The Balanced Scorecard as a Strategic Management
Global businesses seek to change their strategies towards business through available information on the market. This transformation aims at bracing the companies for the ever-growing competition in the business field. The most notable challenge here is the businesses’ capacity to exploit intangible assets in which they have already invested. The article makes emphasis on the application of balanced scorecard in strategic management. This approach mainly explores the use of conventional thinking about performance metrics. Mostly, balanced scorecard employs nonfinancial metrics because of their ability to predict future financial performance rather than simply report events that have already taken place. In addition to the recommendation of managers to use balanced scorecard, the article gives an in-depth analysis of how the approach systematically connects current actions with future goals.
The application of balanced scorecard in business management focuses on three significant outcomes. In this study paper, we analyze these three main expected results of using the balanced scorecard strategy. They include feedback and learning, communication and linking, and business planning. Feedback and learning mean the ability of top management to carry out review of their management strategies. Balance scorecard allows for real-time research amongst businesses’ management. According to the author, balance scorecard gives the managers the capacity to know at any moment in its implementation whether the formulated strategy works and if not, the reasons behind this. Most businesses in the contemporary world function under turbulent circumstances with multifaceted strategies. In this kind of setting where new threats and opportunities constantly arise, businesses must have several tools to evaluate their performance. These evaluations include budget reviews and other financially based management tools which engage the senior management in constant reviews. This tool addresses performance from all aspects of management and involves strategic management. From the above understanding, strategic learning and evaluation tools consist of gathering feedback, testing the strategy-based hypothesis, and making essential modifications (Wheelen and Hunger 39).
Business planning helps resolve the problem of separation of procedures and organizational units that most companies face. These two steps in business planning are essential for budgeting and resource allocation. To put together a companies’ strategic plans, top management needs to off-site and yearly explore the effectiveness of planning and external consultants. The result of this process is a strategic plan outlining the companies’ objectives and goals, especially in a 5-year plan. Business plans ensure a different resource allocation and budgeting process overseen by the finance staff. This department will set out the companies’ targets in relation to revenues, profits, expenses, and investments for the stated period. In this case, the budget put in place will produce almost the whole financial numbers which show considerable connection to the set targets.
Finally, the balance scorecard approach towards strategic management explores the essence of communication and linking in businesses. The personal scorecard supports corporate communication and unit goals to the people and teams performing the work. All the processes involved in strategic management will heavily rely on communicating and linking between the employees and management. However, there is a notable challenge of the broad participation which is the longer period taken to oversee the formulation and implementation of companies’ objectives. In order for the set objectives to work in companies, there is a need for every stakeholder in the company to participate in the decision-making processes. This will allow the presentation of diverse ideas to the management which in turn promotes communication (Harvard business review 9).
From the above discussion, it is clear that contemporary companies apply balance scorecard to clarify and update strategy, conduct periodic performance reviews, and connect strategic objectives to long-term targets and annual budgets. In addition, the approach aligns unit and individual objectives with strategy and communicate policy throughout the company.