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Question Id #226

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Asked on Oct 5, 2011 at 10:25 am

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RahulJain
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Please explain the meaning of Balanced Scorecard.

   
 
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Posting Id #  169

 

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• Posted on Oct 5, 2011 at 10:25 am


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RahulJain
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A :

 

 

As per balanced scorecard.org, the balanced scorecard is a strategic planning and management system to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) 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.

1. “Financial Perspective”

When dealing with Financial Perspective at the expense of the other three perspectives: Please give an example of an organization with which you are familiar from either, form the news, or personal experience where this as been the case. What were the results of this focus on the financial perspective on customers and other stakeholders? Please be as specific as you can and give concrete examples.

Rule # 1: Never rely on just one measure of financial performance. Instead, use a three-bottom-line approach, which provides for checking performance from various perspectives

Here I will give the example of the notorious Enron which was once the fortune five hundred company. At its peak, Enron reported annual revenues of $100 billion and employed over 20,000 employees,  Fortune ranked the company as high as seventh on its "Fortune 500" list. We now know, however, that this edifice was an intricate house of cards built on a foundation of sham transactions and accounting manipulations.  (Bnet, 2009) Enron was myopic on getting the volumes to raise the revenues without considering the other perspectives.

 

 

 

 

 

 

2. “Customer Perspective”

 

Can you think of any organizations that do not have relevant "customers" to take into consideration? If there are such, how are they different from other organizations where all parts of the BSC operate equally?

I will give the example of Kmart.   Kmart was losing market share to Wal-Mart way back in the ‘70’s, but Kmart’s management failed to heed the warning - apparently because the company was still growing and profitable. Although Kmart eventually made some changes to its strategy, it was too little, too late. Now it’s a Chapter 11 "blue-light special" and the chances of it regaining its market position appear to be somewhere between zero and none.

http://www.balancedscorecard.org/BSCResources/PerformanceMeasurement/WhatShouldYouMeasure/tabid/138/Default.aspx

On the other hand Wal-Mart is now the biggest retail chain in world having turnover of more than $378 billion.

http://www.reuters.com/finance/stocks/performance?symbol=WMT.N

 

3. “Business Process Perspective”

 

Many companies place disproportionate emphasis on the financial perspective at the expense of the other three perspectives. Please Give an example of an organization with which you are familiar from either, the news, or personal experience where this as been the case. What were the results of this focus on the financial perspective on customers and other stakeholders? Please be as specific as you can and give concrete examples.

This has been discussed above.

4. “Learning and Growth Perspective”

 

Identifying several measures of the learning and growth perspective, such as

- Real-time availability of accurate customer and internal process information to front-line employees

- Ability to launch new products

- Ability to create more value for customers

- Ability to penetrate new markets

- Alignment of employee incentives with overall organizational success factors

- Rates of improvement in critical customer-based and internal processes

Consideration of these measures reveals that it can be difficult to quantify these factors.

 

a. Identify one specific example of a measure of learning and growth measure that you feel could be critical to an organization, but difficult to measure.

Learning and growth perspective measures aim at developing the human resources to their optimal level. Thus the indicators such as employee training hours, turnover, development and retention will be useful.  One specific example of a measure of learning and growth measure that you feel could be critical to an organization, but difficult to measure is employee satisfaction levels. This is because employee satisfaction is determined by multiple factors.

 

http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx

http://www.financialscoreboard.com/statements.html.

http://findarticles.com/p/articles/mi_qa3655/is_200301/ai_n9221003/


For detailed learning : See Posting No. 222




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