every aspect of the
company" *t %ill focus on the company mission %hile developing strategies to meet long term
and short term goals" *t %ill improve customer satisfaction and retention %hile gaining ne%
customers because %e listen to %hat they have to say regarding our products and ma$e the
3
changes and improvements they suggest" *t %ill assist in improving efficiency and productivity
by t%ea$ing operations procedures and ma$ing employees feel li$e assets %hile re%arding them
for their performance" This %ill develop a very positive# open# and productive culture that %ill
increase employee retention and cut do%n on costs" The more invested in a company's greatest
asset1its' people1 the more %e %ill get bac$ in return" By implementing the balanced scorecard
management system on a continuously improving system# //+ %ill function as a %ell1oiled
machine that %ill allo% them to reali.e maximum profit potential for their sta$eholders %hile
continuing to sustain gro%th and innovation for years to come"
(fter providing the 2resident of //+ this recommendation# she has decided to adopt the
balanced scorecard management system" She has no% as$ed me to provide information regarding
tying compensation to performance measures" Specifically# the unethical behavior that can result
from utili.ing incorrect performance measures# ho% //+ can best avoid these behaviors# ho%
should //+ tie performance measures to compensation# and %ho is ultimately responsible for
creating the performance measures"
*f the %rong measures are utili.ed to tie performance measures to compensation#
employees may ma$e unethical decisions in order to receive more compensation" Top executives#
such as the ones from /nron and Tyco# misrepresented their financial statements# charged many
personal luxury expenses to the company# committed fraud# reduced the labor force to reduce
costs# and the companies declared ban$ruptcy" 3o%er level employees could misstate billable
hours# falsely record their production activity# and alter customer orders or payment# steal# as
%ell as many other unethical behaviors that can result from human greed" (Serving 1445!
4
//+ can minimi.e unethical behavior by establishing a clear and precise
performance6compensation measurement system %here measures and responsibilities are clearly
defined and not easily manipulated" This system should be applied to every employee of //+#
regardless of position# in order to decrease favoritism and uncertainty" 3eadership is a vital
component in establishing and implementing an effective performance6compensation
measurement system" Senior management should be aggressively involved in the creation and
execution of its organi.ation7s performance measures" //+ needs a strong and unified
performance measurement system in order to effectively and fairly tie it to employee
compensation# %hich include both financial incentives and nonfinancial incentives" *t needs to
have precise and clearly defined measures that are easily understood by all of //+'s employees"
By utili.ing the balanced scorecard perspectives# performance measures can be established in
regards to financial# customer# internal business operations# and employee and sta$eholder
satisfaction that %ill be directly tied to compensation %hile striving to reach organi.ational goals
and ob&ectives" *n order to accomplish this# top management should develop a precise and %ell
1constructed performance6compensation measurement structure" This structure should sho% ho%
the structure %or$s and employees should be %ell educated to the measures and ho% their
performance %ill be evaluated in regards to employee compensation" 8or each performance
measure# a starting point and target goal need to be established company1%ide and for each
contributing operation" 9ext# baseline data needs to be established to assist employees in
understanding their individual and group responsibilities" (Serving 1445!
/fficient communication %ith employees# suppliers# consumers# and sta$eholders is
essential to the successful creation and execution of //+'s performance6compensation measures"
/mpo%ering employees to ta$e pride in their %or$ and accomplishments %ill ma$e the culture
5
of //+ a great place to %or$ and having this $ind of reputation can assist in cutting do%n
unethical behavior" /mployee involvement is one of the best %ays to create an influential culture
that %ill thrive on performance6compensation measurement" (lso# assigning accountability to
management and employees in regards to performance results %ill ensure that %or$ers have a
complete understanding of %hat is expected of them in order to receive performance incentives"
*ncentives do not al%ays have to be financial in nature" //+ could offer employees stoc$ options
%hich %ould give them a vital reason to stay ethical and focus on the vision and mission of //+"
-ther possible ideas are //+ dollars to use to%ards a re%ard of the employees choosing such as)
a paid day off# a %ee$end geta%ay# or gift cards"
6
:eferences
Balanced Scorecard Basics" (201!" Balanced Scorecard *nstitute" :etrieved from
http)66%%%"balancedscorecard"org6bscresources6aboutthebalancedscorecard6tabid6;;6defa
ult"aspx
Balanced Scorecard" (201!" *nvestopedia"com" 0efinitions" :etrieved from
http)66%%%"investopedia"com6terms6b6balancedscorecard"asp
Serving the (merican public) best practices in performance measurement" (1445!" Benchmar$ing
Study :eport" :etrieved from
http)66govinfo"library"unt"edu6npr6library6papers6benchmr$6nprboo$"html<section2