balanced scorecard paper

7/24/2019 Balanced Scorecard Paper

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Balanced Scorecard

Balanced Scorecard

Tyler Ledesma, Ryan Mack, Hawa Magassa, Naomi Locherno

Robert Singer

Managerial Accounting

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Balanced Scorecard

Abstract

In our aer we ha!e "ound that a balanced scorecard is a use"ul tool in a business setting#

It hels a comany lan out their year with di""erent asects that are needed to run a comany

including, organi$ation, lanning, controlling, etc# It can also be used in the di""erent

deartments that are used in business as well# A balanced scorecard can mo!e a comany a in

the right direction each year based on what they learn "rom re!ious years# They can "igure out

their strengths and weaknesses to hel make them more success"ul in the u and coming years#

This aer will also talk about the ad!antages and disad!antages o" a balanced scorecard# %e

belie!e some o" the in"ormation we "ound was interesting, but some o" the "acts we anticiated#

%e thought it would be a good idea to ut this in"ormation into e&amles# %e researched some

comanies that use a balance scorecard in their business and how it has made them more

success"ul in the business world# %e then go on to talk about our oinion o" a balanced

scorecard and what we think o" the tool# %e belie!e it is imortant and use"ul in business to hel

an organi$ation meet their o!erall goal#

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Balanced Scorecard

The balanced scorecard is a use"ul strategic management system that enables comanies

to determine !alue and manage its strategic goals# As we ha!e seen earlier, the balance scorecard

o""ers considerable ad!antages, but it also has some incon!eniences# Howe!er, our grou tends

to be "or the balanced score card strategy# The balanced scorecard o""ers the ability to

communicate e""iciently at all le!els o" the comany, thus any emloyee is able to ercei!e and

understand how it work is related to business and its general success

'connect#mheducation#com(# In addition, the balanced scorecard concet ro!ides strategic

"eedback and learning 'hebalancedscorecard#com(#

Balanced scorecard ro!ides a better management o" in"ormation) its strategy "orces

comanies to concei!e essential er"ormance signal "or their di""erent strategic goals in order to

ensure comanies "ocus on measuring what is more imortant# Some studies ha!e ro!ed that

comanies using balanced scorecard strategy tend to ha!e better *uality o" management

in"ormation including increasing bene"its "rom the manner in"ormation are used to make decision

and conduct management Moreo!er, balanced scorecard imro!ed achie!ement reorting, a

comany using a such organi$ed techni*ue to er"ormance management, roduce a suerior

er"ormance reort than a comany that does not use it# There"ore, substantial management

reorts and dashboards disclose accomlishments both internally and e&ternally contributing to a

better le!el transarency 'hebalancedscorecard#com(#

+urthermore, balanced scorecard o""ers a better strategic osition with strategic goals, all

emloyees and suort working units work "or the same obecti!es and hel to e&ecute a better

lan# Lastly, when the balance scorecard is correctly imlemented, it encourages an organi$ation

to line u rocesses like, budgeting, analytics, and risk management, thus contribute to the

de!eloment o" a real strategy concentrated organi$ation#

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Balanced Scorecard

Since the balanced scorecard is used to hel businesses lan out their goals and missions

"or the year, there are some ad!antages and disad!antages that come with this tool# A balanced

scorecard resents an organi$ational chart with di""erent indi!idual areas being "ocused on# 'Hub

-ages( +or e&amle, needs to "ocus on the way their comany is organi$ed# Being organi$ed is

!ery imortant because it lets a comany know e&actly what to do in certain situations# I" a

manager o" a "acility is running around back and "orth, out o" breath, one can say that the

comany is not organi$ed or well lanned# Another ad!antage o" a balanced scorecard is that it

allows comanies to raise change and rocess imro!ements to meet the o!erall goal# 'Hub

-ages( .omanies that use a balanced scorecard can use the tool at the end o" the year or the

beginning, to determine what they need to do better in the u coming year# They can "igure out

their strengths and weaknesses and adust accordingly to re!ent any "urther roblems#

%hile there are ad!antages that come with a balanced scorecard, there are many

disad!antages that come with this tool as well# A disad!antage o" a balanced scorecard is cost

and time# '.hron#com( Although it is a use"ul tool to lan out an organi$ations goal and mission,

it can be time consuming# /nless someone in the organi$ation has e&erience with a balanced

scorecard, it can take time "or emloyees and managers to get used to the tool# In order to be

e""icient, each member in the organi$ation must know how to use or know how a balanced

scorecard works# Another disad!antage o" a balanced scorecard is incomlete in"ormation#

'.hron#com( %hen comanies use this tool, it is imortant that the in"ormation is accurate and

rele!ant to the business goal o" the comany# Managers do not want to waste time utting

irrele!ant in"ormation into this tool that is suosed to better their comany#

Some o" the comanies that use a balanced scorecard are /-S, %ells +argo, 0eri$on, and

the /ni!ersity o" 0irginia# /-S did not start out using a balanced scorecard, which created the

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Balanced Scorecard

comany not to be a 1customer2"ocused enterrise#3 'Har!ard Business Re!iew( The

imlementation o" the scorecard made it easier "or /-S to de!elo an o!erall organi$ational goal

and a mission to increase leads# Another comany that uses and ractices this tool is %ells +argo

and they are the industry leader in electronic banking# 'Har!ard Business Re!iew( %ell +argo

has imlemented a balanced scorecard techni*ue to track and measure er"ormance# Being able

to track and measure er"ormance is imortant "or a comany to monitor because comanies

want to learn "rom their mistakes# I" they are not u to ar as they should be, they need to know

and be able to adust or change their business lan in order to bring the most success to their

business en!ironment# %ithout this tool, comanies can go months or e!en years without

knowing they are digging themsel!es a bigger hole than they need to be in#

The ne&t comany we "ound that uses a balanced scorecard is 0eri$on# They

imlemented a Human Resource balance scorecard to e!aluate the e""ecti!eness and ayo""s o"

human resource management# 'Har!ard Business Re!iew( %e as a grou belie!e that a %ells

+argo used this tool to manage and e!aluate emloyee er"ormance in the comany# Since it is

used "or human resource management, the comany can lan out certain bene"its, health care

ackages, !acation days, etc# "or their emloyees along with er"ormance throughout the year#

The last organi$ation we wanted to talk about is the /ni!ersity o" 0irginia# Surrisingly enough,

e!en education institutions are using a balanced scorecard in their business model# They ha!e

created an entire business lan that e!ol!es around a balanced scorecard that includes obecti!es

and strategies# '0irginia#edu( They use this tool to "igure out ways to better themsel!es with

imro!ed communication, community relations, "inances, as well as the o!erall mission o" the

uni!ersity#

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Balanced Scorecard

The use o" balanced scorecards can be !ery e""ecti!e to a comany, i" used correctly# 4ur

grou is "or balanced scorecards "or numerous reasons, which will be e&lained later in this

section# 4b!iously there are ad!antages and disad!antages to using balanced score, which were

touched on re!iously in this aer, but the *uestion is, why are we drawn to the idea o" the

imlementation o" balanced scorecards in a comany5

As we know, balanced scorecards are a business management tool used to track how a

comany is er"orming based o"" metrics, chosen by management, used to measure the

ersecti!es o" an organi$ation# Balanced scorecards gi!e the management team a nearly o!erall

!iew o" the status o" the comany# 4"ten, comanies only take into account the "inancial health

o" the comany, which ignores other imortant asects o" the comany# +or e&amle, a comany

may currently be doing well "inancially, but the emloyees6 well being is not great, which could

result in decreased ro"itability in the "uture# .ontinuing with the state o" emloyees, the skills

o" the workers may not be u to ar, which can also result in decreased ro"itability# Another

huge asect that balanced scorecards measure that other measurements o" er"ormance ignore is,

customer satis"action# Meeting the customer6s needs is critical, because i" they are not hay

with the ser!ice they are recei!ing the customer will ust go elsewhere, which undoubtedly will

decrease ro"it# Another ersecti!e that balanced scorecards take into account is the business

rocess, which is simly a measure on how e""ecti!e and e""icient the rocedures o" the comany

are# An e&amle o" a balanced scorecard "or a .ollege or /ni!ersity could look like this#

1. Financial Perspective - How do we look to resource providers?1

1 Edwards, G. (2011, May 26). Balanced Scorecard Example for 3 Dfferen! B"sness Models. #e!re$ed

%e&r"ary 21, 2016, from '!!pwww.&r*'!'"&.comoffcefnancear!cles+300.aspx

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Balanced Scorecard

-ro"itability 2 ercent e&cess re!enue and ercent o" net re!enue

7""iciency 2 retail in!entory turno!er

Le!erage 2 total debt to total assets

2. Customer Perspective - How do customers see us?2

/nderstand needs

7ase o" ordering 0ariety8a!ailability

-ro"essional

.ourteous

3. Internal Process Perspective - Are we productive and effective?3

-ersonnel e&ense as a ercentage o" net sales

Net sales8s*uare "oot selling sace

Net sales8student "ull time e*ui!alent '+T7(

. Innovation and !earnin" Perspective - How do our emplo#ees feel?

In"luence in the community

9now how2to use tools

Manage workload

Ad!ancement oortunities

0aluable training

The balanced scorecard ro!ides an o!erall !iew o" the health o" the comany by taking

into account the "our ersecti!es touched on re!iously# The balanced scorecard can assume

any metrics deending on what the comany wants to measure# This adatability and "le&ibility

is a reason that this grou "a!ors the balanced scorecard# 4ne o" the arguments against balanced

scorecards is that o"ten comanies do not use the correct metrics to measure the health o" their

comany# The beauty o" the balanced scorecard is that those metrics can be easily adusted to be

an e""ecti!e tool "or any comany# Another disad!antage o" balanced scorecards are that they

can not be imlemented right away, but on the other hand, in order to ensure the correct metrics

are being used the idea o" taking as much time as ossible "or guaranteed results on success is

not a disad!antage in my oinion# A well lanned, all encomassing balanced scorecard can go

2 IBID

3 IBID

4 IBID

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Balanced Scorecard

as "ar as including !ery well detailed "inancial statements, with "uture redictions and *uarterly

glances#

In the oinion o" the grou, the ros de"initely outweigh the cons when it comes to the

use o" balanced scorecards# Such an adatable tool is wonder"ul "or the !olatile reality that is the

market# A tool that can change as the comany changes to kee u with shi"ts in trends short

term and long term is critical to maintaining success# As shown in the e&amle o" a balanced

scorecard that could be used "or a college o" uni!ersity, it is "airly easy to see that within the "our

ersecti!es co!ered there are !arious metrics# These metrics are caable o" being adusted to

"low with shi"ts in trends i" need be# Besides the "le&ibility balanced scorecard o""ers, there is

the "act that balanced scorecards o""er a wide o!er!iew o" the state o" the comany# As stated

earlier, ust "ocusing on the "inancials does not o""er a large enough scoe o" how the comany is

er"orming, which is why the balanced scorecard would be imlemented in the comanies o"

each o" the members in our grou#

:uring our research, we ha!e seen that the balanced scorecard is a tool that e&ands

measurement areas traditionally in!ol!e in accounting, so it aims to contribute to reduction o"

roblems related to the use o" merely "inancial measures to control# Because it not restricted to

"inancial measure, concerning strategy, it changes the way to communicate# Balanced scorecard

is easy, though it could be highly ower"ul i" it is greatly imlemented# An organi$ation will

surely enhance action inasmuch as management teams use the main ideas 8 notion o" the

Balanced Scorecard to create a uni*ue method and !isuali$e it in a cause2and2e""ect ma de!elo

rele!ant key er"ormance 8 imlementation inde& and use them to ease learning and imro!e

decision making, and range the organi$ation and its oerations to the goals identi"ied in a

strategy ma#

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Balanced Scorecard

Moreo!er, we ha!e also seen that balanced scorecard is not only reduced to "inancial and

non2"inancial measures organi$ed into three to "i!e ersecti!es# A great balanced scorecard

mirrors the comany strategy, so the strategy can be distinctly seen when looking at it# Many

comanies "ailed to make their strategy re"lecting this# The grahic reresentation o" scorecards

on a strategic ma o""ers a comrehensi!e and rational way describing the strategy# In addition,

they clearly con!ey the comanies6 intended results and its assumtion about how these results

could be achie!ed# 7!ery emloyee and comany6s units are able to comrehend and to

determine how to contribute and be aligning to the strategy# There"ore, a balance scorecard that

illustrates clearstory o" strategy o""ers a reliable "oundation "or the management concetion#

Howe!er, we also conclude that the balanced scorecard needs some adustments and

de!eloment, mostly because it does not assure any organi$ational rooting, including

comlication assuring en!ironmental settling# This can create a ga between the strategy

e&ressed in the actions taken and the strategy lanned#

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Re"erences

Bene"its "rom using the Balanced Scorecard# 'n#d#(# Retrie!ed +ebruary ;?, "rom

htt@88thebalancedscorecard#com8bene"itsbsc#htm

7dwards, # 'n#d#(# Balanced Scorecard 7&amle "or C :i""erent Business Models# Retrie!ed

+ebruary ;?, "rom htt@88www#brighthub#com8o""ice8"inance8articles8

balanced scorecard paper

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