Balanced Scorecard Differs from Traditional Performance Measurement Systems
Every organization at some point needs to evaluate their performance. Performance measures are strategies that are used to assess financial and non-financial aspects of the business. They are important to evaluate the organization's resources allocation, targets, and budgeting. The results of these measures are used to manage and monitor the organization's performance in all the areas of the business. The paper aims at analyzing, comparing and summarizing these two performance measures, balance scorecard and traditional performance measurement systems.
A balanced scorecard is a tool for performance measurement which integrates the financial and non-financial measures. It helps an organization to integrate their performance measures with strategic objectives. It allows for the analysis of business regarding its results, organizational capacities and their operations (Asefeso 25). The balanced scorecard helps the organization to learn about their customers and their value. It is the system that helps the organization to prioritize and focus its energy to achieve both their long and short term goals.
In contrast to the balanced scorecard, which focuses on integrating both the financial and non-financial performance measures for the purpose of evaluating the long run and the short run performance in a single report, traditional performance measurement systems focus on the organization financial objectives (Asefeso 27). This means that there are logics in the balanced scorecard that cannot be found on traditional performance measurement systems since they only on focus financial measures in the short-term.
Traditional performance measurement systems focus on improving and monitoring business processes that exist (Asefeso 27). The only time they go beyond financial measures is when they attempt to incorporate metrics that are time-based and quality. They can, therefore, be said to focus on improving existing business processes. On the other hand, the scorecard focuses on coming up with new processes that the enterprise can adopt in a bid to meet its customers' desires as well as the organization's financial objectives.
While the Balanced scorecard takes future and present innovations and attempts to incorporate them into the perspective of the internal business process, traditional measurement systems focus on delivering existing products and services to present customers without any future processes incorporation. These systems represent value creation in the short wave which begins with a customer's receipt of order, and this process ends with products being delivered to the customers (Asefeso 25). This short wave value results from controlling and improving the business' already existing processes.
Concerning sufficiency in record keeping and business performance evaluation, the traditional methods are insufficient since they don't account for the value of intangible assets. On the other hand, the balanced scorecard incorporates a means of monitoring the present performance of the business and at the same time analyses the readiness of the business for the future. The balanced scorecard also links the performance of the enterprise to its objectives, vision, and strategy (Asefeso 26).
For example, if an organization used traditional measurement systems, they …
