The activity-based costing is focused on boosting profitability in a business entity. This is through the identification of actual overhead costs as well as cost drivers (Smith, 2005). This is core in the streamlining of business processes. As such, organizations can pinpoint the inefficient and efficient operations within organizations subjects to the costs associated with each of them. More attention and resources can be invested in profitable activities, while the costly and wasteful processes are eliminated (Tutoit, 2007). In the end, the quality of products and services, as well as manufacturing performance, is improved. Overall, this enhances profitability due to very accurate product pricing, which can allow organizations to avail to the market-competitive price offers while maximizing or boosting returns.
A balanced scorecard is defined as a framework within an organization that is used to implement and manage strategy. It links organizational vision to strategic initiatives, objectives, measures, and targets. A balanced scorecard strikes a balance between financial measures and performance measures and objectives related to all other parts or elements of a business entity (Tutoit, 2007). Companies use the balanced scorecard to capture necessary information on growth, business processes, customer perspectives, and its financial standing. The growth is achieved through the evaluation of training and knowledge resources and how impactful they are to a business organization. The BSC is core in reviewing how well products are manufactured and how best the processes can be more efficient (Smith, 2005). Through its data collection aspects, the BSC goes a long way in capturing consumer feedback which is factored in critical organizational decisions. Lastly, the BSC provides an insightful look into financial data such as income, expenditure, and sales that are indicative of financial performance.
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The compensation systems ought to be linked to the balanced scorecard as it is very transparent. It communicates the department mental and divisional goals or expectations without ignoring the role played by compensational programs in attaining the company’s overall success and strategy. The usage of the balanced scorecard method translates to the creation of performance-based remuneration in the form of bonuses coming out of a more significant number of evaluation criteria split into distinct individual or personal perspectives.
An adaptive business system can fuel strategic alignment in an organization. This is because it evolves and reacts in cognizance of the business needs and demands. This is because the business environment is constantly changing. Each stakeholder from time to time may have needs that have to be satisfied through the alignment. A business may concentrate its resources to meet an emerging need in response to the market by aligning its activities and customer needs with the business goals. New organizational developments as raised by the stakeholders can be assessed using the organizational goals as the basis.
The double-loop learning process involves the altering of decision-making or goals from garnered experience. In this context, the first loop utilizes the decision or goal-making rules, while the second loop facilitates the altering (Smith, 2005). As such, the double-loop learning process acknowledges that the way a challenge is defined and countered can be the actual source of the problem. This type of learning allows organizations to set strategies and modify them in light of experience and contextual environment.
Five scorecard measures that can adequately measure performance in a company such as Apple are customer satisfaction, core competencies, employee alignment and commitment, market share, and shareholder value (Tutoit, 2007). Customer satisfaction is essential as it highlights whether the products are meeting the needs of the target market. As for core competencies, a BSC needs to pinpoint where the organization’s strengths lie. The employee alignment and commitment tests whether the employees have what it takes to meet the organization’s objectives. Market share, as a scorecard measure, encompasses a number of elements such as marketing cost, marketing return of investment et cetera that are impactful on a company’s standing. The shareholder value is core as it highlights the impact of shareholder equity and input into the organizational processes.
References
Smith, M. (2005). Performance Measurement and Management: A Strategic Approach to Management Accounting . Thousand Oaks, CA: SAGE.
Tutoit, E. D. (2007). Fresh Perspectives: Cost and Management Accounting . Cape Town, South Africa: Pearson South Africa.
