Finance and Accounting

Subject: Business
Type: Analytical Essay
Pages: 3
Word count: 922
Topics: Accounting, Finance, Microeconomics, Statistics

Summary / Purpose of the Research

The purpose of the research by Kaplan & Norton (1993) is to explain the balanced scorecard and its significance in assessing organisational performance. The article starts by emphasising that what is measured is what the company obtains. Managers are implementing new approaches and procedures for improving performance without evaluating if old measurements of performance are pertinent and the new measurements that should be invented and introduced (Kaplan & Norton, 1993).

The efficacy of the balanced scorecard is that it integrates an efficient measurement system that assists in solidifying organisational strategic goals with a management system that can assist in driving change within significant areas like market development, product, customer as well as process (Kaplan & Norton, 1993). The balanced scorecard provides management with 4 diverse perceptions to select measures from financial, clients, internal processes, and innovation activities). Measurements used in the scorecard are important in assisting an organisation to focus its strategic vision, promotes thinking regarding existing and future success, as well as assists in providing a balance between external and internal measurements (Kaplan & Norton, 1993). The comprehensive perspective assists management in seeing what tradeoffs they make among their main success factors. 

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Organisations should use scorecard measurements to identify their competitive strategy (Kaplan & Norton, 1993).  Organisations that have utilised the balanced scorecard as measures have been illustrated within the article. An example is Rockwater which is a global engineering and construction firm that utilised the scorecard measured to act in response to their changing industry. Accordingly, the Rockwater CEO and administration devised a vision and strategy and transformed them into the scorecard’s perspectives (Kaplan & Norton, 1993).  The perspectives that Rockwater used included: financial perspective, customer perspective, internal process, and innovation perspective. The balanced scorecard assisted the leadership at Rockwater to put into practice changes that made it a leader within its industry. Other organisations provided in the article and they have successfully used balanced scorecard to drive changes include: Apple Computer that utilised the scorecard as a planning strategy; AMD which used the balanced scorecard to transit since it had a clearly defined and performance measures (Kaplan & Norton, 1993). The balanced scorecard assisted AMD in incorporating everything coherently although no key changes were implemented. The article uses illustrations of these companies to show that the balanced scorecard is most effective when utilised in implementing changes (Kaplan & Norton, 1993). 

Target Audience of the Research

Target audience includes organizations and their leadership that are planning to drive change within their firms. Organizational leaders are targeted because they seldom use measurements as a component of their strategy despite the significance of measurements in performance evaluation. Therefore, it is important for the organization senior management to ensure that new strategies and process that are implemented for performance improvement along with the old performance measures are examined. 

Findings of the Research

The research found out that the balanced scorecard assisted management in focusing on the organizational strategy. This means that balanced scorecard is effective in setting strategic goals in companies and this as illustrated by examples is effective in change implementation. The balanced scorecard helps in linking measurements to organizational strategy (Kaplan & Norton, 1993). Companies can use the balanced scorecard in measuring and managing their intangible assets and also in measuring performance. This is because a balanced scorecard entails development of organizational strategy or mission. The aim is integration of all aspects of the organization that contributes to the organization accomplishing the mission. In the process, through the balanced scorecard measures the organization is able to gain new understanding regarding their business as well as a new management system (Kaplan & Norton, 1993).  The main benefit from the balanced scorecard is in ensuring that the scorecard is the foundation of all business operations. The balanced scorecard should be the basis of the management system. Organizational senior management have the responsibility of ensuring that they use the scorecard as a lever for streamlining and focusing strategy that can result to breakthrough performance. The ability of the balanced scorecard to facilitate organizational breakthrough performance is demonstrated using examples of successful companies that used the balanced scorecard as their strategy (Kaplan & Norton, 1993). 

Personal Synopsis

The article was based on a multi-company research study that was used in studying the performance measurement within organisations whose intangible assets were significant in value creation. In my opinion, I believe that organisations need to incorporate the measurement of intangible assets within their management system in order to enhance the management of organisational intangible assets (Paladino, 2007).  The ability to measure and express the intangible assets is important in improving the management. Therefore, just like (Kaplan & Norton, 1993) measurement is essential to management because integrating measurement of intangible assets into the management systems plays a significant role in improving the management of the intangible assets. 

In addition, I believe that balanced scorecard ensure that the management do not solely depend on short-term financial measures. This is because the balanced scorecard ensures that the senior management has a balanced perspective regarding the organisational performance. Additionally, the balanced scorecard is important in driving down organisational strategy to divisions and functions by promoting managers to set success measures allied to organisational objectives (Kaplan & Norton 2004). Finally, the balanced scorecard assists stakeholders in assessing the company when measures are communicated externally and this is supported by Kaplan & Norton (1993) who explain that the balanced scorecard is extremely effective during change implementation.  

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Possible Personal Application

The balanced scorecard can be used in helping the implementation of a person’s personal goals and strategies. Development of measures to measure an individual performance helps in informing an individual regarding how an individual’s activities fit in with their personal objectives and goals. It is therefore important for an individual to perform assessments of their performance and compare the performance against the balanced scorecard measures. It is also important for an individual to review one’s overall performance of balanced scorecard measures. This can help in monitoring if the set goals and strategies are being accomplished and to take the necessary action where necessary. In conclusion, the balanced scorecard measures can assist in having a better understanding on personal objectives. 

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  1. Kaplan, R & Norton  P. (1993).Putting the Balanced Scorecard to Work. Harvard Business Review. 71(5), pp: 134-147.
  2. Kaplan, R & Norton P. (2004). Measuring the strategic readiness of intangible assets. Harvard Business Review. 1(2), pp: 52-63.
  3. Paladino, B. (2007). 5 key principles of corporate performance management: How do Balanced Scorecard Hall of Fame, Malcolm Baldrige, Sterling, Fortune 100, APQC, and Forbes award winners drive value? Strategic Finance. 6(1):39-45. 
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