Key Concept Explanation:
A Balanced Scorecard (BSC) is a business tool used to measure business performance, strategic management, and project management ( Behrouzi, Shaharoun, & Ma’aram, 2014 ). Apart from the financial metrics that a BSC pinpoints in an organization, it integrates three non-financial metrics; customer, internal process, and learning and growth. Since its inception in 1992, BSC has been used extensively to evaluate the progress of large and small businesses, private and public projects, and manufacturing and service industries. In their article, Awadallah and Allam indicate that although the business tool receives profound affirmation from various corporate entities, other business scholars suggest that it has inadequacies that inhibit its optimal use. Hence, they instead propose the adoption of other performance measurement tools. I am intrigued to find out how the BSC’s concept application and practice results in organization progress and the contending issues that the scholarship body attribute to its use. Therefore, this paper focuses on evaluating BSC as a performance measurement tool, to establish whether it is a universal solution for corporate performance measurement.
Comparison:
The initial conception of BSC emanated from the intangibility and measurability of assets ( Awadallah & Allam, 2015) . Although intangible assets play a vital role in defining the value of an organization, there were few instances where business valuation considered the value measurements attributed to intangible assets. Kaplan notes that if an individual cannot measure an input, he or she cannot understand it ( Awadallah & Allam, 2015) . These notion compares to the intrinsic use of BSC that apart from using the financial figures to discern the performance progress of a business, there are more seminal non-financial metrics that factor in an aggregate scope of business progress. While private or for-profit organizations major on maximizing profits, public or non-profit organization have more diverse obligations that are welfare oriented ( Hoque, 2014 ). Thus, away from the requisite financial solidness that these organizations require, partnership and teamwork create a greater avenue of exemplifying the projected result-oriented measures. Moreover, strategic managers get formative insights on BSC indicators. As such, they are in a better position of creating better value propositions and decisions that steer the organization forward. It is, therefore, crucial to note that the needs of a BSC in initiating better performance measures cannot be disputed based on the additional value it brought to the market.
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Article Summary:
Awadallah and Allam subscribe to the importance of the BSC as a performance measurement, strategic management, and project management tool. The article evaluates the usage of the BSC in three areas commencing from the core business needs that necessitate its implementation. Notably, the article points out that tangible and intangible assets are of equal importance in shaping the performance of an organization, rather than the traditional conceptions on financial metrics as the sole determinants of business performances. Additionally, the study evaluates the use of BSC in manufacturing and service industries, large and small organizations, and public and private sectors. Particularly, real entities considered for this evaluation are Fosters Brewing Group as a strategic management tool, London Heathrow Airport as a project a management tool, and in a small family business ( Awadallah & Allam, 2015) . In Fosters Brewing Group, the CEO aimed at rejuvenating the declining business performance. After the implementation of the BSC, the company improved intellectual capital and the market value for the organization. However, the implementation of BSC was marred with challenges of distracting the senior management. As such, their departure stalled the implementation and reconceptualization of the tool’s indicators due to changing market dynamics and the overall need to adjust the BSC for the meta-change initiative, which was rather costly for the firm.
Similarly, BSC worked well for London Heathrow Airport in identifying, customizing, and reviewing performance metrics as outlined by the project objective. Nonetheless, the application was subject to the project’s inclusion of suppliers, neighborhood communities, and the environment. While the article identifies with the very endearing characteristics of BSC’s application, it also points out the possible obstructions that could arise in its implementation.
Biblical Integration:
The BSC corresponds to a holistic approach to business performance through abiding by God’s law of inclusivity as denoted in the Bible. Particularly, God’s laws are embodied in the Ten Commandments and exemplified through the life of Jesus Christ. God expresses his will, love, and purpose for humanity and illustrates the conduct and relationship he expects from every human being. Contextually, BSC diverted the perception of evaluating business performances based on the sole considerations of the financial metrics and adopted indicators that indicate the importance of customers and the relationships existing between them and the business entity. Indeed, this portrays human consciousness that is exemplified through business operations.
Application:
Since the inception of the BSC into business operations, organizations have since diversified their perceptions of evaluating business performance. The BSC is applied across strategic management and project management, on public and private entities, manufacturing and service industries, and small and large entities ( Giannopoulos et al., 2013 ). Ivanov & Avasilcăi note that a company can improve their competitive leverage by focusing on accelerating talent improvement and exploiting intangible assets that focus less on financial results (2014). The BSC is, therefore, undoubtedly influential in not only ascertaining the position of business operations but also in deciphering the best innovative procedures that businesses should espouse for greater gains. Although faced with inconsistencies in application and interpretation, BSC stands as a seminal business model that with continued organizational-oriented adjustments, will continue to distinguish business problems more substantially.
Annotated Bibliography:
Awadallah, E. A., & Allam, A. (2015). A critique of the balanced scorecard as a performance measurement tool. International Journal of Business and Social Science, 6(7), 91-99. https://pdfs.semanticscholar.org/df15/16c5f3bdf66d1be5c704770a16661f5b43d0.pdf
The resource is a review of the Balanced Scorecard as used in businesses on different dynamics. The authors start by launching a rationale of BSC use since 1992 as driven by the need to offset the belief that business performance is solely determined by the financial metrics. This brings along the essentiality of intangible assets that comprise of other three segments entailed in the BSC; customer, internal processes, and learning and growth, as integral in this pursuit. The study evaluates BSC, particularly its conceptualization, application and practice. The authors consider case studies of Fosters Brewing Group using BSC as a strategic management tool, London Heathrow Airport as a project management tool, and BSC in a small family business to demystify the merits and limitations of the business tool.
Behrouzi, F., Shaharoun, A. M., & Ma’aram, A. (2014). Applications of the balanced scorecard for strategic management and performance measurement in the health sector. Australian Health Review, 38(2), 208-217. https://www.researchgate.net/profile/Farshad_Behrouzi/publication/260484597_Applications_of_the_balanced_scorecard_for_strategic_management_and_performance_measurement_in_the_health_sector/links/57a57bae08aefe6167b250af/Applications-of-the-balanced-scorecard-for-strategic-management-and-performance-measurement-in-the-health-sector.pdf
This study focuses on applying the use of the BSC on the strategic and performance management in the health sector. The authors note that the application of appropriate performance perspectives and indicators is crucial in reflecting all the strategies of an organization. The authors conducted a survey to give an insight into the BSC as used in the health sector in the last decades while affording a generic approach of developing the use of BSC in the health sectors. Particularly, the study analyzes 29 articles written since 2002, where four attributes of the BSC were established. They included BSC generation, performance perspectives, performance indicators, and auxiliary tools. The internal business process was the most recurrent advocacy for the BSC in all articles while it noted that numerous Key Performance Indicators (KPI) were required to cover strategic objectives in the health sector.
Giannopoulos, G., Holt, A., Khansalar, E., & Cleanthous, S. (2013). The use of the Balanced Scorecard in small companies. International Journal of Business and Management, 8(14), 1. http://eprints.kingston.ac.uk/30288/1/Khansalar-E-30288.pdf
This study evaluates the use of BSC in small companies. The author states that though BSC tool is appropriate for use by all types and sizes of business, there is minimal empirical evidence that the business tool is used extensively within small-scale businesses. The study adds to BSC literature by reporting the results of comparative investigations of BSC awareness within small business enterprises in the UK and Cyprus. Data is collected using self-completed questionnaires distributed across 500 companies in the UK and Cyprus. Findings indicated that the majority of small-scale companies especially in the UK were unaware of the BSC model and the usage was consequentially low.
Hoque, Z. (2014). 20 years of studies on the balanced scorecard: trends, accomplishments, gaps, and opportunities for future research. The British accounting review, 46(1), 33-59. https://pdfs.semanticscholar.org/9d64/3e6ebdac3c12fbfdf8d0eace28cddde7b238.pdf
Zahirul Hoque evaluates studies made on the BSC in the last 20 years, to identify the trends, accomplishments, gaps and the opportunities present for future research. The study reviewed 114 articles in 25 accounting journals and 67 articles in business and management journals between 1992 and 2011. The findings of these studies are presented in three parts. First, reviewed articles are categorized by topics, theories, research settings, research methods, and the techniques of primary data analysis. The second category is the contribution of the research on the practice field and the lessons learned from these studies. The third findings segment illustrates knowledge gaps found in existing BSC research, hence the need for future research.
Ivanov, C. I., & Avasilcăi, S. (2014). Measuring the performance of innovation processes: A Balanced Scorecard perspective. Procedia-Social and Behavioral Sciences, 109, 1190-1193. https://core.ac.uk/download/pdf/82664863.pdf
Ivanov & Avasilcăi focus on measuring the performance of innovative processes using the BSC. They indicate that moving away from the normative use of financial constructs in evaluating business performance enables a greater perception of business performance in regards to the intangible assets underpinned in the model, which is a finer way of attaining competitive leverage in the market. The research considers a cross-sectional analysis of three case studies to identify the proper key indicators of measuring innovation processes. The results of the article are majored on an analytical framework that is created through the exploitation of key indicators of the organization as used to measure the performance of innovation processes.
