The Balanced Scorecard is a strategic management performance
indicator used to identify and improve various internal business
functions and the external results they produce. b It is primarily used
to measure and provide feedback to the organization, and company
personnel can use this information to make better decisions for the
future of their organization. Key features of the Balanced Scorecard
include a focus on strategic topics relevant to the organization and
the use of financial and non-financial data to create strategies. And
where data collection is the key to providing quantitative results
(Tarver). Usually, different groups of stakeholders have varying
demands or expectations that must be balanced by a company's
managers. What the Balanced Scorecard does is measure how well
the company is doing while considering the concerns of these
competing stakeholders.
The balanced scorecard is based on four perspectives, including
financial, business process, customer, and organizational capabilities
(CFI). Under a financial perspective, a company's objectives are to
ensure that it receives a return on the investments it makes and to
manage the key risks involved in running a business. These objectives
can be achieved by satisfying all the stakeholders involved in the
business. The customer's perspective monitors how the entity
provides value to its customers and determines the level of customer
satisfaction with the company's products or services. How a
company treats its customers can directly affect its profitability. b In
terms of internal business processes, the balanced scorecard puts
into perspective the measures and objectives that can help a
company run more efficiently. At the same time, the scorecard will
help evaluate the company's products or services to determine
whether they meet the standards expected by customers. In addition
to this, organizational capabilities are important in terms of
optimizing targets and goals. The organization needs the right
infrastructure to deliver according to management's expectations.
For example, the organization should use the latest technology to
enable the successful conduct of business activities.
Reference:
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2020).
Accounting Information Systems (15th ed.). Pearson Education (US).
