Balanced Scorecard and Its Application to Not-For-Profit Organisations - Essay Example

These measures form the framework for the implementation of the strategy. BSC obtained its name from the attempt to balance both financial and nonfinancial performance measures. While traditional approaches to strategy focused on the financial aspect of the business the balanced scorecard looks at both the financial and non-financial aspects of the organisation. Finkler (2010, p. 299) indicates that the balance scorecard approach monitors how well the organisation is achieving its goals based on four critical perspectives: financial perspective; customer perspective; internal business perspective; and learning and growth perspective.

Olve and Sjostrand (2006, p. 1) indicates that a good scorecard documents a strategic logic which represents a cause and effect relationship between current activities and long-term performance. Critical Evaluation of the Balanced Scorecard and its Development The concept of a balanced scorecard can be traced to various sources including Peter Drucker’s “management by objectives” (Balanced Scorecard Review n.db). It has evolved from being a performance management tool in 1992 to being a strategic performance management system in 1996 (Balanced Scorecard Review n.da). .

In 2010 it developed a new emphasis in order to facilitate closer integration with organisational systems and capabilities such as Enterprise Risk Management. This development has indeed resulted in an increase in its scope to make it more applicable to all organisations including not-for-profit organisations. However, it has been criticised for not having a perspective relating to the environment/impact on the society (Drury 2009). With the impact of climate change, customers are increasingly becoming environmentally aware.

Additionally, environmental groups have sought to discourage support of companies that operate in flagrant disregard to the environment. This can lead to a reduction in revenues which organisations seek to protect. Companies that Have Implemented the Balanced Scorecard Model BSC is applicable to all types of organisations. It has been applied successfully to both not-for-profit and profit organisations. Horngren et al (2011) uses a cause-and-effect relationship to illustrate how Chipset Inc used BSC approach to grow its customer base and its revenues.

The company achieved its goals by focusing on key objectives in each of the four dimensions of its scorecard. In the financial perspective Chipset increased income and shareholder value by managing cost and unused capacity; and building strong customer relationships. From the customer perspective Chipset’s increased market share and customer satisfaction was obtained by identifying customers’ future needs and identifying new target-customer segments. In terms of Chipset’s internal business process perspective they improved service response time; manufacturing productivity and quality; reduced delivery time, improved processes and improved manufacturing capability.

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