The balanced scorecard is a way to create a report that measures
beyond the financial statements. Balanced scorecards instead focus
on four dimensions within a business' performance: financial,
customer, internal operations, and innovation and learning. This
allows the report to create measurable goals for the performance of
the business. The balanced scorecards do this by looking at prior
years and using the results of those years to create goals. For every
dimension, the company's management creates goals and measures.
Target metrics can be derived from industry standards, however
these should only be used as inspiration, not as actual goals. Using
industry standards as actual goals could limit the potential targets and
does not account for the company's actual strengths and weaknesses.
"Many organizations make the mistake of setting targets that reflect
industry benchmark values. The problem with such an approach is
that the organization’s aspirations and, hence, its performance are
limited by its competitors’ performance. Although industry
benchmarks may provide a useful reference point, management
should set targets that take into consideration the organization’s
unique strengths and weaknesses" (Romney et al., 2020). Managers
use this information to measure performance and can potentially
change the course of operations to better reach the goals when they
have quantifiable information and metrics. The mistake many
businesses make is relying solely on financial measurements, which
relies on information that is in the past and managers can not change
the course. "Robert Kaplan and David Norton recognized a significant
shortcoming: while finance is imperative to business health, it only
reports what has already happened" (Kidd, 2019).
Kidd, Chrissy. (May 31, 2019). The IT Balanced Scorecard (BSC)
Explained. Retrieved from https://www.bmc.com/blogs/it-balanced-
scorecard-explained-using-bsc-for-it-performance/
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2020).
Accounting Information Systems (15th ed.). Pearson Education (US).
https://mbsdirect.vitalsource.com/books/9780135573082
