With the passage of time, new inventions, innovations and improvements emerge, overcoming the drawbacks of the old systems. In the present era of liberalization, globalization and privatization, the business environments, financial markets, financial instruments and products have changed drastically. The structural changes and emerging trends associated with the new open regime, have rendered the traditional performance measures like ROI, Residual Income, EVA, etc, which concentrate only on financial performance (ignoring the nonfinancial aspect), ineffective. The drawbacks associated with such traditional measures have led to the emergence of a new innovative tool of performance managementThe Balanced Scorecard (BSC), which was first developed at Analog Devices Inc., a mid-sized semiconductor company, during 1986-92 and was later popularized by Robert S Kaplan and David P Norton as an Integrated Performance Management System for turning strategy into action, combining both financial and nonfinancial performance measures. However, till now, very few people in the corporate world actually know how to implement this strategic tool of performance management. It has been applied successfully only in a very few companies, in a very limited manner, and, that too, mostly outside India. The paper aims at gaining an insight into the concept of BSC, studying its superiority over other traditional performance measures like ROI, EVA, etc., and its successful implementation in a few reputed Indian companies. It throws light on Indian companies like Philips Electronics, TISCO and Tata Motors, which have successfully implemented the balanced scorecard.
The
term `performance management' is basically used to define the contours of performance
measurement information to bring about positive changes in organizational culture,
systems and processes. The system works by setting up accepted performance goals,
allocating resources to meet these goals, informing managers to either confirm
or change current policy to meet these goals, and later sharing the results of
performance in pursuing those goals.
Performance
measurement is an integral part of any performance management system. For the
success of performance measurement, it is essential that the top management is
receptive to positive changes for organizational improvement. An efficient performance
measurement system measures the critical areas of performance and aims at striking
the right balance between a mix of key performance indicators. The mix of performance
indicators covers five main areas, such as, customer service, internal processes,
innovation and development, learning and growth and financial performance. |
