Balanced Scorecard, Definition, Characteristics, Benefits
Balanced Scorecard (BSC) is a strategic tool used by companies to align vision with goals, measures, targets, and initiatives, facilitating performance management. Learn more here.
Mridula Sharma19 May, 2024
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The Balanced Scorecard (BSC) is a smart strategy tool linking a company’s vision with its goals, measures, targets, and initiatives. It’s like a roadmap for managing business performance by blending financial measures with other performance metrics.
By using this framework, businesses can implement and oversee strategies more effectively, making sure they're balanced across the whole organization. Dive into this article for further insights, especially if you're preparing for CA Exams .What Is Balanced Scorecard?
The balanced scorecard (BSC) is a tool used by companies worldwide to improve their performance. Originally developed by Dr. Robert Kaplan and Dr. David Norton, it helps organizations measure and enhance their internal functions and external outcomes. By collecting and analyzing data, managers can make better decisions for the future. The BSC was first introduced in a 1992 article in the Harvard Business Review, based on a study of top-performing companies. Initially designed for profit-driven businesses, the BSC has since been adapted for non-profits and government agencies. It evaluates a company's intellectual capital, including skills, knowledge, and competitive advantages. The model focuses on four key areas: learning and growth, business processes, customers, and finance. Using the BSC, companies can identify obstacles to performance and plan strategic changes. It helps in setting objectives, measurements, initiatives, and goals, leading to improvements in efficiency and the bottom line. Additionally, the BSC aids in strategy mapping to pinpoint where value is added within an organization and to develop strategic initiatives. By assigning tasks and projects strategically, companies can enhance both financial and operational effectiveness.Characteristics of Balanced Scorecard
We gather and study information from four key areas of a business:- Learning and Growth: We look into how employees are trained and what resources they have for knowledge. This helps us see how well they're capturing information and using it to stay competitive.
- Business Processes: We evaluate how smoothly products are made. This includes checking for any hiccups like delays or wastage in operations.
- Customer Feedback: We ask customers about their satisfaction with our products or services. This helps us understand what they like and what could be improved.
- Financial Performance: We analyze sales, spending, and income to see how well the business is doing financially. This involves looking at things like budgets and income targets.
| Also Check: | |
| Management Accounting | Financial Accounting |
| Auditing and Assurance | Taxation |
| Financial Management | Business Laws and Ethics |
Benefits of Balanced Scorecard
The balanced scorecard offers several advantages. Firstly, it consolidates information and data into one report, saving time, money, and resources compared to using multiple tools. This simplifies management's review process for improving procedures and operations. Scorecards also provide valuable insights beyond financial performance, including service quality. By measuring various metrics, executives can train and support employees and stakeholders, effectively communicating goals and priorities for future success. Additionally, BSCs help companies minimize process inefficiencies, known as suboptimization. Addressing these inefficiencies can boost productivity and output while reducing costs and preserving the company's brand and reputation.Balanced Scorecard Examples
Corporations often employ their own methods of assessing performance, like the Balanced Scorecard (BSC). For instance, banks frequently reach out to customers for feedback on their service quality. These surveys cover aspects like waiting times, interactions with staff, and overall satisfaction, often asking for suggestions to enhance service. Bank managers use this feedback to improve staff training or address any issues customers have with products or procedures. Alternatively, some companies hire external firms to conduct such evaluations. J.D. Power survey is a popular example of this. They provide insights and data to help companies spot operational issues and plan for improvements. J.D. Power conducts surveys across various industries, like finance and automotive, and shares the results with the hiring company. Advance your career with PW CA Courses! Gain insights into strategic management with our Balanced Scorecard module. Enroll now for comprehensive CA exam preparation and professional growth.| Also Check | |
| Activity-Based Costing (ABC) | International Standards on Auditing (ISA) |
| Equity Capital Markets | Direct Tax |
| Business Valuation | Transfer Pricing |
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