The current research is based on appropriateness of non-financial metrics in examining firm performance. Therefore, the paper focuses on critical analysis of BSC as a performance measurement tool. That is, the researcher intends to answer the following primary research question: To what extent does the balance scorecard (BSC) approach influence both performance appraisal and strategic management?
Specifically, the paper reviews what BSC is and how it is applied in various firms. The paper also attempts to link performance appraisal and strategic management. In doing so, it answers the following study sub questions:
How effective is the application of the balance scorecard?
What importance does performance appraisal have to the growth of a firm?
What are the consequences of not implementing non-financial measures within an organisation?
To answer the questions, the researcher conducts a critical literature review of past studies and theories on performance management, strategic management and BSC. The goal of the review is to explain the impact of BSC as a firm performance management tool on the strategic success of the firm. The rest of the paper is, therefore, organized in two sections i.e. literature review and conclusion and recommendations. Literature review section presents a critical evaluation of past studies and theories on BSC and performance management and appraisal. The conclusion and recommendations section summarises the findings and make suggestions for practice and future studies.
Table of Contents
Rationale
Research questions
Literature review
Effectiveness of application of the balance scorecard
Importance of performance appraisal to the growth of a firm
Consequences of not implementing non-financial measures within an organization
Conclusions and recommendations
Research Objectives and Key Topics
This paper examines the influence of the Balanced Scorecard (BSC) approach on performance appraisal and strategic management, aiming to provide a critical evaluation of its usage, benefits, and the necessity of non-financial metrics in contemporary business environments.
- Theoretical evaluation of the Balanced Scorecard as a management tool.
- The link between strategic management and performance appraisal processes.
- Effectiveness of financial vs. non-financial performance metrics.
- Impact of the BSC on organizational strategy and employee performance.
- Recommendations for future research on BSC implementation and effectiveness.
Excerpt from the Book
Effectiveness of application of the balance scorecard
Performance measurement was the original use for which BSC was created. According to Kaplan and Norton, when BSC is used to measure performance, the user must focus on its four performance metrics of financial, customer, internal process, and learning and growth metrics. De Waal (2013) indicated that measuring these four metrics help firms to track all the essential metrics of the firm’s strategy and attain the continuous improvement of teamwork and partnerships. Though BSC retains financial metrics as the primary measure of firm’s performance, it also assesses qualitative elements which are necessary in supporting the overall mission of the firm. Among private and for-profit organisations, the financial metric focuses on profitability and market share while for government and non-governmental organisations, the financial metric focus on projected result-oriented measures. Elsewhere, BSC measures customer perception of the organization as customers directly contribute to revenues via sales and perceptions which are vital for increasing and sustaining sales. Under the customer perspective, BSC can also measure time, quality and cost (Srivastava & Verma, 2012). Besides, BSC measures internal processes that can improve the level of customer satisfaction while learning and growth perspectives focuses on the skills of the employees to attain superior customer value from the internal processes.
Summary of Chapters
Rationale: This chapter introduces the systematic process of strategic management and the emergence of the Balanced Scorecard as a tool to improve upon traditional financial-based measurement systems.
Research questions: This section establishes the primary and sub-questions focusing on the effectiveness of the BSC, the importance of performance appraisal, and the consequences of excluding non-financial measures.
Literature review: This section evaluates existing theories and studies regarding the BSC, defining it as a comprehensive management report used to monitor strategy implementation and operational performance.
Effectiveness of application of the balance scorecard: This chapter discusses how the BSC integrates financial and non-financial metrics to provide a more holistic view of organizational health compared to traditional methods.
Importance of performance appraisal to the growth of a firm: This chapter explores how performance appraisal systems, when linked to the BSC, enhance employee development, motivation, and goal alignment.
Consequences of not implementing non-financial measures within an organization: This chapter highlights the risks of relying solely on financial indicators, arguing that non-financial measures are crucial for capturing intangible assets and long-term success.
Conclusions and recommendations: This final chapter synthesizes the findings, noting the comprehensive data BSC offers while acknowledging the need for further field research into its practical application.
Keywords
Balanced Scorecard, Strategic Management, Performance Appraisal, Non-financial Measures, Firm Performance, Strategy Implementation, Financial Metrics, Organizational Goals, Employee Development, Management Systems, Internal Processes, Business Strategy, Performance Measurement, Stakeholder Needs, Accountability.
Frequently Asked Questions
What is the primary focus of this research?
The paper focuses on the extent to which the Balanced Scorecard (BSC) approach influences both performance appraisal and strategic management within organizations.
What are the central themes discussed in the work?
The central themes include the shift from purely financial performance measurement to a holistic framework, the role of non-financial metrics, and the integration of these tools into daily management and employee appraisal processes.
What is the core research question?
The core research question asks: To what extent does the balance scorecard (BSC) approach influence both performance appraisal and strategic management?
Which methodology is applied in this research?
The researcher conducts a critical literature review, synthesizing past studies and theories on performance management, strategic management, and the BSC.
What topics are covered in the main body?
The main body covers the definition and features of the BSC, its effectiveness in organizational strategy, its impact on employee appraisal, and the inherent risks of omitting non-financial measures.
Which keywords characterize this paper?
Key terms include Balanced Scorecard, Strategic Management, Performance Appraisal, and non-financial performance metrics.
How does the BSC differ from traditional measurement tools?
Unlike traditional tools that rely solely on periodic financial metrics, the BSC incorporates customer, internal process, and learning/growth perspectives, allowing for a proactive rather than reactive assessment.
Why are non-financial measures considered vital for a firm?
Non-financial measures are vital because they capture intangible assets like customer loyalty and employee satisfaction, which are often better predictors of long-term success than historical financial data.
What is the relationship between performance appraisal and the BSC?
When linked to the BSC, performance appraisals evolve from simple checklists into strategic tools that align individual employee goals with the overall mission and vision of the organization.
What does the author suggest for future studies?
The author recommends further empirical field studies, such as semi-structured interviews and quantitative surveys, to better understand how organizations practically implement and benefit from the BSC.
- Citar trabajo
- Anonym (Autor), 2019, To what extent does the balance scorecard approach influence both performance appraisal and strategic management?, Múnich, GRIN Verlag, https://www.grin.com/document/961647
