Emre Tezcan MBA 631 AWA 3

Balanced Scorecard
Balanced Scorecard is a powerful tool which is used by managers to control and see performance of activities. It is a directional tool to use strategies at all levels of the organization. This performance management tool is also being used in order to monitor the consequences of activities. It is not about strategy, it about making strategy actionable.1 Balanced Scorecard is a methodology to solve problems and challenges with the balancing of categories. Such characteristics could be defined for Balanced Scorecard, some of these are; managing business strategy, using a common language at all levels of organization, using a common set of principles to manage operations. It is also designed to categorize and manage business purposes. Balanced Scorecard is all about choosing measures and targets; typically no more than 20 measures spread over financial and non-financial topic and easily reported. It presents reports to its users with the mixture of financial and non-financial measures. This report is also a summery combine of financial and operational reports. Firstly there were only financial measures in this tool but non-financial measures like Customer, Internal Business Process and Learning and Growth2 were implemented lately. With the Kaplan & Nortons book in 1992, Balanced Scorecard, this tool spread over widely. This book is the most popular one about the tool Balanced Scorecard. Lately, second book which is The Strategy Focused Organization has been published as a second book from
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Nair. (2004). Essentials of Balanced Scorecard. Canada: Wiley & Sons. Balanced Scorecard. (n.d.). Retrieved November 23, 2010, from Wikipedia: http://en.wikipedia.org/wiki/Balanced_scorecard

Emre Tezcan MBA 631 AWA 3

Kaplan& Nortons. In this book, two measures are linked each other, Strategic Linkage Model and Strategy Map. Balanced Scorecard is all about meeting expectations using financial and non-financial measures. It is really important for managers, especially when any activity goes behind expectations, this tool really helps to them to understand and focus their attentions to these areas. When first balanced scorecard book was published, some criticisms were attracted; for example, it does not provide a bottom line score with clear recommendations. Also there are such studies that helped balanced scorecard to be useful. Four Perspectives of the Balanced Scorecard Balanced Scorecard could be categorized into 4 perspectives; which are Financial, Customer, Internal Business Process, Learning and Growth3. These four categories help to understand this tool easily. Financial category helps managers to understand the how firm looks like to shareholders. Questions need to be asked are for example what the financial targets are, what drives these targets or what kind of profit and revenue to achieve. Customer perspective is for customers, about how they see the firm. These questions could help while in this perspective: Who are the customers, what segments is being wished to address, what are the goals for distribution channel.

Balance Scorecard - Four Perspectives. (n.d.). Retrieved November 24, 2010, from Tutor2u: http://tutor2u.net/business/strategy/balanced-scorecard-perspectives.html

Emre Tezcan MBA 631 AWA 3

Internal Perspective is about managing operations, controls how well organized they are. Questions could be about how to win customer in each processes. The last category, Innovation and Learning, controls whether firm has the power to add new values to company or not. What must be done in order to perform great, what climate and culture nurtures growth or what is need to be done in developing and training employees to achieve companys projects are some of the questions.

Implementing Balance Scorecard in the Different Areas Balanced Scorecard tool is started to implement many industries, one of them is health care industry. It is implemented to a hospital in Asia and the results in two years became really impressive. For example, the performance of nursing department in a hospital which implemented Balanced Scorecard improved in the 2 years.4 Especially nursing executives are charge of determine how the hospital can better serve customers and meet their expectations. Under the Balanced Scorecard plan, nurses are divided into groups and then these groups are compared based on their group performance. After two years as previously stated, departments performance improved in the many categories. An organization could take several steps for performance measurement

Chu, Wang, Dai. (2009, November-December). A Study of a Nursing Department Performance Measurement System: Using the Balanced Scorecard and the Analytic Hierarchy Process. Nursing Economics , p. 1.

Emre Tezcan MBA 631 AWA 3

improvement; such as maintaining communication at all levels, developing organizational goals and integrating the performance system into the organization.5

Balanced Scorecard is also implemented to many companies starting from early 1990s until now. For example, this tool gave good results at HR Dept. of companies; helped managers to react to the data, predicting problems and finding solutions. The scorecard would measure the acquisition of talent, the diversity of workforce, targeted capabilities, and the ability to retain these individuals.6 HR is now able to watch the development and movement of the employees. As a result, implementing Balanced Scorecard provided improving results to the company, GTE. Over the past decade, after the resource and budget restrictions, it has been required consider approaches to business systems and business relationships by the Department of Energy; therefore DOE decided to use Balanced Scorecard tool.7 All objectives and measures should be supported by these three statements which composed by DOE: Mission: In order to provide business services to support success of the Departments goals. Vision: Maintaining publics trust and fulfilling public policy objectives while delivering best value products or services to customers. Strategy: Emphasizing

Amaratunga, Haigh, Sarshar, & Baldry. (2002, April, May 15). Application of the Balanced Scorecard concept to develop a conceptual framework to measure facilites management performance within NHS facilities. International Journal of Health Care Quality Assurance , s. 10.
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Solomon. (2000). Putting HR on the Scorecard. Workforce Optimas , 3.

PAM. (2005). Balanced Scorecard Performance Measurement and Performance Management Program for Federal Procurement and Major Site and Facility Management Contractor Purchasing Systems. 1.

Emre Tezcan MBA 631 AWA 3

Competition, openness and efficiency while developing and maintaining the organizational culture, management systems and the line processes. These goals and statements are connected with the four perspectives of the Balanced Scorecard. These four perspectives were prepared under the name of Balanced Scorecard Assessment Plan by each organization under assessment. Balance Scorecard mixes of companys mission into a set of performance measures. Therefore Balanced Scorecard goes beyond not only focusing the financial objectives but also presents the non-financial objectives that an organization must achieve to meet various goals. The Balanced Scorecard has emerged as a proven and powerful tool which is able to capture intangible assets and turn these into real values for stakeholders, managers. Balanced Scorecard has important benefits to which company it is implemented; these benefits are increased beneficial results, greater goals success along with the employees and improved collaboration.8

Niven. (2006). Balanced Scorecard Step-By-Step. Canada: Wiley & Sons.

Emre Tezcan MBA 631 AWA 3

Bibliography
Amaratunga, Haigh, Sarshar, & Baldry. (2002, April, May 15). Application of the Balanced Scorecard concept to develop a conceptual framework to measure facilites management performance within NHS facilities. International Journal of Health Care Quality Assurance , p. 10. Balance Scorecard - Four Perspectives. (n.d.). Retrieved November 24, 2010, from Tutor2u: http://tutor2u.net/business/strategy/balanced-scorecard-perspectives.html Balance Scorecard - Four Perspectives. (n.d.). Retrieved November 24, 2010, from Tutor2u: http://tutor2u.net/business/strategy/balanced-scorecard-perspectives.html Balanced Scorecard. (n.d.). Retrieved November 23, 2010, from Wikipedia: http://en.wikipedia.org/wiki/Balanced_scorecard Chu, W. D. (2009, November-December). A Study of a Nursing Department Performance Measurement System: Using the Balanced Scorecard and the Analytic Hierarchy Process. Nursing Economics , p. 1. Nair. (2004). Essentials of Balanced Scorecard. Canada: Wiley & Sons. Niven. (2006). Balanced Scorecard Step-By-Step. Canada: Wiley & Sons. PAM. (2005). Balanced Scorecard Performance Measurement and Performance Management Program for Federal Procurement and Major Site and Facility Management Contractor Purchasing Systems. 1. Solomon. (2000). Putting HR on the Scorecard. Workforce Optimas , 3.