Balance scorecard Essay Example | Topics and Well Written Essays - 1250 words

Balance scorecard - Essay Example The Balance Scorecard is a framework or tool for measurement of sustainability of an organization which acts as a decision support system for the management for taking necessary action in order achieve sustainability of business operations in the long run In order to maintain sustainability of business, it requires constant monitoring of business operation which needs to be measured and quantified as per certain parameters that are preset. The various perspectives, with the help of which the performance of an organization are measured are namely financial perspective, customer’s perspective, internal perspective and learning perspective (Niven, 2005, p.49). The performance in these internal and external areas supported by proper funding and training of human capital are essential for sustainable growth of business of a company. Each perspective of growth of the company is assigned a metric and a target value against which the performance of the company is measured. The financi al objectives of the company are growth of revenue, growth of operating profits and solvency of the company in short term as well as long term (Olve and  Sjostrand, 2006, p.43). The fulfilment of these objectives is essential in order to achieve sustainability in business operations. The revenue growth is measured by an annual rate of growth and a target value is assigned against which the actual growth rate is measured. The growth of operating profits is measured by the amount of earnings before interest and tax as a percentage of sales. The metric for short term solvency is the current ratio and for long term solvency is the long term debt-equity ratio. The actual performance of the companies in any industry is measured against these metrics and the achievement of these metrics against the target values. The performance on sustainability of the company from customer’s perspective is measured by the average transaction size of customers, annual rate of increase in customer base and percentage reduction of customer complaints. The measurement of the company’s performance against the target values of these metrics supports the decision making process of the management. The internal performance of the company is measured by evaluating the performance to fulfil the objectives of product innovation, quality of service, sustenance of domestic market share, etc. These are measured by the metrics namely, the percentage of expenses for research and development with respect to the revenues earned, average turnaround time, percentage of market share, etc (Kaplan and  Norton, 1996, p.79). The actual performance of the company against the target value of these metrics helps the management to take decision to attain sustainability of the organization. The final perspective is the learning perspective which helps the companies in any industry to retain their employees and train them for sustainable operations and development. The learning performance of th e companies could be measured with the help of metrics like employee turnover, annual hours of training of the employees and average compensation. The comparison of actual values of these metrics against the target values helps the business to take decisions on sustainability (Blokdijk, 2008, p.88). The Balance Scorecard provides insight to the management on the different areas of business management and also allows them to take necessary steps for ensuring sustainability of business. Strengths and Limitations of Balance Scorecard The balanced scorecard is an important strategic performance measurement tool and semi-standard structured report that helps the managers to keep track of several activities executed by the staffs. In addition, this tool effectively monitors the consequences arising from several organizational actions. This part of the essay will determine several