Reference no: EM13339601
My organization has decided to utilize one of two performance measuring strategies: a balanced scorecard or economic value added. The management team in the organization needs to have both explained and given a recommendation so that it can make the best decision for the organization.
A balanced scorecard uses both financial and non-financial data to determine how the organization or firm compares to its goals and also can be compared against previous results. The scorecard uses key performance indicators from four categories: customer, internal processes, innovation & learning and financial (Wild & Shaw, 2012, page 340). The organization has the ability to decide on what exactly to measure within each of the categories. The customer category can utilize results of customer satisfaction surveys, refunds or returns as a percent to sales, number of new and repeat customers or time to process or deliver sales. Internal processes may include production time and production cost, number of days without and incident, error or defect rate and labor hours per unit. The innovation & learning category may include data retrieved from employee satisfaction surveys, turnover rate, money used for and results from research and development and data from the training department. The last category, financial, can include sales growth, return on investment, net income, stock price and residual value (Wild & Shaw, 2012, page 340).
Economic Value Added (EVA) also known as residual income is used to measure the financial performance of an organization. Residual income is measured solely in dollars (Wild & Shaw, 2012, pages 339-340). EVA is calculated by finding the results of the difference of net operating profit after taxes and cost of capital (Economic Value Added - EVA, 2013). EVA gives management data for a given time period. However; it does not help with forecasting how the future of the company appears and is limited on the data that is a result of the strategy.
The recommendation to my organization is to put the balanced scorecard in place. The scorecard strategy gives upper management a broad view of the company's performance. It can use the scorecard to determine the success of the company in many different facets.