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The global recession and other economic problems created drastic low demand and increased competition among competing firms, affecting both production and service sectors, serve as limitations to many firms from achieving their set out strategic goals and objectives.
These adverse economic factors, has redirected some firms in adopting new and efficient production process and procedures with an intention of paying attention to satisfying their customers by improving on their product quality at a reduced cost.
The current economic condition, such as the one that Nigeria finds hersef, makes survival difficult for many firms who find themselves in such competing environment to survive.
Unless a firm improves on its operational efficiency in terms of cost and quality, identifying and erradicating non value added cost, there is high tendency that the concerned organisation is likely to find it difficult in sustaining its competitive position.
Therefore, the organization must always keep abreast, its focus on customers, to improve its financial performance.
According to Roberts S. Kaplan and David P. Norton, rather than using only financial indicators ( which are information disclosed in financial statement) to measure the performance of an operation, Balanced scorecard is used to balance both the financial and non financial performance to evaluate the company’s mission and its strategic plans, and determine those non financial indicators that are critical to the achievement of those strategic plans and objectives.
Therefore, Balanced scorecard is an approach to the provision of information to management to assist in strategic policy formulation and achievement. Essentially, Balanced scorecard is a management system that enables an organisation to identify and clarify its vision and strategy, and translate them into action. The information provided may include both financial and non financial.
CIMA official terminology.
The purpose of balanced scorecard is to enable management and other employees to consider cause and effect relationships on business profitability as a result of decision taken. Balanced scorecard evaluate the short run and long run performance through the balancing of both financial and non financial performance measures. The ability of an organization to improve its non financial measures is a catalyst of creating future economic value.
Therefore, balanced scorecard is a financial planing model or a cause and effect model, that explains the cause and effect relationships that exist between the financial and non financial indicators… The balanced scorecard model is a tool use to provide management personnel with the extent to which the organization’s resources have been utilized in adding value to the business.
– Shogundo Moses Itopa, an Associate Accounting Technician West Africa(AAT) and an Associate Chartered Acountant (ACA), writes from the Department of Accounting, Kogi State University.
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