Measurement of Corporate Performance Through Balanced Scorecard PDF

© 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) MEASUREMENT OF CORPORATE PERFORMANCE THROUGH BALANCED SCORECARD Jeevanraj...

© 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) MEASUREMENT OF CORPORATE PERFORMANCE THROUGH BALANCED SCORECARD Jeevanraj Lecturer, dept of commerce and management Sahyadri commerce and Management College Shivamogga Abstract This paper presents an overview of studies that have described the emergence of innovative performance measurement systems. Performance measurement system has changed a lot in comparison to the past. The measurement results are real just when the comparisons apply between similar items. In traditional performance measurement approach, the most important goals of evaluation is performance measurement while modern approach has focused on evaluated growth and development capacity. Modern evaluation system results in satisfaction improvement, efficiency improvement, and finally improvement in effectiveness of organizational activities. In this changed business paradigm relying on only the financial measures, which are considered as the indicators of short-run performance, to measure the corporate performance is puzzling and often misleading. In order to remove this drawback, Balanced Scorecard added three additional perspectives covering operating aspects of an organization which exhibits not only the current position of the enterprise but also how it is progressing. This balanced scorecard translates an organisation’s strategy into performance objectives, measures, targets and initiatives. A proper balanced scorecard can predict the effectiveness of an organisation’s strategy through a series of linked performance measures based on four perspectives including finance, customers, internal processes, employee learning and growth. Keywords: Balanced Scorecard, Performance Management Tools, Management Control Systems Introduction From the beginning, it is important to understand why measuring an organization’s performance is both necessary and vital. An organization operating without a performance measurement system is like an airplane flying without a compass, a Formula One race car driver guiding his car blindfolded, or a CEO operating without a strategic plan. The purpose of measuring performance is not only to know how a business is performing but also to enable it to perform better. The ultimate aim of implementing a performance measurement system is to improve the performance of an organization, so that it may better serve its customers, employees, owners, and stakeholders. If one “gets” performance measurement right, the data generated will tell the user where the business is, how it is doing, and where it is going. In short, it is a report card for a business that provides users with information on what is working well and what is not. Performance measures are recognized as an important element of all Total Quality Management programs. As a process, performance measurement is not simply concerned with collecting data associated with a predefined performance goal or standard. Performance measurement is better thought of as an overall management system involving prevention and detection aimed at achieving conformance of the work product or service to your customer's requirements. An organization’s measurement system strongly affects JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 401 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) the behavior of people both inside and outside an organization. If companies are to survive and prosper in the information age competition they must use measurement systems derived from their strategies and capabilities. One of the main shortcomings of current performance measurement systems is that business processes are not measured systematically. A number of authors have been criticizing traditional performance measurement. The basic idea behind the introduction of the Balanced Scorecard was that the traditional financial measures (like ROI, EPS etc.) alone cannot provide a clear and comprehensive performance target or focus attention on all the critical areas of the business that bear significant impact on its long-term survival, growth and development, rather it requires a balanced presentation of financial as well as operational measures. Quoting Kaplan and Norton as that as companies around the world transform themselves for competition based on information, their ability to exploit intangible assets has become far more decisive than their ability to invest in and manage physical assets. This trend shows that the development and the adoption of more sophisticated managerial innovation system such as the balanced scorecard (BSC) used in planning, measuring and monitoring firm’s performances are increasingly popular. The Balanced Scorecard is an organizational framework for implementing and managing strategy at all levels of an enterprise by linking objectives, initiatives and measures to an organization’s strategy. The Balanced Scorecard is a strategic management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. When fully deployed, the Balanced Scorecard transforms strategic planning from an academic exercise into the nerve centre of an enterprise. The scorecard provides an enterprise view of an organization’s overall performance. Through the use of the various perspectives, the BSC captures both leading and lagging performance measures, thereby providing a more “balanced” view of company performance. Leading indicators include measure such as customer satisfaction, new product development, on-time delivery, employee competency development, etc. Traditional lagging indicators include financial measures, such as revenue growth and profitability. The BSC performance management systems have been widely adopted globally, in part, because this approach enables organizations to align all levels of staff around a single strategy so that it can be executed more successfully. Review of literature: Dr A A Malgwi & H. Dahiru (Jul-Aug, 2014), in their study entitled “Balanced Scorecard financial measurement of organizational performance: A review” in their article they opined that, achieving profitability in businesses has always been a necessary requirement for continuity, growth and expansion. Managers of organizations are tasked with the responsibilities of ensuring success of operations within their areas of control all the time, to attain this, it demands making strategic plans by the managers and using appropriate performance measurement techniques to enable them achieve their goals all the time. Emad A. Awadallah and Amir Allam (July 2015) made a study on “A Critique of the Balanced Scorecard as a Performance Measurement Tool” in their article they opined that, Given the dynamic nature of business markets, organizations have witnessed a rapid change in their performance measurement systems in the last three decades with most of the performance measurement tools being more sophisticated. One of the most widespread tools is the Balanced Scorecard (BSC). The BSC has been applied to almost all industry sectors and industry sizes –from manufacturing to services industries, from large to small organizations and from public to the private sector. Originally, the application of the BSC framework was more appropriate for organizations using intangible assets to create value (Kaplan and Norton, 1992). JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 402 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) Meena Chavan made a study on “The balanced scorecard: a new challenge” she stated in their article, There is nothing new or original about the notion of combining a number of measures in a compact description of an operation. Traditional methods of measuring performance focused on financial indicators. Even within the profit sector, financial statements cannot properly capture the kind of measurements that companies need today. High quality services, intellectual capital, skilled employees, prompt and reliable services, responsiveness efficient and adaptable business processes are all intangible assets which are important but their presence or absence does not show up on a balance sheet and does not alert employees, customers, shareholders and the community to the real worth of an company or enterprise. The Balanced scorecard emphasizes that financial and nonfinancial measures are all part of a system that gives information to every part of the organization. They are part of a top down driven process, driven by the mission and strategy of the “Business Unit”. Arman Poureisa, Mohaddeseh Bolouki Asli Ahmadgourabi, Ako Efteghar, (MAY 2013), made a study on “Balanced Scorecard: A New Tool for Performance Evaluation”, they stated in their article, Performance measurement system has changed a lot in comparison to the past. The measurement results are real just when the comparisons apply between similar items. In traditional performance measurement approach, the most important goals of evaluation is performance measurement, while modern approach has focused on evaluated growth and development capacity. Modern evaluation system results in satisfaction improvement, efficiency improvement, and finally improvement in effectiveness of organizational activities. Nowadays, just the organizations can be considered as a leader of their industry which can use the resources better and quicker than their adversaries and by using new methods increase their competitive advantages. In this way, BSC as a new tool in management hands can provide a better competitive situation by better assessment of organizational performance. A well designed balanced scorecard should be able to describe your strategies through the objectives and measures you have chosen. Samir Ghosh, Subrata Mukherjee,( March 2006 ) made a study on “MEASUREMENT OF CORPORATE PERFORMANCE THROUGH BALANCED SCORECARD : AN OVERVIEW” they stated in their article, In the present era of emerging intense global competition, organizations’ are facing increasingly knowledgeable and demanding customers and activist shareholders which have changed the competitive environment from competition based on ability to invest in and manage physical assets to competition based on knowledge and the ability to exploit intangible and soft assets. In this changed business paradigm relying on only the financial measures, which are considered as the indicators of short- run performance, to measure the corporate performance is puzzling and often misleading. A Balanced Scorecard added three additional perspectives covering operating aspects of an organization which exhibits not only the current position of the enterprise but also how it is progressing. Dr A A Malgwi & H. Dahiru, made a study on “Balanced Scorecard financial measurement of organizational performance: A review” he opined in their article, Business managers are tasked with the responsibility of ensuring smooth operations of business activities tailored towards achieving organizational goals. Managers of organizations are tasked with the responsibilities of ensuring success of operations within their areas of control all the time, to attain this, it demands making strategic plans by the managers and using appropriate performance measurement techniques to enable them achieve their goals all the time. Managers make use of only financial perspective to measure performance in the past but that seems not to be adequate enough and hence the development of a tool called the balanced scorecard which incorporated both the financial and non financial measures of performance, because the non-financial criteria are as important as financial criteria in measurement systems and when both measures are integrated in the system, JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 403 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) they lead to superior results. It provides a framework that not only provides performance measurements but helps planners identify what should be done, measured and executed Objective of study: 1. To critically evaluate the concept of Performance measurement in corporate. 2. To highlight traditional performance measurement tools and techniques. 3. To conceptualize about Balanced Scorecard as a measurement tool. 4. To analyze the extent of usage of balanced scorecard as a performance measurement system in companies. Methodology: The study focuses on extensive study of secondary data collected from government websites, various national and international journals and articles, publications, conference papers, government reports, newspapers, magazines which focused on various aspects of performance evaluation tools BSC. Performance Measurement-A Theoretical Framework Background: In an increasingly dynamic and information-driven environment, the quest by business leaders and management researchers for performance measures which reflect competitive strategies, quality improvement and speed and quality of service is at the forefront of managing organization performance. Performance measurement is important for keeping an organization on track in achieving its objectives (Kaplan and Norton, 1992). The selection of the most appropriate performance measures is, however, an area with no defining boundaries as there are number of purposes to which performance measurement can be put, although not all performance measurement can be used for all purposes. Even though individual organizations tend to utilize organization-specific performance measures appropriate to their needs, for many organizations the main performance measures would typically include some combination of financial, market/customer, internal business process, learning and growth, employees, shareholders, social and environmental. The performance measurement has relied on financial or accounting-based measures, despite the drawbacks associated with such an approach. Specifically, the use of financial measures alone has serious limitations because of their inherently backward-looking nature, their limited ability to measure operational performance and their tendency to focus on the short-term (Kaplan and Norton, 2001). The reliance on financial measures alone, therefore, to present the true picture of organizational performance, is in itself backward looking, especially when organizations/institutions are confronted with increasing expectations from a variety of stakeholders. As a result, an organization requires more from its performance measurement system than ever before. A performance measurement system (PMS) enables an organization to plan, measure, and control its performance according to a pre-defined strategy. In short, it enables a business to achieve the desired results and to create shareholder value (Johnson, 2007). Figure provides below the framework for designing a performance measurement system. Strategy defines the critical success factors; if these factors are measured and rewarded; people are motivated to achieve them. JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 404 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) Figure: Framework for Designing Performance Measurement Systems What Counts, gets measured What gets What gets rewarded, Strategy measured, really counts gets done What gets done, gets rewarded Various performance measurement systems are used by various organizations depending upon the nature and type of activities based on financial measures as well as non-financial measures. The major performance measurement systems in use today include: The Balanced Scorecard (BSC), Activity-Based Costing and Activity-Based Management (ABC and ABM), Economic Value Added (EVA), Total Quality Management (TQM), Customer Value Analysis (CVA), Customer Relationship Management (CRM), Performance Prism, Profitability Measures (ROI, ROE, ROA and ROAA), Productivity Measures (per branch and per employee), CAMEL Model (ratios), etc. Financial Measures Various financial performance measures are intended to evaluate the effectiveness and efficiency by which organizations use financial and physical capital to create value for shareholders. They also provide detailed financial information to present and potential investors, and other interested users through the various components of quarterly, half yearly and annual reports, including balance-sheets, profit and loss statements, cash flow statements, etc. A variety of financial accounting measures of performance are used in order to provide such information. Some of the more popular measures include: Earnings, Cash Flow, Return on Investment (ROI), Return on Assets (ROA), Return on Equity (ROE), Return on Capital Employed (ROCE), Earnings per Share (EPS), Price/Earnings Ratio (P/E ratio), and Return on Sales etc. Moreover, financial accounting measures based performance measurement systems like Profitability ratios, Activity-Based Costing and Activity-Based Management (ABC-ABM), Economic Value Added (EVA), Productivity ratios and other ratios etc. were most commonly used (Tapanya, 2004). All these are explained briefly as follows: Return on Investment (ROI) is calculated when an accounting measure of income is divided by an accounting measure of investment, with a positive ROI indicating that the return on a particular investment exceeds the firm’s cost of financing (Income/Investment). Return on Assets (ROA) is a profitability ratio calculated by dividing earnings before interest and taxes by total assets and is an indicator of a firm’s overall financial health. A firm with a higher ROA is able JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 405 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) to raise money more easily and cheaply in securities markets because it offers prospects for a better return on investment. Return on Equity (ROE) is a profitability ratio of net profits divided by equity and provides shareholders with a comparative indicator of the return on their investment in the firm. Return on Capital Employed (ROCE) is based on pre-tax profits plus interest (EBIT), divided by capital employed. Other measures focus more on company sales, including return on sales and overall overhead/sales ratio. It is a good indicator of organizations’ overall profitability and efficiency. Price/Earnings Ratio (P/E Ratio) Measures relating to earnings per share and the price/earnings ratio (P/E ratio) relate directly to the firm’s share price. The price/earnings ratio for a firm stock is the market share price divided by the firm’s earning per share. It will vary with the market’s assessment of the risk involved. Productivity Measure is another technique based on financial measures which includes business, profit, expenses and income etc. per branch/unit and per employee. Limitations of Financial Measures Despite their apparent objectivity, financial indicators suffer from number of limitations, which need to be acknowledged. Perhaps most notable is that financial measures are backward looking and do not reflect the long-term and future consequences of managerial action. In a changing world it may will be wrong to assume that past results will be repeated as conditions change. However, relying solely on financial measures is not adequate for the following reasons: a) First, they are backward looking and wedded to past. b) Second, it may encourage short-term actions that are not in the organization’s long-term interests. c) Third, business managers may not undertake useful long-term action to obtain short-term profits. d) Fourth, tight financial control may motivate managers to manipulate data. BSC –A Conceptual Framework Harvard’s Robert Kaplan and David P Norton, his consulting partner developed an innovative and multi-dimensional corporate performance scorecard known as the Balanced Scorecard. It provides a framework for selecting multiple key performance indicators that supplement traditional financial measures with nonfinancial measure of customer satisfaction, internal business process and learning-growth activities. It is a step towards linking short term operational control to the long term vision and strategy of the business. It compels the firm to align its performance measurement and control with both financial and non- financial indicators. It is not a management control device but it is more about communication than control. It is not substitute for a well defined strategy. It is a tool to implement strategy. In short, the Balanced Scorecard is a tool for composite measurement system. Origins of the Balance Scorecard The Balanced Scorecard was developed by Robert Kaplan and David Norton (1992). In 1990, Kaplan and Norton led a research study of a lot of companies with the purpose of exploring the new methods of performance measurement. The importance of the study was a growing belief that financial measures of performance were ineffective for the modern business enterprise. Representatives of the study JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 406 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) companies, along with Kaplan and Norton, were convinced that reliance on financial measures of performance had an affect on their ability to create value. The group discussed a number of possible alternatives but settled on the idea of a scorecard, featuring performance measures capturing activities from throughout the organization—customer issues, internal business processes, employee activities, and of course shareholder concerns. The Balanced Scorecard has been translated and effectively implemented in both the nonprofit and public sectors. Success stories are beginning to accumulate and studies suggest the Balanced Scorecard is of great benefit to both these organization types. Such statements suggest that the Balanced Scorecard has become popular and brought about many changes in a variety of organizations. The first Balanced Scorecard in the word was created and implemented by Analog Device, Inc. (ADI), USA (Schneiderman, 1999). It had developed as an offshoot of the company’s strategic planning process (SPP) and its quality improvement initiatives. ADI’s system was driven by strategic objectives which related to its stakeholders- customers, suppliers, employees, society, etc. The focus of the strategic objectives was to create a ‘delight for the stakeholders.’ The five year strategic plan provided the roadmap and the total management of quality was the main device to achieve the stakeholders delight. In developing its five year strategic plan, ADI examined its internal and external perspectives. Where was the company going? Was it going where it was intended to go? What should the company do to reach where it intended to reach? The Strategic planning process was a massive effort taking about 18 months and involved several hundreds of business and product line mangers. To think a\through the SPP, the company created several cross-functional and functional teams and strategic planning councils, deployed strategy in both directions, top-down and bottom-up, and set five year measurable goals to achieve business success. Both the internal and external perspectives led the company to realize that the non-financial goals were driver of business success. ADI’s quest to develop measurable non-financial goals gave birth to the first balanced scorecard. Concept of the Balanced Scorecard The Balanced Scorecard can be understood as a management system, which is structured according to the logic of the management circle (“plan-do-check-act”). A new approach to strategic management was developed in the 1990s by Dr. Robert S. Kaplan of Harvard business school, together with David P Norton of Renaissance solutions of Massachusetts. They named this system the ‘Balanced Scorecard’. Recognizing some of the weaknesses and vagueness of previous management approaches, the Balanced Scorecard approach provides a clear prescription as to what companies should measure in order to balance the financial perspective. The Balanced Scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the Balanced Scorecard transforms strategic planning from an academic exercise into the nerve centre of an enterprise Managers initially introduced and used the BSC as a new performance measurement system. It was a set of measures that gives managers a complex view of their companies from four perspectives: financial, customer, internal, innovation and learning. In each of these perspectives objectives are defined. To each objective one or more measure (indicator) is matched to make the BSC more operational. Then, precisely defined and time-scaled targets have to be established by combining objectives, measures, and planning periods. BSC balances traditional financial indicators by the set of non-financial measures: customer, internal, innovation and learning perspectives. The key feature of the BSC created in this manner is a holistic and balanced approach to the performance measurement. It guards the company against sub- optimization. By demonstrating targets and results from several perspectives, BSC forces executives to see the company as a systemic whole and helps them to achieve goals in one area without disturbing efforts in another area. The BSC balances measures related to the past (financial perspective) by indicators showing JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 407 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) current effectiveness and efficiency (customers and internal perspectives), as well as measures related to the future development (innovation and learning perspective BSC, thus, strikes a balance between long term and short term objectives, financial outcomes and performance drivers for the same, and introduces a continuous process of learning and adaption to modified strategies. The strategy is broken down into critical operational strategic objectives considering the customer value proposition (Kaplan and Norton, 1996) and the desired financial results. The performance drivers or the lead objectives to these outcome objectives in the financial and customer perspectives are then identified and placed in the internal business processes and learning and growth perspectives forming a causal relationship. The drawing that shows these objectives placed in different perspectives, linked with arrows depicting causal relationship is known as strategy map (Kaplan and Norton, 2004). The measures on the balanced scorecard ensure a balance between external measures for shareholders and customers, and internal measures of critical business processes, innovation and learning and growth. It strikes a balance between the outcome measures of past performance (lag indicators); the measures that drive future performance (lead indicators), and also between clearly quantifiable and somewhat subjective measures (Kaplan and Norton, 1996). BSC introduced the idea of measuring the drivers of performance, i.e. the lead indicators while retaining the measures of financial performance, i.e. the lag indicators of performance (Brown, 2000). Measures in each of these perspectives are interlinked such that a change in the leading measure results in a change in the lagging measure (Kaplan and Norton, 2001). A balance is maintained between the financial and non-financial, short term and long term, and the lead and lag objectives. Each of these objectives are well defined to ensure common understanding of the terms, appropriate measures, targets and initiatives areidentified with respect to each objective. A typical format of balanced scorecard is given in below: The BSC has gained worldwide popularity. Spender (2014) noted that the BSC has been adopted in more than half of all major firms. As the BSC has been more and more extensively used, executives appreciated the comprehensive performance measurement system. However, they wanted to use this system in a more powerful way than just measuring performance. They wanted to use the BSC in a new application – as the strategy execution system (Kaplan & Norton, 2004). Various researchers have shown that 60-80% JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 408 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) of companies do not succeed in achieving targets in their strategic plans (Kaplan & Norton, 2008; Niven, 2008). There are many reasons of strategic planning failures identified in the literature (Peel, 2012):  Failure to understand customers,  Failure to coordinate (inadequate structure and control systems),  Failure to obtain managers and employees' commitment,  Failure to follow the plan (not follow through and no tracking progress without consequences),  Lack of focus only on a few high-leverage goals  Lack of shared vision of the future  Activities are not strictly connected to the goals and are not reviewed in an ongoing basis, These failures create serious limitations of the strategic management process. The growing popularity of the BSC used as a method for strategy execution proves that it could be helpful in overcoming some of these limitations and solve the serious problem managers faced – how to implement strategy. They recognized that if the measurement system will be strategy-driven, then such a system will be helpful to communicate and implement the strategy. Currently, the BSC is treated as a complete strategy management system rather than just performance measurement method (Kaplan & Norton, 2008; Niven 2005; White 2004). One of the most powerful tools developed under the BSC concept umbrella is the strategy map. The strategy map could be seen as a one-page picture showing the paths of the firms’s movement from the present to the desired future. This poster outlines what the organization has to do in four perspectives of the BSC in order to successfully execute its strategy (Niven, 2008). The crucial feature of strategy map is its simplicity - one page picture can tell us the short story that explains how the organization defines its success and signals to everyone what must be done in order to execute the strategy (Niven, 2008; Smith, 2007). Four pillars of the BSC- The perspectives The traditional financial view of performance measurement as a vehicle to control performance is immature. They fail to link current actions with long-term strategy. But the BSC is said to take a long term, strategic view and considers all financial as well as non-financial actions and variables that are necessary for the sustainability and excellence of an organization. It provides a finer blending of financial and non- financial measures of performance. It considers financial performance measures as a result of the nonfinancial variables-the leading variables. The BSC allows management to look at business from four important perspectives; i. How do customers see the firm? ii. What must they excel at? iii. Can they continue to improve and create value? iv. How do they look to shareholders? 1. Financial Perspective Financial perspective is important because it gives the results of all other perspectives of customer, internal processes and innovation and learning, and also that without this perspective the other perspectives can fail to take place, as this perspective is about financing the others. The financial objectives represent the long term goal of the organization, which is to provide superior returns on the capital invested in the unit. JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 409 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) Many corporations use identical financial objectives for all their divisions and business units. Executives, before developing the financial perspective for their BSC, should determine appropriate financial metrics for their strategy. Financial objectives differ considerably at each stage of business life cycle; growth, sustenance and harvest. Growth businesses are at the early stages of their life cycle. Business operates with negative or low returns. Products have significant growth potential so firm invests more. The overall financial objectives for the growth firm are the percentage growth rates in revenues, sales growth rates in targeted market, customer group and regions. A vast majority of business units will be in the sustain stage where they earn excellent returns on investment. They have financial objectives like return on investment, return on capital employed and economic value added. The business unit in the harvest stage wants to recover the investment. The overall financial objectives for harvest stage are the operating cash flow and reduction in working capital. 2. Customer Perspective Customer orientation would positively contribute to the performance of the institution in the sense that customers will be satisfied once their needs and wants have been supplied. This would result in high enrolments, and therefore high revenue that could be used to improve the internal processes of the institutions as well as improve its innovation and learning processes. Recent management philosophy has shown increasing realization of the importance of customer focus and customer satisfaction in any business. Each organization must know; how do our customers see us? How should we appear to them? The customer perspective of BSC requires an organization to know how it should create value for its customer, if it is to succeed. In the customer perspective of the BSC, companies identify the customer and market segments in which they have chosen to compete. These segments represent the sources that will deliver the revenue component of the company’s financial objectives. In fact these are leading indicators, which enables companies to align their core customer outcome measures- satisfaction, loyalty, retention, acquisition, and profitability – to targeted customers. 3. Internal –Business- process perspective For the internal business process perspective, managers identify the processes that are critical for achieving customer and financial objectives. Companies typically develop their objectives and measures for this perspective after formulating objectives and measures for the financial and customer perspectives. This is the most critical perspective for the success of an organization. It includes internal processes which ensure highest quality of product and services. Are our business processes excellent? What are the areas that need improvement? The manager should ensure their businesses, based on internal processes are running well and that the firm’s products and services are meeting the customer’s requirement and creating value for them. Most organizations’ existing performance measurement system focus on improving operating processes, while the BSC recommend that managers must define a complete internal process value chain that starts with the innovation process, proceeds through the operations process and ends with post sale service. 4. Learning and Growth Perspective The fourth and final perspective on the BSC develops objectives and measures to drive organizational learning and growth. The objectives established in the financial, customer, and internal business- process perspectives identify where the organization must excel to achieve breakthrough performance. The JETIR1905J59 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 410 © 2019 JETIR May 2019, Volume 6, Issue 5 www.jetir.org (ISSN-2349-5162) objectives in the learning and growth perspective provide the infrastructure to enable ambitious objectives in the other three perspectives to be achieved. Objectives in the learning and growth perspective are the drivers for achieving excellent outcomes in the first three scorecard perspectives. Intense global competition requires that companies make continual improvements to their existing products and processes and have the ability to introduce entirely new products with expanded capabilities to penetrate new markets and increase revenues and margins. Learning and Growth perspective is a critical one which focuses on innovation, creativity, competence and capabilities. Conclusion The success of any organization is reflected upon by its performance which is in turn highly dependent upon its strategies. In this era of cut-throat competition, what an organization requires is not just framing the right strategies, but also managing the same. The impact of the right strategies will automatically be reflected in the results. Moreover, any organization has to understand that it needs to give impetus not only towards the financial results, but also towards satisfaction of the customers, development of state-of the- art technologies and creation of an environment of learning and growth. The balanced scorecard is therefore a very important strategic management tool because it measures the organization performance through four perspective i.e. internal business perspective, learning and growth perspective, customer perspective and financial perspective, which helps an organization not only to measure performance, but also decide/manage the strategies needed to be adopted/modified so that the long-term goals are achieved. References 1. Emad A. Awadallah, Amir Allam (July 2015)” A Critique of the Balanced Scorecard as a Performance Measurement Tool, Vol. 6, No. 7, pp. 91-99. 2. Meena Chavan (29 November 2007)” The balanced scorecard: a new challenge. 3. 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