ACCOUNTING THEORY

Accounting Theory

Accounting Theory

Balanced Scorecard

The Balanced Scorecard is a performance measurement tool which has been recognized globally and under use in many business organizations. The balance scorecard has been developed as a tool that has many dimensions which are used to measure the performance of organizations across multiple dimensions of the organization. Business organizations throughout the world have been using the financial measures to evaluate their performance, but in this era the popularity and use of financial measures, as a tool to evaluate the performance of the organization, has decreased to a large extent. The financial measures were considered to be too short term in nature and gives rise to inter departmental conflicts. For example, an organization may want to reduce its research and development costs, but it would only be decreased at the cost of future product development and competitiveness of the organization in the long term.

Therefore, the need to evaluate the performance of organizations across other dimensions besides the financial performance led to the development of the balanced scorecards. The balanced scorecards were then developed by Kaplan and Norton in 1992 to measure the performance of organizations with more emphasis on the customer satisfaction, which was considered to be a very important measure among all the nonfinancial measures of organizational performance.

The balanced scorecards are used to measure the performance of organizations across four different aspects which are Financial, Customer, Internal Business Processes, and Learning Growth perspectives. These different measures are targeted to the stakeholders of the organization including the shareholders, customers and the employees of the organization. In the balanced scorecards, the goals are set in each of these perspectives and then the measures to evaluate the performance are identified. Therefore, the balanced scorecards evaluate the performance of business organizations across these four perspectives (Ahmad et.al, 2010, p. ...