Strategic Plan Part Iii: Balanced Scorecard Essay

Soderberg, Kalagnanam, Sheehan, and Vaidyanathan (2011) presented the balance scorecard as a strategic planning procedural tool used by organizations to balance financial concerns, customer concerns, process concerns, and innovation concerns with the main purpose of developing appropriate strategy in favor of a more favorable market position (p. 689-690). Similarly, Lawrence and Webber (2008) illustrated

Children’s Resale Shop is a store for parents to purchase and sell quality children’s items. Just like any other organization Children’s Stop Resale Shop needs to have a vision, mission, and values in determining the strategic direction of the business. Developing the vision is important to know what direction the business is heading in. Laying out the guiding principles and values will assist in guiding the business in the correct directions. Children’s Stop Resale Shop will assist the community in becoming a better place by setting good examples.

A Balanced Scorecard is, “A set of four measures directly linked to a company’s strategy: financial performance, customer knowledge, internal business processes, and learning and growth” (Pearce & Robinson, 2009, p. 202). Healthy Place needs to develop a balanced scorecard in order to assist in defining the company’s mission, values, vision, and SWOTT analysis. Herein, the four perspectives, financial performance, customer knowledge, internal business processes, and learning and growth will be discussed as they relate to the Healthy Place mission, values, vision, and SWOTT analysis.

The Balance Scorecard(BSC) model assist managers and board of directors to manage overall business by focusing into financial factors ( Profitability, cost, revenue, budgeted cost and real cost etc) as well as non-financial factors such as customer satisfaction, internal business process, innovation, learning and growth of organization. Kaplan and Norton decided to introduce concept of BSC in 1992, when they studied belief of famous British scientist, Lord Kelvin (1990) about performance improvement. As a result of this, many companies (private, public and non-profit organizations) adopted balance scorecard (BSC) model to assess their business performance. The BSC model is still used by many organizations. For-example, TESCO plc manages their business by applying BSC model. In my view, this article provides the chance to senior managers and directors who have power to influence the business performance. However, this article did not cover other important factors, for measuring the business (marketing strategies, employee satisfaction etc) to make sure how business is performing. Therefore, I have chosen this article for critical review.

The balanced scorecard was first identified by Kaplan and Norton in 1990 as a management tool to help management to summarize the key factors to conduct a successful business, and to align the whole business operations according to the overall business strategies. Then, in the following year, they implemented the balanced scorecard in various companies to conduct the study, and it appeared that the balanced scorecard was the key to drive the performance in the companies. It provided the management all the necessary strategic information by emphasizing enablers over results and changing strategic management paradigms.

Organisations, in order to increase performance, profitability, efficiency and to gain a competitive advantage, will benefit from a good strategic performance measurement system to ensure that lower-level managers are acting in a way that is consistent with top managers’ goals and whole organisation’s strategy. One the dominant system is the balanced scorecard framework (Hill, Jones & Schilling, 2015, p.376). The Balanced Scorecard (BSC) defined as “a tool that translates an organisation’s mission, objectives and strategies into performance measures. It is used to implement strategy and to monitor and manage performance, and may form part of the

The use of balanced scorecard has been developed from the early use as a simple performance measurement framework, a complete strategic planning and management systems. The "new"

The balanced scorecard consists of four critical performance measures that managers can use to align their company’s initiatives with organizational strategy. It is one of the most important developments in management accounting, particularly in strategic planning and control because it offers a balanced view of how non-financial and financial measures can be casually linked together (Shutibhinyo, 2014). The purpose of this research paper is to provide a brief history of the balanced scorecard, the components of a balanced scorecard, and finally an in-depth comparative analysis of how two companies use the balanced scorecard to meet its strategic objectives.

It was originated by Drs. Robert Kaplan (HBS) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. BSC provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. The BSC suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:

“The Balanced Scorecard translates a company's vision and strategy into a coherent set of performance measures” which was defined by Robert S. Kaplan, David P. Norton (1996).

The company has a plan of policy which they intend to use in the quest to achieve their objectives. These objectives include customer satisfaction by ensuring timely delivery and also increasing the number of products required for sales and thus quench the increased demand for online products (Kotler et al, 2015). Strategy formulation has certain features which need to be put in place so as to ensure that the laid down action plan succeeds. These include:

A balanced scorecard can be thought of as a strategic management tool, which the management of various organizations can use to monitor how the activities of employees affect the related operations. The origin of the concept can be traced back to the 1990s when Robert Kaplan and David Norton developed and published the idea in Harvard review journal. It can transform a company’s mission and vision into objectives, which can be quantified and measured. Therefore, it can quantify financial performance, the performance of business processes in the market, innovation performance, and employee performance among others. This tool can further be defined by two characteristics. Firstly, it focuses on organizations ' main agenda. Secondly, it uses a small number of data to measure various processes. This paper seeks to determine the ideal inputs for the four major elements of the Balanced Scorecard.

The balanced scorecard was developed by Dr. Robert Kaplan and David Norton. It was initially introduced as a tool for multidimensional performance management. But over the years it has evolved into a framework for strategic planning and management. It is a performance evaluation framework which augments the performance measures related to the non-financial aspects to traditional financial metrics to give executives. Thus companies can monitor the financial aspects while simultaneously keeping in check the progress on capabilities, intangible assets acquired for the future growth. Thus the managers and the executives have a 'balanced ' view of the organization’s performance.

The balanced scorecard will be linked to incentive plans. The balanced scorecard is a set of financial and non-financial measures relating to the company’s mission, strategies, and critical success factors. It usually has four perspectives: the customer perspective - how do customers see us; the internal business perspective - what must we excel at; the innovation and learning perspective - can we continue to improve and create value; the financial perspective - how do we look to shareholders. These four perspectives generate performance measures to assess the progress of a company’s vision and strategy. Implementing incentive plans, like bonus plan, company can better align employee’s performance with its long-term goal. To be more specific, employees and management will devote more their energy and times to their work, so as to facilitate the performance in the above four perspectives. Sales person will promote company’s products based on customers’ preferences. Internal business person will work more efficiently, R&D department person will develop new products. Management will stay focused on the entire business process and ensure that the actual current operating performance is in line with shareholders’ interests. Thus the goal of balanced scorecard, maintaining an alignment among an organization’s vision, strategy, programs, measurements, and rewards, will be achieved.

The learning and growth perspective uses the organization’s resources to adapt to the changing wants and needs of customers. The organizations must ask itself whether it can continue to improve and create value for its customers (Kinney and Raiborn 2013, 11). An organization’s ability to innovate and improve their products or services directly affects its value. An organization can create economic growth by developing new products and services, improving existing products and services, and developing more efficient operations (Kaplan and Norton January/February 1992, 75).