Balanced Scorecard in Business and Non-Profits Essay (Critical Writing)

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Organizational strategic planning involves the development, evaluation, and modernization of strategies for organizations. This type of accounting activity may be performed by means of competitor analysis, analysis of customer profitability, and cost analysis.

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An effective tool that allows for the integration of both non-financial and financial parameters into the measurement and management systems of strategic planning was designed by Kaplan and Norton (2001a, 2001b) and is focused on four primary strategies of the organization, namely, financial, customer, internal business processes and learning and growth. This tool, the Balanced Scorecard system, may be implemented both in private and public sectors of the economy as well as in non-profit organizations.

Since its development, the Balanced Scorecard system became known as an effective tool for successful strategy implementation (Kaplan & Norton, 2001b). Indeed, series of studies (Butler, Letza, & Neale 1997; Fernandes, Raja, & Whalley 2006; Kaplan & Norton 2001a, 2001b) show that those organizations which risked using balanced scorecards in their financial management benefited in the establishment of better relationships with customers, development of new business processes, professional training of their employees and the development of new methods and technologies. All these comprehensive transformations became possible because of the clear strategy definition and its relation to all leverages that affected organizational changes.

As beneficial and effective as it may be, the Balanced Scorecard system has its implementation difficulties. A series of research shows that the main implication of the Balanced Scorecard system is the stage of strategy definition (Butler, Letza, & Neale 1997; Kaplan & Norton 2001a). Butler, Letza, and Neale (1997) also state that the majority of organizations face difficulties in the search for measures of change leverages-strategy linkage.

Fernandes, Raja, and Whalley (2006) observed that Kaplan’s system lacks a practical approach and that its implementation by many small and medium-size companies results in problems with KPI analysis, project management, and developing support systems. Kaplan and Norton (2001a) claim that the implications in the Balanced Scorecard system implementation may arise when the organization is focused mainly on the improvement of the business process and not the innovation of customer relationships.

Considering the abovementioned, it is possible to conclude that the Balanced Scorecard system can hardly be considered as suitable for all organizations. In the majority of cases, organizations have to adapt their system to their specific features. Butler, Letza, and Neale (1997) studied the case of Rexam Custom Europe and found that the company had difficulties in the application and use of the balanced scorecards.

However, the Balanced Scorecard system helped RCE management to identify the important strategy for RCE. As a result, the company decided to focus on its employees. Nonetheless, some organizations such as American Rockwater and Intel and Apple computers as well as British Milliken, Abbey National and Leeds Permanent Building Society, the Nat West Group, and BP Chemicals found that the Balanced Scorecard system is a brilliant tool for strategic planning (Butler, Letza, & Neale 1997).

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However, as in the case with RCE, several non-profit and government organizations such as United Way of Southeastern New England, May Institute, and New Profit Inc. found that the Balanced Scorecard system helps to define the most important strategies for organization and is effective only if it is adapted to needs of an organization (Kaplan & Norton 2001a). Having analyzed the cases in the refrigeration and air-conditioning industry, Fernandes, Raja, and Whalley (2006) found that the Balanced Scorecard system is more suitable for large organizations rather than small and medium-sized organizations. The brief analysis of literature makes it possible to conclude that the Balanced Scorecard system is suitable for bigger organizations and, in any case, requires the adaptation to the organizational features.

Reference List

Butler, A, Letza, SR & Neale, B 1997, ‘Linking the balanced scorecard to strategy,’ Long-range planning, vol. 30, no. 2, pp. 242-253.

Fernandes, KJ, Raja, V & Whalley, 2006, ‘Lessons from implementing the balanced scorecard in a small and medium-size manufacturing organization,’ Technovation, vol. 26, no. 5, pp. 623-634.

Kaplan, RS & Norton, DP 2001a, ‘Transforming the balanced scorecard from performance measurement to strategic management: Part I,’ Accounting Horizons, vol. 15, no. 1, pp. 87-104.

Kaplan, RS & Norton, DP 2001b, ‘Transforming the balanced scorecard from performance measurement to strategic management: Part II,’ Accounting Horizons, vol. 15, no. 2, pp. 147-160.

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IvyPanda. 2020. "Balanced Scorecard in Business and Non-Profits." November 24, 2020. https://ivypanda.com/essays/balanced-scorecard-in-business-and-non-profits/.

1. IvyPanda. "Balanced Scorecard in Business and Non-Profits." November 24, 2020. https://ivypanda.com/essays/balanced-scorecard-in-business-and-non-profits/.


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