Why do companies need a Balanced Score Card (BSC)?

Organizations function with distinct management, placement and communication procedures but their BSC remains a workable path which defines value-creation methodologies.

In their performance assessment study, Kaplan R. S. and David Norton (2005) opined that successful firms don’t just examine operations with monetary measurements but use other assessment tools such as clients, internal processes, together with learning and development. The researchers suggested four measurement tools made up of finance, customers, the internal business activities as well as development and learning.

Furthermore, the purpose and yardstick of any measurement framework are found in the organizations missions and strategies whereas performance is evaluated with vision. The application of this technique in contemporary societies has triggered concentration on companies’ intangible properties, necessitating thorough reviews on the value of its intangible asset to weigh its contributions, identify shortcomings and apply remedies (Del W. and Kennedy N., 1982).

Balanced scorecard

Image 4: Balanced Score Card (Source: Kaplan and Norton)

BSC as a measurement tool looks into the company’s activities as far as ideas and current approaches, to provide management with an insight of business performance; it also encourages organizations to clarify their strategy and vision and transform them into profits (Bremser & Wagner., 2013). BSC is considered by Kaplan and Norton (1996) as a descent model that provides stability amongst strategies and procedures.

BSC concentrates is strategy-oriented; with regards to its performance assessment function, BSC proffer flawless solutions to organizational problems and questions. Developing this analytical tool requires careful use of company strategies and a far-reaching structure which covers all activities for better assessment of performance.

BSC as a Management System

Most companies used performance assessment tools that incorporate monetary and nonfinancial criteria, but BSC is beyond all previously common estimation framework. According to Simons (1988), innovative companies apply the scorecard as a central system for sieving administration processes. While organizations are encouraged to choose initial BSC with few realistic goals to promote clarity of vision, inspire commonness of purpose, present unified focus on strategy, and ensure that the goals are regularly explained to all workers, Kaplan and Norton said companies experience the real strength of BSC only when it is transformed from a measurement structure to a management framework.

Why do Companies need a BSC?

The impact of an organization’s assessment system on individuals within and outside its business environment cannot be overlooked in this 21st century. There is need to utilize effective management and assessment frameworks selected from client-based strategies as well as the company’s core abilities while inspiring and evaluating performance using only monetary yardsticks.

BSC applies monetary valuations in its initial rundown of performance from both management and business activities although it utilizes a broader and integrated measurement structure that links existing customers, internal process, workers and system performance for long-term monetary achievement.

Scorecards prove meaningful in identifying unproductive strategies, including those that need to be adjusted, and the key-achieving measures that should be added into the framework (Stewart., 1991; 1994).