Stratigic Management : Balanced Scorecard

Strategic Management- BSc

Question :

1) How does the Balanced Scorecard get around the problem of just

using financial performance to measure overall performance?

Why financial only is not enough?

Answer :

The Balanced Scorecard get around the problem of just using financial performance to measure overall performance due to the

Balancing between short & long term objectives, external & internal performance, financial & non- financial measures, and between lagging & leading indicators

It covers the four areas of: Financial, Customer, Internal operation, and Growth & learning

The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Then Why financial only is not enough :

Kaplan and Norton, who develop the BSc Model, describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

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