Balanced Scorecard and Activity-Based Costing and Management

The balanced scorecard is a performance measurement system that includes financial and operational measures related to a firm’s goals and strategy. Balanced scorecards are used for many reasons. They help companies while making their business strategy by helping determine the specific areas they should put their focus on. It also creates unity among the workforce by making sure everyone knows their part in supporting the strategy and understanding how their actions influence the short and long term goals of the company. Balanced scorecards use three or more performance measures to track to help the company identify its needs to be successful.

Originally the balanced scorecard used four perspectives; “Financial”, “Customer”, “Internal Business Processes”, and “Learning and Growth”. This design made it hard to justify the measures chosen; therefore it left little confidence in the choices made. Without confidence in the scorecard, there was less motivation towards meeting the set measures since there was no good way to describe how these measures were in fact important.

In the 1990s a new way of selecting measure emerged. Measures were selected using a strategic linkage model’s or strategy map’s strategic objectives. These measures were then shown how they link together and how affect on one could affect another. Generally three or more measurements are chosen. The most common include: Finance, Customer Satisfaction, Internal process, Operational, and Innovation and Learning.

Basically, a company takes a strategy, or a main goal in which they intend to proceed towards and break it down to short term goals in which they should hit in order to be successful. They then develop a system called a balanced-scoreboard where they take key indicators of success in different categories and relate them to all levels of the business. This allows them to track the progress and opportunities in all levels of the company. One example would be taking the...