Although organizations measured their performance even before emergence of the balanced scorecard, they did not know how to implement new strategies. The balanced scorecard has evolved in its functionality to embrace translation of company strategies into action.
The balance scorecard seeks to operationalize organizational strategy towards achieve desired outcomes. In this case, the balance scorecard ensures that the organization realizes its vision and mission through mobilization of resources and utilizing them in line with corporate objectives and goals, both short term and long term. Through the balanced scorecard, an organization can assess the current performance situation, as well as any feedback available from previous performance, and updating corporate strategies in such a manner that it effectively eliminates any bottlenecks available. This paper will discuss the adoption of Balanced Scorecard by contemporary organizations, and more specifically, the role of Balanced Scorecard in translating strategies to action as well as its role as a strategic management accounting technique.
Translating Strategy into Action
The Balanced Scorecard helps translate an organizations strategy and vision into a comprehensive set of measures and metrics to performance. This functionality puts into practice four perspectives of the Balanced Scorecard that include customer knowledge, financial measures, learning and growth, and internal organizational processes. This functionality particularly offers a balance between the company’s desired outcomes and their performance drivers, long term and short-term objectives, alongside objective outcomes. In addition, the balance scorecard has been used by managers as a revolutionary tool that enables them to mobilize their resources and strongholds to achieve the mission of the organization. The Balanced Scorecard appears as a management system that is applicable in channeling abilities, energies, advanced knowledge among its employees towards company objectives and long-term goals. The balanced score card is basically applicable in translating strategies put in place by companies into performance measures that are comprehensive to the targets and achievement needs of the organization as a whole with respects to the complex environments in which they operate (Kaplan &Norton, 1996, p.2). Use of Balanced Scorecard for Strategy translation application to action has been evident among senior executives in banking, insurance, retailing, and oil industries to streamline current performance and target their future performance needs. Strategy translation focuses on effective and efficient use of a company’s intangible assets to spearhead the long-term financial success and value creation of the company through financial and non-financial perspectives. Growth and learning regards individual employees and the entire organizational human resource alongside cross-departmental initiatives to identify efficient new processes that would enable the organizations to meet customer needs and objectives of shareholders (Holl & Bohm, 2005, p.15). The Balanced Scorecard is applicable as a learning system that is robust for testing the current situation, accessing situational feedback and updating ideal strategies fit for shortcomings of previous organizations functionality. However, strategy translation to action using the Balanced Scorecard is not completely ignorant of the steps that organizational managers use to build a tailored balanced scorecard.