Long-Term Financial and Strategic Usage for Scorecard Concepts - Essay Example

Balanced Scorecard Author’s Name Class Name Professor’s Name School City and State Date Balanced Scorecard Introduction The balanced scorecard approach is a management framework method that was brought forth from the nineties. The scorecard translates for the vision and the strategy that goes into the four quadrants. These were reflected in to the following strategies that were translated to the implications of the following strategies. These were the financial, customer, international business processes as well as the aspects of organizational learning and growth involved. When the scorecard was first developed, it was positioned as a holistic and performance measurement framework that had customer perceptions and internal growth process evaluations. Executive summary The balanced scorecard approach is one of the foremost Management Framework Performance Measurement criteria and has been quite successful in this century. This paper aims to discuss its usage as a performance measurement tool for helping organizations to achieve better overall performance. As such, we will look into the background of performance measuring framework in the management field. From there we will go into the long term and strategic usage for the balance scorecard concepts. Then a discussion and case study, which is going to feature, balance score, card usage in Coca Cola and Nike, which are both large corporations in different fields. At this point, the paper evaluates the pros and cons and give recommendations on the effectiveness of the balanced score card performance metric according to the results we have attained. Background of balance scorecard usage Management based on performance measurements is not new, considering it was developed during the Second World War because of the innovative usage of company data (Davis & Albright, 2004). This approach to management was oriented to an industrial age that is currently in the past. This earlier usage for measurement-based management was based industrial development. In operations such as vehicle production, one can use of tangible processes or processes that repeat themselves. They can be monitored also measured accurately. In the 90s though, the drivers for the economy were not inclusive of the mass production companies. In this setting, intangible things include processes such as research and development. The question therefore, is how performance can be measured also utilized in the modern setting. In many of the traditional industrial and other organizations, there are many instruments of one kind, considering the statistical data. For most companies, the profit or margins are the main determinants, which are used for success. Financial data are known for being objective and precise. However, it tells stories of the health of the company. The financials consider the lagging indicators because they only show past events. The needed instruments are the leading indicators, which give an idea of what may be ahead. As such, this is why the balanced scorecard offers an alternative as compared to the traditional financial indicators. It describes and shows the things that are measured in order when assessing strategy effectiveness. The scorecard method goes toward the alignment of strategy considering applicable action of the public sector. This is because it does not dwell on financial themes such as profit, not relevant for NGOs. The scorecard method can be a good way to implement needs of performance and results for the legislative act. Long-term financial and strategic usage for scorecard concepts There are quite a few definitions of unemployment and underemployment. The later as described the definition of the international labor organization is either working for durations significantly lower than that of full time and wanting to work more, or working at a pay rate that is lower than a living wage. Therefore, underemployment refers to someone already working. The former in this case refers to the situation whereby the individual has no paid work whatsoever. It can also refer to a person or a whole society, whereby a community may have high unemployment in the area. Monetary and fiscal policies have typical differences such as that monetary policy get implementation from a central bank while fiscal policy decisions are the responsibility of the government to set (The Genuine Progress Indicator, 1995). The two terms seem to be the same, although, one goes through government and the other through a bank. The two are used by the government for influencing the performance of the economy in the short run. In this way, the government uses expansionary monetary and fiscal policy to lower the rate of unemployment below the natural status, Hoover, (2008).The new approach used up to date called the balanced scorecard approach has many advantages. For one, using the basic data provided by the excel sheets, the method can show the interdependency between different parts of an organization. Thus, it increases employee satisfaction and employee satisfaction, therefore, having a positive effect on quality and service. Management looks at the relationships between cause and effects when making decisions. The power of the SAS software can measure what the links are between cause and effects, SAS: The power to know, (2011). Balance Scorecards: A strategic planning and management system Balanced score cards translate the nebulous goals that are found in the mission statements and convert them into a strategic roadmap which can be used by the staff within the corporation. When detailing the definite requirements and the main relationship between actions and financial objective, the scorecard approach is not a measurement metric for performance solely, but a means for the communication of strategic initiatives to be used for the long term if there is going to be financial profit. This would include crucial practices of the different disciplines forming a main performance measurement system in order to improve things like statistical and the financial bottom line. Improving things such as financials after going through the balanced scorecard approach is dependent on some leading aspects of performance. The aspects being talked about are not financial, but they are considering the links between performance on the selected financial and non-financial measures (Davis & Albright, 2004). Use of the balanced scorecard assists manager’s selection facets by viewing things through these measures. The measures the client, financials, inward processes as well as the growth process. Recent literature shows attempts of balanced score card use and improved organizational performance. The performance of the organization comes from a self-reported measure, the same to their requirements within the industry. It is because of these, that people indicate relationships between the balance scorecard approach, and performance. As such, the balanced scorecard approach is a management initiative, which develops measures as based on methods for business stratagem (Davis & Albright, 2004).The linkages between the non-financial measures of the system and financial requirements are used to communicate to the employees understanding the way their performance affects company performance. Case studies for Balance scorecard in balancing the financial and growth sectors within organizations (Nike and Coke) The balanced score card has helped to create and analyze the responsibility of the Nike’s footwear department. Considering the broad departments one of the broad categories covered by the scorecard, there are processes, which have to be balanced. Some of the phases include what Nike pays for delivery, which means receiving product as represented by the decision-making tools of the industry (Knight, 2005). Numbers can be tracked within in real time considering the facilities are evaluated on the way that they hit targets for the processes. When a facility hits a designated target, then they can get more orders. The metrics, which are used for evaluating the progress, are projected according to the measurements used on a regular basis. At the same time, Nike for the system to make better factories. They also mean to use it as a tool for management for the facilities, which required better improvements. There are ratings for compliance, which create a lot of visibility on the compliance factories and achieve many responses from the units. The balanced scorecard has aided the ascent of Nike. It has also been significant in the interrelationships for performance measurement. They have concluded that pushing in one particular department could be detrimental and cause imbalance in another area. Coke case study The coke case study falls under a number of categories including the customers, employees, operations, business ethics, and financial sectors. Under the customers would be the brand identity representation, satisfaction and the measurement of target is the market capitalization and customer surveys. So far, the market has an overall good perspective on the brand and these surveys are done on a regular basis to make sure that the company is on the same page with the market. The employee department focuses on morale and service training. This is to evaluate the production levels and the tempo at the different facilities. Is the work environment conducive to mass production and what can be improved? Operations deals with the diversification of the product line (Vaillancourt, 2013). In the case of Coca Cola, it has done this well considering the different ventures into clothing and advertising. In this current state, the objective would be the acquisition of Kelloggs Company. Business ethics entails ethics training for the personnel at the company and making sure to create a culture of energy and corporate social responsibility, which means recycling. Financial analysis deals with the revenues and ratio analyses, which are the moment, are quite good considering the measurement targets are for an increase of 50 percent more than the year before. This is astronomical by any account but a valid target nonetheless. Analysis Nike claims the balanced scorecard approach has been a big help when it comes to the interrelationships for the different departments of performance measurement in a company. Apparently, being focused on one department is going to be bad for the balance of another department. Clearly, the measurement tool has been one of the most effective in the history of the organization because it does not only show the performance of different departments but the relationships between these different fields (Knight, 2005). The same goes for Coca Cola considering the metric has allowed for the assessment of financial success alongside that of employee morale and brand recognition. Coke and Nike are both large conglomerates whose brand identity is paramount so they have to be included within the performance measurement criteria. The balanced scorecard is an effective measurement tool in both cases for both individual and grouped reasons. Pros and cons of the balanced score card The balanced scorecard creates value by the translation of energy into operational tasks and activities. It is able to provide a strategic map for the clarification and implementation of vision and mission into a set of critical success factors. An increase in the financial value added is not idealistic if a balanced scorecard framework is implemented. As such, the balanced scorecard framework can give opportunities for value creation through product creation, sales and cost reduction, as well as improvements in the client and stakeholder relations. It is unreasonable to claim that application of the balanced scorecard framework is going to create value though because they can fail for reasons beyond the measurement framework and likely because of poor management practices. Information from the scorecard analysis can be input into the performance measurement system used in the plant. The visibility and measurement of the strategic success factors for the internal operations may assist both the plant and corporate management in terms of decision-making (Tregenna, 2009). However, the scorecard shows an idealized causal flow from learning and innovation to the internal processes for the client in terms of financial performance. The actual operational processes in a number of ways do not resemble this and this presents limitations for the relevance of the balanced scorecard. Recommendations The balanced scorecard is quite effective in showing not only the performance measurement for the field that it has been tasked but also the relationships between the different fields, which may include customer representation, financial analysis, and branding. It can be used to upgrade the management practices within the factories that need the greatest improvements, as is the case with Nike. However, one should also consider that even though one can track the details as they happen and the management is judged according to the way they it targets. The balanced score card may fail occasionally from detail oriented error. Conclusion The fact is that the perspectives that are used by the balanced scorecard are necessary at the present for the current business strategies. In order for a business to succeed, these methods have to be measured, analyzed and improved together because the scorecard concept keeps the corporations looking and moving forward instead of backward. According to the case study analysis, it is a success in both Nike and Coca Cola, who are legitimate giants in their fields. Its reputation in the corporate world speaks for itself and it will be in use as a template for a long time. References Tregenna, F. (2009). The fat years: the structure and profitability of the US banking sector in the Pre-crisis period. Faculty of Economics, University of Cambridge. 33 (4), 609-632. SAS: The power to know, (2011), ‘Measuring that a corporate strategy is working with SAS Balanced Scorecard Solution’ SAS Institute Incorporated, retrieved on May 2nd 2011 from < http://www.sas.com/success/cust_dexia_scorecard.html> The Genuine Progress Indicator. (1995), ‘Summary of Data and Methodology, Redefining Progress’, what's wrong with the GDP? Retrieved on 2nd May 2011 from < http://jayhanson.us/page11.htm> Hoover. K.D, (2008), ‘Phillips Curve’ the concise encyclopedia of economics, Liberty Fund, Incorporated, retrieved on 2nd May 2011 from S. Davis, T. Albright. An investigation of the effect of Balanced Scorecard implementation on financial performance. Management Accounting Research. 15. (2004) 135–153 Knight, P. (2005). Nike Corporate Responsibility Report. http://www.accountability.org.uk/news/default.asp?id=111 Vaillancourt, C. (2013). Strategic Management Case Study Coca-Cola Co. 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