I have seen all of these tools being utilized at one time or another in
the companies that I have worked for. They all help management
make decisions about the direction of the company. The only
difference is what industry the company is in. For retailers I have seen
balanced scorecards being used frequently. A balanced scorecard is "a
management report that measures four dimensions of organizational
performance: financial, internal operations, innovation and learning,
and customer perspectives" (Romney, 2020, p.586). Balanced
scorecards allow management to see how they are doing in regards to
the goals that they have set for the company. These scorecards are
usually broken down into the following sections: "financial, customer,
internal operations, and innovation and learning" (Romney, 2020,
p.586). Within these sections are the goals that management wants
to meet. Financial goals could include bringing in revenue from the
new items that they are selling or making sure that they achieve a
positive cash flow. In the customer section they could be looking at
gaining new customers or reducing customer returns. In regards to
internal operations they are looking at efficiency, service quality, and
reducing shrink. Under innovation and learning management could
set goals for employee training or for creating new products to
introduce to the consumers. By using scorecards management can
see where they stand in reaching their goals. They can also use these
scorecards to compare different quarters or even different years to
see if they have made any improvement and in which categories they
are lacking. A company may keep the same goals for a couple of years
before choosing new goals. For instance, a company has a goal of
reducing internal shrink by 50%. The first year of implementing a new
strategy they reduce it by 28%. They may keep this same goal the
next year because they didn't reach it the first year. The second year
they try a new strategy and reduce it by 62%. Now the company
knows what strategy or policy they need to follow to keep shrink low.
Now they may choose a new goal the following year to replace the
shrink goal. And this can go for all the other categories too. Say the
company wants to increase the number of customers by 1000. They
will implement strategies to do this. It could take a quarter or a year
or a few years to achieve. Another aspect about the scorecard is it
allows management to see what strategy works best. To increase
customers the company may also set a goal of increasing the new
products that they sell or the quality of service or of the product they
offer. By meeting the goal of increasing service quality by 75% they
can gain 600 customers and by creating and selling 10 new products
they gain another 400 customers. Not only has management meet
their customer goal but they have also reached their service and new
product goals as well. By following the scorecards and comparing
them between different quarters and different years they can come
up with a strategy that works best for the company going into the
following years of operation.
Reference
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
