EVALUATING BUSINESS PERFORMANCE USING THE BALANCED SCORECARD METHOD

Abstract

The main objective of this paper is to use modern approaches for evaluating the performance and competitiveness of a company with regard to a dynamic business environment. The evaluation method used is the Balanced Scorecard, which was designed in 1993 by the authors Kaplan and Norton as a system of balanced perspectives (based on finances, customers, internal processes and growth). Currently, however, the original Balanced Scorecard method exhibits certain deficiencies in its approach to measuring business performance and achieving a competitive advantage, especially in terms of an overly simplistic unidirectional causality in the strategic map, the same weight assigned to individual scales or the failure to distinguish cause and effect in time. Content included in the case study is a comparison of a classical and dynamic model of a Balanced Scorecard in the Czech business environment, particularly in companies providing banking services. A properly drawn up scorecard should contain a set of standards of outputs and driving forces for the company’s performance. The methods given by the authors indicate that a company should follow the general standards that reflect a common goal of all strategies across sectors and companies. These are output standards, or “delayed indicators”, which include profitability, market share, and customer satisfaction. In contrast, lead indicators should also be defined in the company, the “driving forces of performance”, most of which are unique to a particular company. These strategic standards then define a strategy for achieving a competitive advantage. Recently, many authors emphasise the need for change in the approach to performance measurement. Although the Balanced Scorecard is very effective tool in this area, the question remains whether this method in today’s dynamic environment is still sufficient.