{"id":295,"date":"2021-01-26T22:38:29","date_gmt":"2021-01-26T22:38:29","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=295"},"modified":"2021-06-11T23:21:46","modified_gmt":"2021-06-11T23:21:46","slug":"balanced-scorecard","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/chapter\/balanced-scorecard\/","title":{"raw":"Balanced Scorecard","rendered":"Balanced Scorecard"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Create a balanced scorecard<\/li>\r\n<\/ul>\r\n<\/div>\r\nTraditionally, business organizations have focused on financial results, which mainly have reflected the shareholders\u2019 interests. In recent years, organizations have shifted attention to customer issues, such as quality and service, to employees, and to the community.\r\n\r\nThe <strong>balanced scorecard<\/strong> is a set of performance targets and results that show an organization\u2019s performance in meeting its objectives to its stakeholders. It is a management tool that recognizes organizational responsibility to different stakeholder groups, such as employees, suppliers, customers, business partners, the community, and shareholders. Often different stakeholders have different needs or desires that the managers of the organization must balance. The concept of a balanced scorecard is to measure how well the organization is doing in view of those competing stakeholder concerns.\r\n\r\nAn example of a balanced scorecard is shown below. As you can see, the focus is to balance the efforts of the organization between the financial, customer, internal process, and learning and growth (innovation).\r\n\r\n<img class=\"aligncenter wp-image-1514 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/11180622\/Screen-Shot-2021-05-11-at-10.07.27-AM.png\" alt=\"A graphic called \u201cBalanced Scorecard\u201d is shown. The graphic has a box labeled Strategy in the center. Surrounding the Strategy box is a circle with four quadrants labeled Financial, Customers, Internal Processes, and Learning and Growth. Each of those four quadrants has a box attached labeled KPIs.\" width=\"647\" height=\"561\" \/>\r\n\r\nThe first step in creating the balanced scorecard is to determine (a) what to measure, and (b) how to measure it. For instance, in creating KPIs for learning and growth, management might ask, \u201cAre we improving and creating value?\u201d From there, the challenge is to find a way to measure that domain. For instance, management might track the number of employee suggestions that are made and implemented, or the number of employee training hours.\r\n\r\nDifferent companies use different perspectives, but the domains would be defined and relevant. For learning purposes, we\u2019ll define the four domains\/perspectives as follows:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Learning and growth<\/em> - look at organizational performance through the lens of human capital, culture, technology, and infrastructure.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: Are your employees using technology to execute tasks and manage processes? Does the organization provide adequate training and resources? What steps is the company taking to remain competitive?<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">The learning and growth perspective considers how well information and knowledge are captured and implemented by employees to create a competitive advantage.<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Internal processes<\/em> - focus on how well internal processes are operating.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: Are there gaps, delays, or bottlenecks in the pipeline that need to be addressed? How can the organization streamline processes for greater efficiency and effectiveness? How quickly can the organization adapt to changing business needs or conditions?<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Customer<\/em> - focuses on finding new customers, building brand recognition and trust, and increasing customer satisfaction.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: \u201cWhat is important to customers and stakeholders?\u201d How well is the organization serving its customers, shareholders, and other internal and external stakeholders?<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Financial<\/em> - looks at numbers and financial results.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: How is the company doing financially? In addition to net income, what other financial aspects of the business are important to stakeholders?<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Although finances are lagging indicators of past decisions, they are still an important part of any organization\u2019s health and key to understanding overall performance and creating strategies for the future.<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\nAs in all of managerial accounting, there are no set or prescribed rules, so every company\u2019s balanced scorecard will be unique, but the process is similar.\r\n\r\nHere is an overview of the process:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=3704753&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=M_IlOlywryw&amp;video_target=tpm-plugin-vsfs2hst-M_IlOlywryw\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/BalancedScorecard_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"Balanced Scorecard\" here (opens in new window)<\/a>.\r\n\r\nHere is a more in-depth description of the balanced scorecard:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=6352615&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=yQR31GtZU_M&amp;video_target=tpm-plugin-2u42wz0j-yQR31GtZU_M\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/TheBalancedScorecard_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"The Balanced Scorecard\" here (opens in new window)<\/a>.\r\n\r\nWhat you will find as you research this topic further, is that there are many ways to create and organize a balanced scorecard.\r\n\r\n&nbsp;\r\n\r\nNow, check your understanding of creating a balanced scorecard.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]221664[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Create a balanced scorecard<\/li>\n<\/ul>\n<\/div>\n<p>Traditionally, business organizations have focused on financial results, which mainly have reflected the shareholders\u2019 interests. In recent years, organizations have shifted attention to customer issues, such as quality and service, to employees, and to the community.<\/p>\n<p>The <strong>balanced scorecard<\/strong> is a set of performance targets and results that show an organization\u2019s performance in meeting its objectives to its stakeholders. It is a management tool that recognizes organizational responsibility to different stakeholder groups, such as employees, suppliers, customers, business partners, the community, and shareholders. Often different stakeholders have different needs or desires that the managers of the organization must balance. The concept of a balanced scorecard is to measure how well the organization is doing in view of those competing stakeholder concerns.<\/p>\n<p>An example of a balanced scorecard is shown below. As you can see, the focus is to balance the efforts of the organization between the financial, customer, internal process, and learning and growth (innovation).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1514 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/11180622\/Screen-Shot-2021-05-11-at-10.07.27-AM.png\" alt=\"A graphic called \u201cBalanced Scorecard\u201d is shown. The graphic has a box labeled Strategy in the center. Surrounding the Strategy box is a circle with four quadrants labeled Financial, Customers, Internal Processes, and Learning and Growth. Each of those four quadrants has a box attached labeled KPIs.\" width=\"647\" height=\"561\" \/><\/p>\n<p>The first step in creating the balanced scorecard is to determine (a) what to measure, and (b) how to measure it. For instance, in creating KPIs for learning and growth, management might ask, \u201cAre we improving and creating value?\u201d From there, the challenge is to find a way to measure that domain. For instance, management might track the number of employee suggestions that are made and implemented, or the number of employee training hours.<\/p>\n<p>Different companies use different perspectives, but the domains would be defined and relevant. For learning purposes, we\u2019ll define the four domains\/perspectives as follows:<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Learning and growth<\/em> &#8211; look at organizational performance through the lens of human capital, culture, technology, and infrastructure.\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: Are your employees using technology to execute tasks and manage processes? Does the organization provide adequate training and resources? What steps is the company taking to remain competitive?<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\">The learning and growth perspective considers how well information and knowledge are captured and implemented by employees to create a competitive advantage.<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Internal processes<\/em> &#8211; focus on how well internal processes are operating.\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: Are there gaps, delays, or bottlenecks in the pipeline that need to be addressed? How can the organization streamline processes for greater efficiency and effectiveness? How quickly can the organization adapt to changing business needs or conditions?<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Customer<\/em> &#8211; focuses on finding new customers, building brand recognition and trust, and increasing customer satisfaction.\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: \u201cWhat is important to customers and stakeholders?\u201d How well is the organization serving its customers, shareholders, and other internal and external stakeholders?<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><em>Financial<\/em> &#8211; looks at numbers and financial results.\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Examples of exploratory questions: How is the company doing financially? In addition to net income, what other financial aspects of the business are important to stakeholders?<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Although finances are lagging indicators of past decisions, they are still an important part of any organization\u2019s health and key to understanding overall performance and creating strategies for the future.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>As in all of managerial accounting, there are no set or prescribed rules, so every company\u2019s balanced scorecard will be unique, but the process is similar.<\/p>\n<p>Here is an overview of the process:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=3704753&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=M_IlOlywryw&amp;video_target=tpm-plugin-vsfs2hst-M_IlOlywryw\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/BalancedScorecard_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;Balanced Scorecard&#8221; here (opens in new window)<\/a>.<\/p>\n<p>Here is a more in-depth description of the balanced scorecard:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=6352615&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=yQR31GtZU_M&amp;video_target=tpm-plugin-2u42wz0j-yQR31GtZU_M\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/TheBalancedScorecard_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;The Balanced Scorecard&#8221; here (opens in new window)<\/a>.<\/p>\n<p>What you will find as you research this topic further, is that there are many ways to create and organize a balanced scorecard.<\/p>\n<p>&nbsp;<\/p>\n<p>Now, check your understanding of creating a balanced scorecard.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm221664\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=221664&theme=oea&iframe_resize_id=ohm221664\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-295\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Balanced Scorecard. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Balanced Scorecard. <strong>Authored by<\/strong>:  IntrafocusUK. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/M_IlOlywryw\">https:\/\/youtu.be\/M_IlOlywryw<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><li>The Balanced Scorecard. <strong>Provided by<\/strong>: Edspira. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/yQR31GtZU_M\">https:\/\/youtu.be\/yQR31GtZU_M<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":14,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Balanced Scorecard\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Balanced Scorecard\",\"author\":\" IntrafocusUK\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/M_IlOlywryw\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"copyrighted_video\",\"description\":\"The Balanced Scorecard\",\"author\":\"\",\"organization\":\"Edspira\",\"url\":\"https:\/\/youtu.be\/yQR31GtZU_M\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-295","chapter","type-chapter","status-publish","hentry"],"part":39,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/295","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/users\/364389"}],"version-history":[{"count":10,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/295\/revisions"}],"predecessor-version":[{"id":2245,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/295\/revisions\/2245"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/parts\/39"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/295\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/media?parent=295"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=295"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/contributor?post=295"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/license?post=295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}