Business Studies

Strategic Management Topic 6 Q3 Discuss the underlying premise of the balanced scorecard and each of its four perspectives. Why is balance between the four controls important?

ANSWER

Balanced Scorecard

A balanced scorecard is a strategic planning scheme that organizations implement into their daily operations to assign priority to their items, services, and projects. They communicate about their intended objectives plus their routine procedures. Scoreboards are significant in measuring a company’s success rate and further improvements to the affected areas. The management group is always measured against key performance indicators to outline their contributions to the strategy and fulfillment of their targets. The four perspectives of the balanced scorecard include the financial, internal business processes, customer, and organizational capacity perspectives.

From the financial perspective, the objective of the business is to maintain an active earning on returns on the investments made and proper control of the real risks involved in running a business. On the other hand, the customer perspective monitors how the business provides value to its buyers and acknowledges the degree of buyer satisfaction with the business’s services and goods (Nørreklit, Kure & Trenca, 2018). The internal business process perspective evaluates how well the organization runs. A balanced scorecard considers the objectives and measures which will help a business operate more effectively. Finally, the institutional capacity perspective is essential in optimizing objectives and goals with favorable outcomes. The employees should show high performance in terms of leadership, application of knowledge, and business culture.

Maintaining a dynamic balance between the four controls is significant because of their active internal business roles within a business entity. All four also provide feedback and measure results (Quesado, Aibar Guzmán & Lima Rodrigues, 2018). These are operational functions of any business; therefore, the balance should prevail between the four perspectives. Organization personnel can still use the data provided from the four factors to make informed decisions for the future of the business.

References

Nørreklit, H., Kure, N., & Trenca, M. (2018). Balanced scorecard. The international encyclopedia of strategic communication, 1-6.

Quesado, P. R., Aibar Guzmán, B., & Lima Rodrigues, L. (2018). Advantages and contributions in the balanced scorecard implementation. Intangible capital, 14(1), 186-201.