Performance Management and Control

 

Performance Management and Control

Introduction

            A balance scorecard encompasses a report that is semi-standard in nature, which is under the support of automation tools as well as design methods that is utilized by managers in the keeping track of  their staff’s execution of  duties at the same time monitoring the arising consequences culminating from these duties. It is utilized by many corporations as a strategic performance tool that aids in the implementation of the corporate strategies (Dr. Pham-Gia, 2009). It articulates and presents both the operational and financial measures, which are compared to set values into a single terse report. The design methods incorporated into the balance scorecard are selected in accordance to the targets and measures linked to the requirements needed to implement the corporate strategies. When the corporate strategies are set by CEOs, then the balance scorecard can be used in the evaluation of the overall performance encompassing both the financial and non-financial part of the business to ensure that the strategies adopted are being implemented according to the specifications of the CEO.

Discussion

Corporate Strategy and Balance Scorecard

Corporate strategy encompasses the over-arching strategy set and adopted by a diversified firm. The SWOT analysis of a certain firm should be analyzed before the corporate strategies can be set. This is such that the corporate strategies set could aid in the enhancing the strength of the company, eliminate the weaknesses, formulate solutions to the threats and take advantage of the opportunities (Kinney & Raiborn, 2008). A balance scorecard includes the strategic management and planning system utilized comprehensively in industry and business, non-profit organizations and the government in the aligning of the business activities with the strategy and vision of the business, the monitoring of the business performance in line with its strategic goals and the improvement of external and internal communications. The balance scorecard, which is employed in the efficient implementation of the corporate strategies, contains both advantages and disadvantages based on the design methods selected. The first advantage of the use of balance scorecard is that it mixes the operation and financial measures used in, one report thus easing the business evaluation process.

Advantages and Disadvantages of Business Scorecard

The business evaluation process in most cases is cumbersome because the corporate operation and financial reports have to be evaluated separately for the realization of the real position of the corporate, which can be made easy through using the balance scorecard that articulates them together (Epstein & Manzoni, 2004). The second advantage of the balance scorecard is the fact that the design methods employed are such that a small number of the financial and non financial measures are identified and targets are attached to them so that during their reviewing conclusions are made as to whether the performance expectation are being met or not. This ensures that the managers concentrate on the areas where performance is dismal enhancing its improvement. Corporates apply different strategic planning systems and tools in the implementation of the corporate strategies and due to its simple nature, and then the balance scorecard is advantageous as it can be used comfortably together with the other tools. Another advantage of the balance scorecard is its reliance on the four perspectives of financial, customer, internal process as well as innovation and learning, which ensure that all the corporate stakeholders are considered in the improvement of the performance of the business.

Although the card encompasses many advantages, it also contains diverse disadvantages. The first disadvantage of the balance scorecard is the fact that the balance scorecard of one organization cannot be applied effectively in another organization because the design is selected in accordance to the strategies of the organization in question, which might be different from those of the other organization (Brown, 2007). The next disadvantage is the fact that due to the utilization of the four perspectives, the card cannot be very helpful to other big organizations because it was set in a way that it could only aid the medium-sized organizations dealing with commercialization in the US. Another disadvantage of the balance scorecard is that it does not provide any recommendation, but it just encompasses a list of metrics that do not develop any strategies but provide merely the position of the company. The fact that the balance scorecard can be utilized together with other tools of evaluation is a disadvantage in itself because it eliminates its autonomous use thus bringing out the fact that it cannot be authentically utilized alone to provide the precise position of the organization.

Implementation of Corporate Strategies

Product Differentiation

Product differentiation is one of the corporate strategies employed by most corporates to cope with the global competition that has been enhanced by the easy entrance of other companies into a certain industry. In an auto-making industry, all the firms are involved in the production of the same products (Niven, 2005). To deal with competition, the firms engage in the improvement of their products to enhance their market share through increased sales. The improvement of the products is known as product-differentiation. The balance scorecard is used to review the operation and financial measures employed into product differentiation to help the management in the improvement of those sections that are underperforming during product-differentiation. It is also used in acquiring the outside communication, especially from the customers on what should be improved to enhance the success of the product-differentiation.

Cost Leadership

Cost leadership is a corporate strategy formulated during the establishment of competitive advantage in a competitive market. It depends on an organization’s size, scope, efficiency, cumulative experience and scale. Its main aim is the exploitation of production scale, definition of scope and economies, utilization of high technology and the production of standardized products (Neely, 2002). Adoption of cost leadership ensures that the organization’s profits are maximized while their costs are minimized. The balance card is thus used in the evaluation of the financial and operation reports of the company such that the management can realize the departments that are incorporating high costs yet their production is low. The management will thus take such measures as incorporating wide use of technology to replace the inefficient workers thus cutting on costs and increasing the company’s productivity. If the balance scorecard concludes that the measures being employed to cost leadership are ineffective, then the management will ensure that different measures are implemented thus increasing the efficiency of cost leadership and in turn improve the organization’s competitive advantage.

Conclusion

            Corporates have been relying on the separate evaluation of the corporates’ financial and operational reports to predict their real position. This was a cumbersome affair, which was revolutionalised by the introduction of the balance card, which is a report that mixes both the financial and operation measures taken-up by a corporate in the reviewing of whether the corporate is meeting the strategies it has put in place or not. This ensures the success of the corporate strategies adopted by a corporate (Dr. Pham-Gia, 2009). Before the setting of the corporate strategies, SWOT analysis should be carried out to bring out the areas that should be improved. After the implementation of such corporate strategies as cost leadership and product-differentiation, balance scorecards are used to evaluate their success so that the management can look at the areas that need to be improved or changed to enhance the productivity of the company. The balance scorecard contains both advantages and disadvantages that should not be ignored during its use. The profound characteristic of this card is the fact that it can be used in line with other evaluation tools comfortably without any form of competition. The profound disadvantage of the balance card is the fact that the balance card of one organization cannot be implemented in another organization. Most corporates who want to ensure the successful implementation of their strategies should therefore adopt the use of the balance scorecard, which will improve their overall performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Brown, M. G. (2007). Beyond the Balanced Scorecard: Improving Business Intelligence with Analytics. New York, NY: Productivity Press.

Dr. Pham-Gia, K. (2009). Balanced Scorecard – Solving All Problems of Traditional Accounting Systems? München, Germany: GRIN Verlag.

Epstein, M. J. & Manzoni, J. (2004). Performance Measurement and Management Control: Superior Organization Performance. Bradford, West Yorkshire: Emerald Group Publishing.

Kinney, M. R. & Raiborn, C. A. (2008). Cost Accounting: Foundations and Evolutions. Los Angeles, CA: Cengage Learning.

Neely, A. D. (2002).Business Performance Measurement: Theory and Practice. New York, NY: Cambridge University Press.

Niven, P. R. (2005). Balanced Scorecard Diagnostics: Maintaining Maximum Performance. Hoboken, NJ: John Wiley and Sons.