Kaplan and Norton introduced balance mark card in 1990s as a footing to supply a construction for assorted steps of organizational public presentation. Since debut it has gained a high grade of celebrity as one of the most widely used inventions in direction accounting ( Lawrie, 2004 ) .It ‘s a tool that translates a company ‘s mission, ends and schemes into public presentation steps for each strategic country.
The scorecard translates vision and scheme into four quarter-circles. From the get downing these quarter-circles reflected the undermentioned positions and deductions of the scheme:
The key to the popularity of the scorecard lies in its flexibleness and adaptability whether for commercial administrations, governed by net incomes, public sector operations governed by service bringing, or not-for-profit administrations driven by committedness to a peculiar cause, a scorecard that improves public presentation. ( Liz Murby, 2005 )
ADVANTAGES OF BALANCED SCORECARD
Using balanced scorecard the directors can pull off the public presentation of the company efficaciously. First, it gives company a full position of public presentation direction by supplying four positions including fiscal every bit good as client positions, internal concern procedure and acquisition and growing. It represents how it affects to supervise company ‘s public presentation in every facet such as bettering return to stockholders, fulfilling client demands, developing new merchandises and preparation staffs, etc. ( Langfield-Smith, 2012 )
The BSC is an incorporate set of fiscal and non-financial steps. It is an built-in portion of an organisation ‘s scheme executing procedure that emphasizes pass oning scheme to the members and supplying feedback to assist achieve aims. ( Mendoza, 2001 )
Second, conventional method of measuring public presentation direction based on fiscal steps which provide general information related to company ‘s operation and give recommendations for bettering it instantly and efficaciously merely in the short term. On the other manus, utilizing balanced scorecard helps directors get information for doing determination in the short and long term. Specifically, company can acknowledge any jobs related to public presentation direction such as low net income, out of day of the month package, and inexperient staffs, etc. , so they can better them efficaciously. ( Langfield-Smith, 2012 )
Finally, it supports directors obtain the best results in comparing with company ‘s aims or schemes in their planning which are translated by utilizing balanced scorecard. It helps directors command their ends in each facet decently by mentioning to the causes every bit good as the effects of these issues go oning in the company.
DISADVANTAGES OF BALANCED SCORECARD
Apart from advantages, there are besides some disadvantages that directors can confront when using it in supervising company ‘s direction. First, it takes more clip to acquire benefits from utilizing balanced scorecard. Specifically, directors set ends for doing net income so they need to do proper schemes related to fiscal position, client service or preparation which requires clip and attempts in the long term. In comparing with utilizing fiscal public presentation steps which merely contain Numberss, rates or per centums, directors rely on these to measure company ‘s activities.
Second, it is non easy to measure public presentation measuring accurately because some sectors can non be measured by exact figure or split them into specific things to mensurate. As a consequence, it can be manipulated easy or can be fraud based on estimations related to apportion work in procedure.
Finally, some steps in utilizing balanced scorecard are non utile and suited for some companies which are different sectors in the competitory industry. It leads to cut down profitableness, affect the capacity of making aims of the company. Therefore, directors have to see many steps which can be applicable to their company successfully.
Application OF USING BALANCED SCORECARD IN PHILIPS ELECTRONICS COMPANY
Harmonizing to a study by Bain Co, approximate 50 % of luck companies in USA and 40 % in Europe usage balanced scorecard as a tool in public presentation direction. ( Gumbus, 2002 ) Specifically, Philips Electronics is considered as a good illustration for using balanced scorecard to aline company ‘s aims and employee ‘s public presentations which bring more net incomes to company. Company used balanced scorecard which set up many specific schemes in their concern. It implemented by mensurating their markets, clients and operations.
Philips Electronics relied on four positions of balanced scorecard to acquire their aims in the hereafter. They are including competency, processes, clients and fiscal. Philips Company chiefly focused on employees so they divided into more degrees throughout the organisation including operational marks, organizational beds and concern unit degree.
At the concern unit degree, critical success factors were developed for each positions of the card. Management wage attending to develop high engineering, developing accomplishments for employees. Besides, they improve their merchandises with high quality to fulfill what clients want. A value map can be used for analyzing client study informations, and so it can reflect the capacity of devouring their merchandise in comparing with the competitory 1s. In add-on, fiscal steps besides are required to measure the effectual operations in between the expected marks with existent public presentations. There are some illustrations of indexs at the concern unit degree include:
hypertext transfer protocol: //www.bettermanagement.com/images/library/figures/11/5124_01.gif
The manner Philips Electronics applied balanced scorecard to supervise and pull off its public presentation efficaciously and usefully. Specifically, Philips Medical Systems North America ( PMSNA ) which used balanced scorecard as an alignment tool to concentrate on their schemes so they got $ 1 billion by the twelvemonth 2001. Besides, it brings benefits for the company by making for action planning including reassigning informations automatically from internal coverage system to online balanced scorecard study. As a consequence, directors can entree new consequences instantly.
By utilizing balanced scorecard supports directors monitor employees ‘ public presentations through making traffic-light coverage to acquire presentments such as green coloring material informs employees reach mark, yellow coloring material shows in-line public presentation and ruddy visible radiation indicates that employees get under criterion required so employees can understand and accommodate their activities which are suited with their company ‘s ends efficaciously.
Finally, Philips Electronics applied balanced scorecard into their public presentation usefully by making communicating system where employees can portion their experiences or accomplishments related to job work outing to others. Basically, it helps employees heighten their cognition and more motives to work expeditiously.
Apart from the success of using balanced scorecard in their company, there are few limited issues which should be improved in supervising public presentation measuring. First of all, choosing any package for reassigning informations to equilibrate scorecard system should be careful and accurate so company can avoid confronting many jobs such as lost information or virus attacked, etc. Second, the right of accessing of import information of employees should be recognized by different maps or duties of each section. The sensitive of information should be controlled efficaciously because these are good advantages for rivals in competitory industry. Finally, some standards can non be affected straight in public presentation direction. Specifically, it is hard to measure employees ‘ public presentation in acquiring aims of company expected. Directors need to urge some specific standards related to employees when they accomplish their responsibilities in the needed clip.
About all companies rely on fiscal ratios which reflect their activities happened in the yesteryear. It is hard to link the marks of the company with the sections.It merely adapts the company ‘s short term aims in the industrial age where they focused on effects, non for causes. Therefore company introduced the usage of balance mark card which monitors the public presentation which still maintains fiscal steps. However, it support directors set proper aims to make future value through concentrating on clients ‘ satisfaction, providers, employees, engineering, etc.