Meaning Of A Balance Scorecard Accounting Essay

Based on Balanced Scorecard Institute, the significance of Balance Scorecard ( BSC ) is a ‘strategic planning and direction system that is used extensively in concern and industry, authorities, and non-profit organisations worldwide to aline concern activities to the vision and scheme of the organisation, better internal and external communications, and monitor organisation public presentation against strategic ends ‘ . BSC besides defined as a ‘Strategic planning and direction system used to aline concern activities to the vision statement of the organisation ‘ ( Kaplan & A ; Miyake 2010 ) . Institutions rely on the BSC so much to populate up to the public presentation of direction schemes to accomplish all the establishments ends both net income and non-profit organisations. BSC is really of import tool to regulate and mensurate the internal and external schemes. In the beginning of 90s, Kaplan & A ; Norton developed the scientific theory of BSC in books and little articles have been published at that clip.

Using BSC keeps organisation concentrating on its subdivisions separately to accomplish the ends and strategic purposes, e.g. gross revenues section seeking to accomplish 90 % of the strategic mark and to do clients satisfied by value added in merchandises and services to accomplish high degree of gross revenues and profitableness beyond employees ‘ public presentation toward the scheme.

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BSC goes beyond the fiscal measuring. It besides includes quality measuring. The following positions show the major contains of BSC:



Innovation & A ; Learning

Internal concern

Each positions of the BSC include aims, steps and marks, for illustration profitable growing measured in footings of net net income. The company may gain in a given period of clip. Let say organisation mark is to increase gross revenues by 5 % following twelvemonth. Therefore, it has to take necessary stairss to accomplish its mark.

BSC can be extremely utile tool to change over the high degree aims into operational aims in put to deathing them successfully and pass on the scheme efficaciously throughout the organisation.

This paper highlights the significance of BSC and the most of import advantages and briefing about its beginnings. Subsequently on, research workers discuss the BSC of specific company for how the BSC is success.

Literature Review

Each step in balanced scorecard should associate to the corporate scheme. In bend, each of these steps will be alone and different topic to house ‘s ends and schemes. Harmonizing to Ballantine et Al ( 1996 ) a balanced scorecard can be developed and applied for endeavor system public presentation measuring in both public and private sector. However, it applied from two different points of position. In private sector, it base on fiscal indexs as it has to react to fluctuations in market portion or portion monetary values, dividend growing and other alterations in fiscal position. In public sector, entities adhered to legislative Acts of the Apostless and authorities governments. It has noticed that the chief difference between the BSC in each sector is the intent of using. Public sector emphasizes on cost decrease and client satisfaction whereas private sector is focused on gross coevals and maximise the stockholders wealth.

Epstein and Wisner ( 2001 ) concluded that the integrating is something like showing how environmental and societal issues contribute profitableness. Their empirical-anecdotal grounds relates to the Scorecard of the Health Safety and the Environment section of Bristol Myers Squibb. Besides, their treatment relates to the integrating of the environmental and societal issues with the concern their chief illustration relates to the usage of the BSC tool for the measuring of a Shared Service Unit – the one in charge of supervising the Health Safety and Environment issues in the whole Corporation such as ( Environment, Information engineering, Human resources. The really job for corporation today is in fact their deficiency of integrating.

Pienaar and Penzhorn ( 2000 ) aimed to happen out how the balanced scorecard scheme is suited for strategic direction at an academic information service. Expatriated research workers to place the utility of BSC, they described and explained the significance of BSC based on secondary informations. They adopted the position of Campbell ( 1997 ) , the academic information service is of the sentiment that the BSC is an thought whose clip has come. Kaplan and Norton ( 1996 ) , the BSC is used as a communication, informing and larning but non commanding the system. The research workers found that the BSC is good suited to the type of organisation which is seeking to utilize the academic information service. Finally, the research workers found that the academic information service is in a changeless province of positive alteration and balanced scorecard is seen as a vehicle, through which a broad scope of inventions an betterments in public presentation can be achieved, lending to the development and continuation of long term competitory advantages within a invariably ambitious environment.

Colomina et Al ( 2003 ) , proposed on how to use the BSC to the corporate investing managerial houses, the survey aimed to developing in corporate investing direction houses. It besides aimed to place their nucleus activities in order to specify a superb scheme and better the quality of their services. The concluding purposed was to increase their return on investing ; this survey was conducted in Spain because research workers believed it was the right topographic point for that. The methodological analysiss used in their survey were descriptive and experimental. To obtain this theoretical account they have used dynamic systems theory and other information engineering instruments. Researcher noticed that the BSC is non merely a utile tool for pull offing and be aftering a house scheme but it is besides opens new development potency through appropriate package designs. This tool will be utile to confront the alterations in this field of activity.

Kaplan ( 2005 ) , BSC introduced client prosodies into the public presentation rating. The characteristic of BSC is refering about the client value and client prosodies, for illustrations market portion, accomplishment and keeping. However, companies may confront job in accomplishing their chief aim, maximise the net income, by concentrating on clients delightfulness. In order to avoid this job, the organisations have to monetary value their merchandise decently and bear down excess cost for extra services requested by the clients.

Harmonizing to the writer to pull clients, companies should go client obsessed instead than client focused, this mean that company must establish a manner that can pull client. They must cognize what in client head, non merely maintain watching the client and concentrating on him, companies have to convey attending to clients.

Finally in this research, client can be provided two methods of buying. One when they purchase individual service, therefore the monetary value will be rise for individual service because it is one service and costs will be high. Another manner is when company offer to client broad scope of services that will coerce the cost to be less and this will take client to salvage on majority purchases. An illustration of insurance company, client profitableness prosodies provide a nexus, otherwise losing, between client success and improved fiscal public presentation. Many companies have experience in income growing. Scorecard measures of the Numberss of unprofitable clients and the sum of losingss from unprofitable relationships focus the organisation on pull offing clients for net incomes, non merely for gross revenues, therefore doing the client focal point align with fiscal aims.

It can be noticed that BSC used in different organisations in both private and public sector for different points of position. This is due to the fact that BSC assists the organisations to accomplish their marks and carry through the ends. However, it has its ain restriction when the concern tends to concentrate on client satisfaction without effort to set their merchandises monetary values as needed for excess services.

The use of BSC in Novo Nordisk

Background of the Company

Novo Nordisk is a Danish international wellness attention ( pharmaceutical ) company which bring forthing chiefly drugs diabetes attention. It is public limited liability company with more than 85 old ages of experience. The company is frequently enormously invested in intangible assets and research and development. To guarantee whether the company is traveling on right path after all of these disbursement, the CEO tuned to utilize BSC 13 old ages ago. The ground behind execution of BSC was partially due to the civilization of the Novo and partially of the concern environment in pharmaceutical companies.

Execution of BSC for Novo Nordisk

The illustration holla will be demoing the balanced scorecard of Novo Nordisk. The existent information is based on 2009. The mark is set till 2014.

The least developed state as defined by the UN.

Measured by external consultancy house.

Based on e-Voice, an employee study utilizing graduated table of 1-5 with 5 being the best.

These general aims were cascaded through the organisation and the BSC had been prepared through package. As consequence, Novo Nordisk external study produced from informations treating in this system.

It can be noticed that how the BSC effort to assist this pharmaceutical company to associate their nonsubjective with desire accomplishment. As consequence, it has successfully achieved the mark demand or it was close to its long term mark before the due day of the month expires.

The use of BSC in an Omani Company –

Qalhat Liquefied Natural Gas Company ( QLNG )

QLNG is one of the freshly established and taking companies in Oman. It was established to have the 3rd LNG train in the Sultanate. The undertaking started in 2002 and the LNG cargos successfully started in December 2005. The works is located in Sur where the LNG is exported to Far East and Europe via LNG ships.

QLNG usage BSC to measure the annual public presentation of the company against a figure of Cardinal Performance Indicators which are developed in line with company long term aims or specific undertakings for a peculiar twelvemonth. The purpose of developing BSC is to concentrate on the of import affairs in the concern and promote direction and staff to endeavor in accomplishing the best consequences as they will be rewarded based on the consequences of the company. After the twelvemonth is over, the existent consequences of the BSC are calculated to measure the company public presentation.

The BSC of QLNG consists of 7-9 Key Performance Indicators ( KPIs ) with different weightings and four public presentation classs or sets with specific points of each based on the achieved deliverables. Each KPI is clearly defined in term of goals/purpose, benefits and measures/deliverables. Based on the importance of the KPI the weighting is assigned. The public presentation set specified the minimal set of standards that should be achieved to hit that set. At twelvemonth end the existent consequences are compared with the steps in the scorecard matrix in order to describe the mark of each KPI. The consequences of each KPI are added to describe of company public presentation in the twelvemonth.

Based on our research, we found out that BSC by and large focuses on four of import positions which are listed and briefly explained below.

Fiscal – steps fiscal facets such as return on capital, gross and market portion

Customer – concerns about merchandise quality, on clip bringing, client service and competitory monetary value

Innovation & A ; Learning – measures new merchandise debut versus competition, investing in advanced merchandises and per centum from new merchandise

Internal concern – steps include fabricating cycling clip, efficiency, process output, and quality steps

We have applied the above four positions to Qalhat LNG BSC by placing the ends and steps under each position as shown below:

BSC positions



Fiscal position

Accomplishment of gross revenues degree and concern program gross

Number of LNG ladings produced and delivered during the twelvemonth

Number of ladings sold at higher monetary value than what originally agreed as a consequence of Marketing originative recreation and barter chances

Transporting cost economy

Percentage of LNG use to run the ship comparing to the usage of fuel oil which is more dearly-won.

Customer Perspective

Deliver right quality and measure on clip

Number of instances of hold in presenting LNG ladings to the clients

Number of complains or dissatisfaction of clients if the quality of LNG is non in line with the agreed parametric quantities

Internal Business position

Improve efficiency, concern procedures and controls

Percentage of audit recommendations which are completed and satisfactory closed before the agreed due day of the month.

Reduce Health, Safety & A ; Environmental exposure to the company

Number of HSE plans / preparations implemented during the twelvemonth.

Number of HSE audits carried out during the twelvemonth

Invention and larning position

New originative selling thoughts that increase the gross of the company

Number of new Master Agreements with prospective purchasers

Complete the needed surveies on clip

Carry out Investment surveies suitable for the company and execute selected chances

Satisfactory completion of investing proposals to the Board of Directors on clip

Beginning: interview of a senior staff in the company and

Overall, Qalhat LNG believes on the importance of BSC in bettering the public presentation of the company and promoting all staff to make their degree best and come up with advanced thoughts, and bettering the efficiency of its operations.


In today ‘s universe of information engineering every organisation needs a system which balances between the aim and subjective steps. It is perfectly non plenty by set uping a system that are public presentation or consequence oriented, but besides a system to drive these through a proper channels to accomplish future consequences. BSC tool would surely be helpful in set uping such a system which decidedly fills the bing spread between internal and external steps. No uncertainty there are several systems that are established in order to run any concern operations efficaciously and expeditiously, but BSC is a system designed to take attention a broader array of elements like client satisfaction and hence focal point on their keepings on one side and employee satisfaction and their keepings on the other maintaining in head the Business operations under considerations. Last, any organisation by implementing this system of BSC decidedly shall profit after all they are all learning organisations.


First, companies are advised to direct their directors to establishments that have knowledge of BSC so they can larn the benefit of this tool which influences them to execute better and develop their organisation.

The top direction of the companies must be willing to pass and cook to accept the system of implementing BSC for which a complete understanding the result and its impact along with cost should be worked out.

Besides, it is recommended for the organisations to implement this system of BSC measure by measure which would assist in holding control over the system.

Besides the system of BSC should be customized harmonizing to the demand of the type of industry and nature of production/service organisations.

BSC system must be made compulsory at least for some of the organisations where there is public involvement and thereby accomplish success and growing.


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