Running head: BALANCE SCORECARD 1

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Balance Scorecard

For The Decision Making Process

The Balance scorecard is a way of measuring techniques who measures the performance of an

organization. Early of 1990, it was developed by Robert S. Kaplan. He was a professor of

Harvard business school. The main objective of balance scorecard is to display the real image of

the performance of a company. Earlier, most of the organizations took their decision only based

on financial activities. Later, it came to true that not only the financial aspects but also a

company should measure other business units too such as stakeholders, customer, employees etc.

before taking any decision. Traditionally, company solely relied on previous year’s activities and

result only but Dr. Kaplan and Dr. Norton developed balance scorecard to expand the view and

thoughts of business owners.

One of the main skill that balanced scorecard has is adaptability. It brings the key members of

any company to a same place to execute the best strategy on the purpose of the organization.

Balance scorecard helps to improve a company’s -

I. Strategy of communication.

II. Measuring progress

III. Manage action initiatives.

IV. Business Performance.

V. Align activities to the company’s vision.

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A statistic showed that more than half of major US, Europe and Asian companies are using

balance scorecard. Balance scorecard is often used by a company to meet the business goal

effectively. The main user of a balance scorecard is manager. The management of a company

tries to implement this tool links with business activities to the goal and monitors financial

performance. In this competitive business era, management needs to maintain the quality and

efficiency. It provides equal importance to all its elements that provides well planned and

organized system.

Leading and lagging:

Leading and lagging is two measurers of a business performance. Leading indicator is also called

predictive and lagging indicator is an output measurer. More immediately measurable indicators

are called leading indicators whereas, the indicators those impact leading indicators by

implementing and monitoring the activities are called lagging indicator(Kaplan, R.S. Linking the

Balanced Scorecard to Strategy, California Management Review, Vol 39, No 1 1996). For

example, if we want to increase our sales, we may use leading indicator as this is a predictive

indicator. On the other hand, if we want to reduce accident, we may use lagging indicators as it

indicated our past activities.

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Balance Scorecard Focuses on below 4 perspective:

I. The financial perspective – Balance scorecard performs financial measures that

include the profit and return on investments policy. The main purpose of this segment

is to satisfy the key personnel of a company by fulfilling the ultimate business goal

such as shareholders, customers and suppliers. Because if the company is not the

satisfying position then no shareholders will be agree to continue the business

anymore. They want to cut down cost and maximize the profit.

II. The internal business process perspective – Balance scorecard refer this segment to

identify objects whether company is run effectively or not. It helps to analyze

company’s activity to fulfill customer demand. Also, to improve the quality of

product and service an organization can also be needed to change their way of plan

and activities.
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III. The learning and growth (infrastructure) perspective – Accurate infrastructure is

required for an organization for learning and growth perspective. Because without the

proper infrastructure management can’t make a proper capacity to determine their

perspective. Company should determine high performance leadership in optimizing

goals. Using the latest technology can ensure the ability of doing smart flow of

activities

IV. The customer perspective - Customer perspective indicates our vision towards

customer. Company should focus on customer need and demand. How they can make

them satisfied, how can they make their need? Which is why, we have to acquire the

ability to develop our vision.

Balance scorecard helps a company by improving below areas to maintain a well-planned

execution of company’s objectives.

1. To build up the goal of a business.

2. Analyze the business objective in the best strategic way

3. Evaluating the critical facts

4. Choose the predictive or past indicators and maintain the performance.

5. Monitor activities of internal resources to maximize profit.

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In an organization, all the relevant elements are needed to be placed in one place. Research

shown that the organization who use balance scorecard can do better performance. As balance

scorecard needs to review time to time, therefore it executes best strategy performance. Balance

scorecard is very demandable strategy system because it helps a company to move forward with

planning and graphical way. It also helps to develop and maintain performance reports and

dashboards to ensure their plan.

This Balance Scorecard also made a support tool for decision making process. As balance

scorecard works with two strategic ways and indicates the past activities as well as predict on

future, the outcome of it is very much accurate and effective. With the help of top management,

Balance scorecard expands the facility to involve all the employees into this process.
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References

Ruli, C; Kristanto (2021), Implementation of balance scorecard and key performance indicator

on customer service employee productivity (Online), Scientific Route OÜ

Norreklit (2000), The balance on the balanced scorecard a critical analysis of some of its

assumptions, Management accounting research, Elsevier Ltd.

Chuck, Rick & Peter (2007), lanced scorecard strategy for dummies, WorldCat

Marvin,Suresh,Norman,Ganesh (2011), When is a balanced scorecard a balanced scorecard?,

International journal of productivity and performance management

Wendy (2016), Maximizing Strategy with an Effective Balanced Scorecard, Journal the winners

(Online).