Page 270 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes
Purpose of the Balanced Scorecard
Kaplan and Norton found that organisations are using the scorecard to:

1. Clarify and update strategy
2. Communicate strategy throughout the company
3. Align unit and individual goals with strategy
4. Link strategic objectives to long term targets and annual budgets

5. Identify and align strategic initiatives
6. Conduct periodic performance reviews to learn about and improve strategy.
The Process of Building a Balanced Scorecard
Kaplan and Norton suggest following four step process for building a scorecard:

1. Define the measurement architecture
2. Specify strategic objectives
3. Choose strategic measures
4. Develop the implementation plan

Benefits of Balanced Scorecard
Some of the benefits include:
1. Translation of strategy into measurable parameters
2. Communication of the strategy to all stakeholders

3. Alignment of individual goals with the organisation's strategic objectives
4. Feed-back of implementation results to the strategic planning process
5. Preparing the organisation for the Change - It provides for a front-end justification
as well as a focus and integration for the continuous improvement, re-engineering
and transformation process
Balanced Scorecard for Enhancing Performance

In such constantly shifting environments, management must learn to continuously adapt
to new strategies that can emerge from capitalizing on opportunities or countering threats.
A properly constructed balanced scorecard can provide management with the ideal tool in
reacting to the turbulent environment and helping the organisation to correct the course
to success.
Scorecard provides managers with feedback, thus, enabling them to monitor and adjust
the implementation of their strategy - even to the extent of changing the strategy itself. In
today's information age, organisations operate in very turbulent environments. Planned
strategy though initiated with the best of intentions and with the best available information
at the time of planning may no longer be appropriate or valid for contemporary conditions.
As companies have applied the balanced scorecard, they have begun to recognize that the
scorecard represents a fundamental change in the underlying assumptions about
performance measurement.
The scorecard puts strategy and vision, not control, at the centre. It establishes goals but
assumes that people will adopt whatever behaviours and take whatever actions are
Contd...

264 LOVELY PROFESSIONAL UNIVERSITY