What Is The Use Of A Balanced Scorecard In Organisations?
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Organisations need to measure their management performance as it helps to improve internal functions and the resulting outcomes. A metric is required to measure the performance. The output of this can be used by organisations to make better decisions in the future.
Organisations need to find out the factors that drive their business and what is the key to their business. Balanced scorecard (BSC) have been used by many companies as a performance metric. It is a performance management tool and is used to measure and provide feedback to organisations.
It is used to measure the intellectual capital of an organisation that gives it a competitive advantage. It involves measuring the four main areas of a business: Learning and growth, Business processes, Customers and Finance. It allows organisations to collect information in one single report and this information can be used to improve efficiency.
A scorecard can provide information about an organisation as a whole when the organisation’s objectives are viewed. A BSC model can be used for strategy mapping to see where value is added in an organisation. BSC used past data on performance management to find the inefficiencies in an organisation.
Four areas of BSC
The four areas are also called the ‘leg’ and are used to improve an organisation’s strategy and vision. The data collected in a BSC should be analysed by the organisation’s key personnel.
Learning and Growth
These are analysed based on the training and the knowledge resources. It covers how well the information is understood and how the employees use the information to convert it to a competitive advantage within the industry.
Business Processes
These are evaluated based on finding out how well the products are manufactured. It is used to analyse the gaps, bottlenecks, delays, shortages or waste.
Customers
The perspective of the customers is taken and viewed to find out about customer satisfaction regarding the quality, price and availability of the products or services. Customer feedback on the current products is taken.
Finance
Financial data such as sales, income and expenditure are used to understand the financial performance of an organisation. It may include the costs, profit margin, revenue growth and operating income.
Benefits of using BSC
The main benefits of using BSC are as follows:
● It allows organisations to collect the data in a single report rather than use multiple tools. This helps to save resources, time and money when reports have to be reviewed. Organisations can better train their employees and improve their financial output.
● It can provide valuable insights into an organisation’s service, quality and financial records. By measuring these metrics, the organisations can train the employees and give them guidance and support.
● It helps organisations to find out and reduce the inefficiencies in their internal processes.