The use of responsibility accounting and flexible budgets to design
performance reports, the balanced scorecard (BSC), and the principles of
proper graph design are control tools use to mitigate the treat of a poorly
design management report. The balance scorecard (BSC) is the most
effective and widely used by companies. Key employees of an
organization can attend the institute for BSC to train on how to produce
and manage the BSC in their company. This information is also accessible
through the purchase of books which allows the reader to create their
own BSC, or an expert from the institute can visit on site to help develop
and implement a BSC.
A balance scorecard is “a management report that measures four
dimensions of organizational performance; financial, internal operations,
innovation, and learning, and customer perspectives,” (Romney et al., p.
586, 2021). It measures past performance information and provides the
organization with feedback on how to make better decisions in the future.
An effective BSC begins by ensuring all stakeholders understands the
goals and work towards those same goals. The four perspectives of a
traditional BSC are “financial, customer, internal process, and learning and
growth,” (Balanced Scorecard Institute, n.d.). These four areas are used to
make up a company’s vision and strategy, which is utilized in private and
public sectors.
The four dimensions of the balanced scorecard can provide a
comprehensive overview of the organization performance:
1. The financial data is such as sales, expenditures, and income may be
used to understand the financial performance of the organization.
This could include the budget variances, dollar amounts, financial
ratios, or income targets.
2. The perspective of the customer is collected to measure customer
satisfaction with quality, price, and availability of the product or
service.
3. The organization business processes are evaluated by investigating
how well products are manufactured. On the other hand, the
operational management is analyzed to track any bottlenecks,
delays, gaps, shortages, or waste.
4. The learning and growth are analyzed through the investigation of
training and knowledge resources. This leg handles how well
information is captured and how effectively employees use that
information to convert it to provide the company with a competitive
advantage within the industry.
Upon viewing the company’s overall objectives, the scorecard can
provide information about the organization, which the scorecard model
can be used to implement strategy mapping to see where value is added
within the organization. This can also use to develop strategic initiatives
and strategic objectives. For example, a company can achieve this by
assigning tasks and projects to different areas of the company to boost
financial and operational efficiencies, which will improve the companies
bottom-line.
There are many benefits of using the BSC, such as saving
management time, money, and resources, when information is pooled
together into a single report. A scorecard can also a provide management
with insight of their company’s service and quality, and its financial track
record. This metrics allows management to be able to train employees and
other stakeholders, which can provide guidance and support. When
management communicates their goals and priorities, future goals
attainable. A balanced scorecard can help reduce a company’s reliance on
inefficiencies in their processes. Which is otherwise known as
suboptimization. This can result in the reduction in productivity or output,
which can lead to higher costs, lower revenue, and a breakdown in the
company’s brand and reputation.
Companies can use their internal version of a BSCs such as banks,
who often contact customers and conduct surveys to measure how well
they are doing in their customer service. Customers can rate their recent
banking visits, with questions ranging from wait times, interaction with
bank staff, and their overall satisfaction. Banks can also ask customers to
make suggestions for improvement. The bank manager can utilize this
information by retraining staff, if the survey unveils a problem with
service or use it to identify issues customers have with their products,
procedures, and services.
References:
Balanced Scorecard Institute. (n.d.).
Balanced Scorecard Basics
. Retrieved
December 20, 2022, from https://balancedscorecard.org/bsc-
basics-overview/
Bragg, S. (2022, April 4).
Suboptimization definition
. AccountingTools.
Retrieved December 21, 2022, from
https://www.accountingtools.com/articles/suboptimization
Intrafocus. (2016, June 9).
Balanced Scorecard Example
. Retrieved
December 20, 2022, from
https://www.intrafocus.com/2016/06/balanced-scorecard-
example/
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2021).
Accounting Information Systems
(15th ed.). Pearson Education, Inc.
