Balanced Scorecard Alternate Ways of Measuring Performance
Many organizations are usefully viewed as a web of relationships between and among various stakeholder groups. An organization may be defined as a "nexus of contracts," where said "contracts" are relationships that are marked by contributions from the various stakeholders in return for inducements provided by the organization. Over the long haul, the success of an organization is a function of the extent to which the needs and requirements of its various stakeholders can be integrated and balanced, without sacrificing any one to the other. There is, in this arrangement, mutual influence and accountability.
It is the main thesis of this paper that many organizations would be well served by making use of the Balanced Scorecard as an alternate way of evaluating a company’s performance.
Since its introduction in the Harvard Business Review in 1992, many corporate executives and information technology (IT) professionals have found the concept of Balanced Scorecard it to be a key strategic measuring stick of corporate success. Robert Kaplan and David Norton created balanced Scorecard, often referred to as BSC, in the early 1990’s. Today many large consulting firms like Pricewaterhouse Coopers and Earnst and Young have adopted the balanced scorecard concept.
A balanced scorecard is a framework for translating strategic goals and visions into measurable results for the entire enterprise. The balanced scorecard starts with corporate strategies and objectives, and then uses financial and non-financial measures from across the company to create positive and negative indicators of corporate success for all levels of the organization (Kaplan and Norton, 1992).
These indicators provide an in depth snap shot of corporate performance that managers and executives can use to clearly manage the company for success on a daily basis. Since the scorecard is based on key performance indicators (KPIs) that are directly linked to corporate goals, it provides a true measure of corporate success.
These KPIs consist not just of financial indicators, but also of performance measures in customer satisfaction, internal process, and innovation and improvement (Kaplan Norton, 1992).
The breadth and diversity provided by all four perspectives give managers an ideal cross-functional view of the business from all perspectives. It aligns both internal and external focuses, that offer a true balanced view of the scorecard (Kaplan and Norton, 1996b). A successful balanced scorecard implementation must also incorporate a communication mechanism, which allows management to communicate its strategic vision and goals to the employees, who, in return, can also report their processes and progress back to management.
Since an organization is composed of multiple levels, a scorecard must support different levels and perspectives from...