Balance Score Card
A Strategic Frame Work For Action
A Research Article on
"Balance Score Card"
A Strategic Frame Work For Action
Traditional Financial Accunting Measures Like ROL, EPS Can Give Misleading Signals for Continuous Improvement And Innovation Which Are Demanded By Present Days Competitive Environment.
Many Indian businesses get by Without a Strategy beyond obtaining Licenses to service And make money and were thriving well under protection of government,s closed door policies hereto before 1990. Not that they don,t have one they have bits and piecdes of it, a Customer strategy here,a financial strategy there but nothing that ties in every body and every thing from top to bottom in an Organization. It is Of course tempting to ask Whether we need one After all we Have Done business quite well so far. So why trouble us with all these new foppish ideas that consultants try to sell just to make some business for themselves. This Argument for inaction no longer works, But the winds of change are blowing, several big business houses from the tata,s to the Birlas, NTPC, Godrej, Nicholas piramal ,RPG Cellular, onida etc. have adopted the score card in conjunction with other Share Holders,value and metrics.
Balanced Score Card is a performance management an strategy deployment methodology , is being used for many purposes from clarifying vision to validating strategy to aligning budgets to strategy and developing an enterprise performance management system. it is four layered perspective of the State of Strategy implementation as it is broken down.
At top Layer is financial perspective laying down the financial expectations of Share holders,
Second layer is customers perspective –Laying down costomers, expectation to be met or exceeded So As to achieve financial objectives
At Third level assessing need of internal processes to Deliver Customer value
The fourth layer is about learning and Growth i.e., Organizational competencies, skills, Systems that’s must be created to have a motivated Workforce who will ultimately give shape to strategic goal and overall Vision And mission of the organization.
In Short building up an organizations measurement System for performance appraisals in Conjunction With activity based costing else otherwise if focus is on only Customers satisfactions and value creations loosing sight of Costs, may result in loss of money.
Traditional financial accounting measures like ROl, EPS can give misleading signals for continuous improvement and innovation which are demanded by present days competitive environment. Financial results are post mortem of past performance. They Can not indicate about organizations future.
traditional financial reporting models attempt to build internal assets and capabilities and do not incorporate valuation of intangibles and intellectual assets like, High Quality products & services, Motivated and skilled workforce, internal process Capabilities, Satisfied And Loyal Customers.
The Four perspectives of the Score Card permit a balance between.
Short term and long term objectives.
Between out comes desired and the performance Drivers of those outcomes.
Between hard objectives measures and Softer, more Subjective measures and balance the focus on all the stake holders.
A measurement System must achieve a Balance Which Supports Progress against pre-determined objectives , without sub- optimisation.
In BSC, Strategy is Broken into microoperational tactics that provide a link between ends and means in the short term and long term. What BSC Does Is Break – Down the objectives at each level, create a performance measure for that objective , set targets, and identify the initiative needed to achieve those targets. When all things that need to be measured are measured then prepare a monthly information system that management can act upon.
One pertinent Question is does an organization need to be a specific size to implement the Score Card?
No It Works in Small Organization as well , it get backs to the Fundamental question,
How important is it for every employee to Truly Understand what the organization is attempting to accomplish ?
The Job with the Score card even in a small organization, is to mark all employees understand what the organization is Trying to accomplish and how each one of them can make a contribution to the success of that Strategy.