Discuss about the Performance Measurement With Balanced Scorecard.
The aim of the report is to talk about identification of the suitability of the balanced scorecard for the client’s firm. Being the recently employed consultant in the management consultancy firm the work that is assigned to you is the evaluating of the budgeting system of the client’s firm that is Microsoft. The company is one of the well-known and leading companies across the world. Recently the CEO of the Microsoft Company has attended a seminar related to the BSC in one of the private companies. After the seminar, the company is looking to know the whether BSC model is suitable for the company or not. This report is prepared with the motive to provide the suitability of the model to the company. Moreover, the report will also include the difference between the traditional approach and the balanced scorecard model of the company. In the end, this report will reflect the suitability of this approach to the firm.
It is essential for any business to analyze all the features and benefits of the accounting method before implementing the same in the business. Moreover, the companies also check the suitability of the approach with their current business strategies because every company brings changes in their business strategies and objectives considering the changes in the environment in which the company performs its operations.
Microsoft Corporation is a well-known American multinational technology company with the headquarters in Redmond, Washington. The company develops, licenses, manufactures, supports and sells computer software, consumer electronics, and the services. The company was established by Paul Allen and Bill Gates in the year 1975 on 4th April. The company offers its services in approx. more than 190 countries across the world (Microsoft, 2018). The mission of the company is to empower every person and then every company that is available on the planet to accomplish the more. The company believes in the innovation to reinvent productivity so that their operations become a competitive advantage. The company believes in the technology innovation which is one of the critical to the sustainable social development and the economic growth.
The company’s strategy is to form the best-in-class platforms and productivity services for an intelligent cloud. The company brought the changes in their phone strategy that result in the reduction in the units that are sold and linked with the expenses in the fiscal year 2016 and 2017. This change in the strategy brought the opportunity under which they can increase the strategic investment and acquisitions to drive the cloud innovation (Microsoft, 2018).
A balanced scorecard is a model that is used by the company for the measurement of the performance to enhance and determine the numerous internal functions of a business and their resulting external outcomes. This method also provides the appropriate feedback to the managers of the company so that they can improve their operations and can effectively achieve the goals and objectives of the company (Agarwal, 2018). This modern approach of management accounting was first presented by Dr. Robert Kaplan along with Dr. David Norton. The BSC model is used by the organization to strengthen good behaviors in a company by isolating the four different areas that are essential to be analyzed by the company (Balanced Scorecard Institute, 2017).
The four legs of the balanced scorecard involve business processes, finance, customer and learning, and development. This method is used by the company for attaining the objectives, measurements, initiatives, and targets that result from these 4 primary functions of a business. The company who make use of the balanced scorecard can easily determine the factors that hinder the performance of the company (Investopedia, 2018). The below given is the image of the balanced scorecard with its 4 perspectives.
The below given is the description related to the four perspectives of the company that helps them in measuring the performance.
This is one of the most important measures on which the companies mostly rely. This measure of BSC helps the company in measuring on the basis of return on investment and net income of the company. The reason behind the use of this basis is that almost all the companies make use of these measures to evaluate the financial performance of their company. This measure follows the mutual language of comparing and analyzing a financial aspect of different companies (Agarwal, 2018). Most of the investors who invest their amount in any company with the motive of profit consider these factors as the major factors. Therefore, these factors are considered as one of the important measures for the shareholders. Along with this if any of the banks are lending their funds to the company they ensure that the company is capable enough to pay back the loan taken by them which is possible with the help of these measures only. Moreover, the company who is conducting these financial measures can easily understand the issues faced by the shareholders and lenders with the help of the financial perspective of BSC.
Balanced scorecard includes customer perspective which is another one of the important measures which are evaluated by most of the companies. This method contributes to identify the customers and the market subdivision in which the business will perform the activities and compete with others (Marr, 2018). Along with this, this method supports the company assesses the units of the corporate performance in these targeted segments. This measure includes the different elements which are core and non-specific measure but are essential for the company such as customer satisfaction, customer retention, customer profitability and many others (Bergeron, 2017). On the other hand, this specific measure consists the evaluation of the value proposition that the company provides to its targeted customers.
The internal business process of this modern approach to the accounting helps the company critical evaluating the internal business activities that are performed by the company in the present business environment (Smith, 2010). This perspective measures the value that the company provides for attaining and retaining the customers in the market. Moreover, this method meets the expectations of the shareholders and they will be able to get the maximum returns form the investment made by them (Perkins, Grey and Remmers, 2014). The company can easily achieve the success well all its internal process work smoothly and they will be able to maintain the consistent improvement in the products and services.
This is one of the important perspectives of the BSC model as this model contributes to improve the capabilities and skills of the personnel of the company. Managers know the fact that it is very essential to provide the training to the employees because without training they won’t be able to work effectively and they will not contribute to the productivity of the company. The key measures that are used in the BSC model to analyze the manager’s performance are employee satisfaction and retention. Along with this, they can measure the growth in the operations of the business because this reflects the productivity of the company.
Employee’s satisfaction: – The employee’s satisfaction is one of the essential factors which is required to be considered by the company. The employee satisfaction comes in an organization when the morale of the employees increase. The high employee’s satisfaction will contribute to the enhanced customer satisfaction. Manager of the company tries to satisfy the needs of the employees available in the company. They can motivate the personnel towards the objective of the company along with this they can take the feedbacks through an interview, one-on-one meetings and can observe the employees at work. This measure helps them in understanding the lacking point and will contribute to resolve the issues which are essential for the employee’s satisfaction.
Employee retention: – It is another important measure that is required to be maintained by the company because of employee’s works as an asset to the company. Moreover, this method helps in analyzing the loopholes in the operations due to which the employees are not retaining in the company. In addition, the company incurs the extra cost if they hire new employees in the place of the employee who left the organization.
Employee productivity: – It determines the necessity of the productivity of the employees in an organization. Employees in the organization can generate both financial and physical output.
These are some of the benefits that a company get if they will decide to apply the balanced scorecard model in their business.
BSC model is one of the modern approaches to the accounting method which is used by most of the companies in the current working environment. This method is totally different from the traditional performance system. The traditional accounting management system only keeps the record through the financial analysis. Though, on the other hand, BSC model include the 4 major perspectives that is mostly taken care by the company while evaluating the performance. These 4 perspectives provide the analysis of the financial and non-financial measure that can help the company in improving the performance of the company (Cooper and Ezzamel, 2016).
The business prefers BSC model to the most because they found this model is also suitable for the dynamic environment of the company. On the other hand, the traditional approach of the accounting is different as it is not suitable for the business who deals with the changing environment (Coe and Letza, 2014). BSC model measures the performance of the company and provides the feedback to the company considering the analyses. The traditional method just evaluates the financial aspect and do not provide the information related to the improvement and capabilities of the company. The analysis reflects that the BSC model removes all the limitation of the traditional model. The limitations of the traditional model are; it doesn’t get aligned with the strategies and vision of the company, less accurate, only financial perspective and many others.
The balanced scorecard model recovers all the limitations that are available under the traditional model. This BSC model is linked with the organization’s vision and strategy which is essential to measure the perspective considering in mind about the vision and strategy of the company. The evaluation is done considering the strategy which is effective for the company as they can get more accurate results and can make the future strategies to improve the performance of the company (Striteska and Spickova, 2012). Moreover, the accuracy of the performance evaluations is based on the correct implementation of the BSC model.
This is the fact that the implementation of the BSC model in an organization is one of the difficult things to do. Therefore, the companies will be requiring an accountant expert who can help for implementing the BSC model within the organization. Though, the traditional accounting methods are not difficult to implement within an organization. These traditional methods include cash flow, fund flow, profit and loss statement and many others. In the end, there are many differences that are available in both the methods of the accounting management. According to the analysis, this is the fact that BSC model is the appropriate model that is required to implement by the company as this is suits to the current need of the company and the environment in which they are operating its business.
This section of the report will include the details which explain the suitability of the BSC model to the Microsoft Company. The BSC will support the Microsoft Company in achieving the returns on people, customers, processes and the information technology. BSC will help the company to accomplish the success faster and more reliable so that they can achieve the vision of a company (Biazzo and Garengo, 2012). Below given are some of the aspects which will help in analyzing the suitability of the method for the Microsoft Company.
An organization that is looking to implement balanced scorecard that is striving to become a strategy focused organization. Strategy focused organization is Microsoft that exploit the BSC and technology so that they can become agiler. The implementation of the BSC will allow the organization to attain incremental returns on their processes, customers, employees, and technology. The BSC framework will support the Microsoft shareholders in attaining the returns, leads to the cost-effective operations, reliable customers and the scalable manner of performance of the company (Cooper, Ezzamel and Qu, 2017). Apart from this, this method will provide a full overview of the business to the company which is essential for the effective strategy. This overview will be provided to the managers from financial and operational measures to customer satisfaction, internal processes of the company which contributes to the overall growth. The major benefits that the company will get include tracking of the performance and measure that leads to the fulfillment of the business goals, real-time overview of the KPIs that allows taking the immediate actions. Along with this, the method will support overall business performance considering the strategic plan.
Hence, the overall analysis of the balanced scorecard from the perspective of the company reflects that this method is suitable for the company as will contribute in improving the technology of the company which is one of the important elements of the company. in addition, the BSc model will provide the measures and feedbacks in the customer, financial and internal business processes of the company
Conclusion
In the end, it can be concluded that balanced scorecard model is modern accounting approach that helps the companies in getting the effective result while measuring the performance and capabilities. This method will allow the company an opportunity through which they can improve their future operations and this how the company can lead to the growth and expansion of the business. The report reflects that the model has numerous benefits and this approach is better than the traditional methods of the accounting. All the limitation of the traditional method is improved in the BSC model. In simple words, this method has fulfilled all the limitation of the BSC model due to which most of the company’s implement this method.
Microsoft Company is looking for the suitability of this model in the firm according to the current strategy because this model is totally based on the current strategies of the business. therefore, the report includes the analysis of BSC for the Microsoft company which reflects that this method is suitable for the company and they can make use of this method for achieving the growth and expansion in the market.
References
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Balanced Scorecard Institute (2017) Balanced Scorecard Basics [online]. Available from: https://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard [Accessed on 20th May 2018]
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