- March 13, 2013
- Posted by: essay
- Category: Term paper writing
The balanced scorecard is a relatively new technology designed by Kaplan and Norton at the Harvard Business School. “The balanced scorecard (BSC) was introduced in 1992 to provide a framework for selecting multiple performance measures focused on critical aspects of business”¯ (Banker, Chang, and Pizzini, 2004, p. 2).
The study was conducted with the purpose of finding new ways to improve the company’s efficiency and achieving business goals.
Generally speaking, “the balanced scorecard (BSC) is a performance measurement tool used to translate an organization’s strategic goals into financial and nonfinancial objectives and performance measures”¯ (Kaplan and Norton, 2001 cited in Libby, Salterio, and Webb, 2004, p. 1076).
The advantage of the balanced scorecard is that an organization, which has implemented this system, receives the so-called “coordinate system”¯ of actions in line with the strategy at all levels of management and links different functional areas, such as HR, finance, etc.
There is no doubt that this is really good for Jengo Ltd. Moreover, the balanced scorecard (BSC) provides the company’s purposeful monitoring, allows to predict and anticipate the emergence of problems, seamlessly combines the levels of strategic and operational management, controls the most significant financial and nonfinancial performance indicators of any enterprise. The degree of strategic objectives, the effectiveness of business processes of the entire enterprise, its units and each employee are determined by the values of the so-called key performance indicators, which are closely connected with the system of motivation.
Thus, the balanced scorecard (BSC) is a system for measuring the company’s performance (a strategic planning system) based on a strategy that reflects the most important aspects of any business. The concept of the balanced scorecard (BSC) supports strategic planning, implementation, and further adjustments to the strategy through the joint efforts of all departments.
It is obvious that a balanced scorecard approach to measuring performance would benefit Jengo Ltd. because the balanced scorecard (BSC) helps the managers to quickly gain the valuable summary information on the activities of the enterprise in order to improve a decision-making process. In addition, the balanced scorecard (BSC) provides a well-coordinated interaction of employees and supplies all levels of enterprise management with the ideas about how to improve a decision-making process and achieve the goals.
Identifying two major indicators from each of the quadrants of the scorecard that would be most relevant to Jengo Ltd, it is possible to say that customer and learning and growth indicators will be the most useful and helpful ones for Jengo Ltd. Let us focus our attention on each indicator and describe it in a proper way.
A customer indicator (better knowledge of each client, it is very important to satisfy the customer’s needs and requirements: How do our customers see our company?).
A learning and growth indicator (training, career growth, competence, and level of knowledge: How do we create and increase the value for our customers?).
Furthermore, it is not superfluous to mention that it is very beneficial for Jengo to design the balanced scorecard that should contain six mandatory elements:
”¢ Perspectives that are components with the help of which a decomposition strategy is carried out in order to be implemented;
”¢ Objectives define the directions in which the strategy will be implemented;
”¢ Measures are metric achievements, which should reflect a progress in achieving a strategic objective;
”¢ Targets that are quantitative expression levels;
”¢ Cause and effect linkages that should link all strategic objectives;
”¢ Strategic initiatives are the projects or programs that contribute to the achievement of strategic objectives.
Taking the above mentioned information into consideration, it is possible to draw a conclusion that a balanced scorecard approach and budgeting would be very beneficial for Jengo Ltd.’s planning and control of its inventory, recruitment and cash management activities. The balanced scorecard will provide a complete picture of a company’s business. It will allow Jengo Ltd to prevent the emergence of critical situations and identify the key areas of its business. A budgeting system will allow the company to increase its profits and free cash flows by reducing the costs and control limits.
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