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Management Accounting: Performance Evaluation (Balanced Scorecard) - Essay Example

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Management Accounting: Performance Evaluation (Balanced Scorecard)

Moreover, the organization uses performance measurement tools to motivate the employees and identify the best performers within the organization as well. Performance measurement tools are not only restricted to these functions, but these tools can be helpful in analyzing where the organization has incurred high costs and to identify areas where productivity can be enhanced so that the profitability of the organization can be increased. Therefore performance measurement tools are beneficial for the organization in increasing their financial performances as well as their operational performances (Cardinaels, Paula, and Veen-Dirks. 2010). There are different performance measurement tools and one of the most widely used performance measurement tools is the balance scorecard that has been discussed in this report. Ridgway in the year 1956 came up with the concept of performance measurement and from that time, different organizations have used different types and concepts of measuring their performances. During the mid 1980s and 1990s the idea of measuring and managing performance was one of the most debatable and researched topics and different researchers came up with different ideas (Neely, 2005). During this particular time, it was revealed that performance measurement is not only about managing financial performances of the company, but it is about managing the overall performances of the organization as described by Kaplan and Norton using Balance Scorecard. According to Kaplan and Norton, performance of the organization is linked with different measures and not only the financial measures and therefore it is important to consider other aspects as well in order to improve the performances of the organization. This report discusses about this important and widely used performance measurement tools, balance scorecard as well as the report discusses about how balance scorecard is used as a performance measurement tool. Moreover, the report highlights the progress that has been made since the 1990s in balance scorecard as well as in managing performances and then the effectiveness and usefulness of balance scorecard today as a performance measurement tool has been analyzed. Balance Scorecard Balance scorecard is one of the most used performance management and performance measurement tools around the world. Balance scorecard has been developed by Robert Kaplan and David Norton in the year 1993 and since then it has been continuously refined. Previously, organizations have been relating performance management and performance measurement as the financial indicators, however balance scorecard shows that an organization has to consider different aspects and these aspects are linked with each other and by improving all these aspects an organization can improve its performance, otherwise only financial indicators cannot be improved if other factors are not improved (Geuser, Mooraj, and Oyon. 2009). Balance scorecard allows the organization to analyze and formulate strategies. According to balance scorecard, an organization has to consider four perspectives in order to formulate a strategy and these four perspectives are; financial performance, customer knowledge, internal business processes, and learning and growth. Kaplan and Norton have described balance scorecard ...Show more

Summary

Introduction Performance measurement has become one of the most important functions of any business today. Performance measurement and performance management allows businesses to analyze how the department, individuals, processes, or the whole organization is operating…
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Management Accounting: Performance Evaluation (Balanced Scorecard) essay example
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