The idea of the balanced scorecard was developed in order to supplement the customary traditional financial measures. The balanced scorecard introduces criteria that measure performance from three extra perspectives, including learning and growth, internal business processes, and customers. This paper presents a reflection of the article by Kaplan and Norton (2007) regarding the application of the balanced scorecard as a strategic management system.
The article is accurate to point out that the traditional financial measures, particularly the budget, are not sufficient to cover an organization’s longstanding strategic goals. By incorporating information regarding the company’s learning and growth, its core internal processes, and its relationship with customers would help address the challenges associated with using only the traditional financial measures (Kaplan and Norton, 2007). It can be agreed that when these aspects are incorporated into the organization’s overall management system, the outcome is in the form of a potent organizing structure as well as a wider perspective concerning the company’s condition and operations. As a result, the concept of the balanced scorecard can be considered as an important management system for any organization that wishes to stay or go ahead of its competition.
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The description of processes involved in using the balanced scorecard is quite elaborate, with authors presenting valid explanations for each process. These process, as they are described in the article, are conclusive. Meaning, the description covers the application aspect of the balanced scorecard adequately, without leaving anything out. It can be established that since the scorecard relies on measurement, it compels managers to arrive at an agreement regarding the metrics they apply to accomplish the company’s mission and vision. Additionally, when a scorecard is circulated throughout the corporate chart, everyone gets access to the strategy and can, therefore, use it as a tool going forward (Kaplan and Norton, 2007). It can be deduced that as the scorecard flows to the lower end of the organizational chart, primary strategic measures and objectives are transformed into measures and objectives that are relevant to each business unit. It is when these targets are tied to individual compensation and performance systems that personal scorecards are created. Thus, an employee can understand how their individual productivity contributes to the general strategy of the business unit in which they operate and the company.
While the article holds that budgeting barely relates to an organization’s strategic objectives, it does not disqualify its significance to the organization. Even though classic long-term planning is imperative, the formulation of budgets goes hand-in-hand with such planning (Kaplan and Norton, 2007). This is argument can be considered to be practical because many corporations tend to have separate procedures for budgeting and strategic planning. The concept of the balanced scorecard, in this case, ensures that the budgeting process is in line with the company’s strategic objectives.
It can also be inferred from the article that the balanced scorecard facilitates learning to an extent that is lacking in organizations that do not use it. Considering the description of the balanced scorecard, it can be seen that it allows the company to make strategic adjustments on a continual basis (Kaplan and Norton, 2007). It can be agreed that the balanced scorecard allows the company’s management to check whether the strategy is working as expected. In cases where the strategy is found to be failing, the balanced scorecard allows managers to determine the cause of the problem.
Overall, the article is well-informed, providing many examples in order to bring about a better understanding of the concept of the balanced scorecard. Even though the topic seems complex, the article provides clear definitions of key words and even provides visual representations of some concepts.
Reference
Kaplan, R. S., & Norton, D. P. (2007). Using the balanced scorecard as a strategic management system: Harvard business review , 85 (7-8), 150-+.
