The Balanced Scorecard and the Financial Perspective
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The balanced scorecard system is utilized widely in many organizations to align or support business activities to the strategy and visions of the firm, enhance external and internal communications, and assess the organization performance based on its strategic goals. Drs. Robert Kaplan and David Norton invented balanced scorecard as a performance measurement system that enables managers to develop a balanced view of how organizations are performing their business activities (MacKay, 2004). The balanced scorecard system offers a clear prescription of what organizations should assess to ensure their financial perspectives are balanced. The system enables organizations to clarify their strategy and visions and transform them to actions and to obtain feedback of both external outcomes and internal business processes to consistently enhance strategic results and performance. This paper explains that the Cattaraugus Country Rehabilitation Center performed an efficient task of implementing a BSC (balanced scorecard) approach in a manner which reflects its organizational vision and mission.
The Rehabilitation Center used the balanced scorecard system for assessing performance results and targets based on the four perspectives of performance (innovation, customer, financial and internal processes). Murby and Gould (2005) view that the Center has been responsible for its business activities to meet expectations of its different stakeholders groups (like shareholders, customers, employees, suppliers, and community). The Center uses the balanced scorecard to assess how its performance meets organizational goals relating to the expectations of the stakeholders. The expectations of the stakeholders are quite different. For instance, shareholders depend on the Center to improve and maintain their investment. Employees depend on the Center for their employment. The Center strives to balance such competing wants. The balanced scorecard is used to assess how effective the Center is performing in perspective of competing wants of different stakeholders.
Using the balanced scorecard system has enabled the Center to translate its strategy and mission into operational objectives and assessment for the four perspectives (Martello, Watson, and Fischer, 2008). In financial perspective, the organization uses the balanced scorecard system to assess how the firm realizes its financial goals and to evaluate financial measures (cash flow from operations, return on assets, sales growth, operating income, and reduction of administrative costs). In customer perspective, the balanced scorecard enabled the Center to assess how it meets the needs of its clients and to assess customer measures (customer retention, market share, customer satisfaction and new customer acquisition). In internal processes, the Rehabilitation Center used balanced scorecard system to measure how it enhances critical internal processes (defect rate, material turnover, the rate of practical capacity, time to create orders, lead time, and on time delivery). In growth and learning perspective, the Center uses the balanced scorecard to measure how it improves its capability to ...