BALANCED SCORECARD

Balanced Scorecard



Balanced Scorecard

Introduction

The balanced scorecard is being adopted and adapted in a wide range of organizations and at both the company and business unit levels including categories for financial, human, customer, and structural capital. In balanced scorecard approach, the learning and growth perspective —includes employee training and organizational attitudes related to both employee and organizational improvement.

Discussion

Companies focus on differentiating their product or service from competitors by developing a strategy that leverages their strengths and targets their particular market niches. This differentiation occurs in one or more of the following three areas: quality, cost, and time. Quality encompasses the customer's entire experience with a product and includes innovativeness, durability, desired features, characteristics, and post sales service. Cost includes the life cycle costs from supplier, production and distribution costs, and customer maintenance and disposal costs (Ulrich, 2007). Time involves time-to-market of new products, availability, and time through the production and distribution chain. Financial resources alone will not ensure effectively competing in these dimensions.

Intellectual Capital

Assessing, developing, and protecting the intangible assets is critical to the viability of the company. For example, voluntary and involuntary turnover represents intellectual assets walking out the door. When AT&T layed off 40,000 employees in 1996, they lost an estimated 4 to 8 billion dollars in intellectual capital—equivalent to destroying one third of the physical assets of the organization (Stewart, 1997). Some writers have argued that communications capital is the key to intangibles, whereas others have argued that social capital is the key. Certainly, they are intertwined, since a great idea has no value if no one is interested in it (Norton, 2006).

Intellectual capital represents knowledge but that comes in many forms and its value depends on many factors. Knowledge may be what an individual knows or a routine in the organization that has evolved through practice over a long period. It includes information in files and computers but also informal lessons learned that are passed on from one person to the next through stories that illustrate how the company operates. Ulrich (1998) wrote that intellectual capital is the product of competence and commitment but others have added terms to his equation including communications, collaboration, and courage. This function implies that “knowing what” and “knowing how” are not enough. Knowledge must be shared, and there must be a basis for taking actions and taking intelligent risks with that knowledge (Niven, 2008). Intellectual capital includes pushing ...