Summary of the Area of Research
The balanced scorecard was developed to aid management teams to boost their strategies through measurement and follow-up. It represents a strategic tool of management that facilitates organizations to establish a competitive advantage in their respective industries. The BSC has been used to examine the IT projects and function as compared to the conventional evaluation approaches such s information economics and capital budgeting among others. Information Technology is an important element in achieving strategic and organizational objectives.
The BSC helps to eliminate the problem of IT Black Hole, which is characterized by high IT investments and few returns. The BSC is implemented through a three-layered structure comprised of mission, objectives, and indicator. The indicators are used to measure the performance levels for each area where the BSC has been implemented. The management team is able to achieve a high-performance level through the development of proper strategies based on evaluations of key operations and follow up mechanisms.
The BSC measures are categorized according to four main domains namely: financial achievements, customer focus, internal processes, and innovation and learning. These perspectives must be translated into different metrics in order to measure and assess different situations to precision. The essentials of the model can be extrapolated to different areas of business such as government, non-profit organizations, or private firms. It provides a framework that allows different institutions to align their operations to the vision and strategies. This culminates into improved internal and external communications with stakeholders and allows the organizations to monitor their performance as pertains to the achievement of strategic goals. The IT budget is considered a financial metric as a proportion of sales. The IT projects are meant to add value to the organization.
Robert Kaplan and David Norton devised the BSC with the intention of alleviating the problem of performance measurement that remains a common problem with most organizations (Nazemi & Khajavi 2010, p. 320). It provided a way for the organizations to utilize strategic non-financial performance measures in combination with the financial metrics in order to achieve a balanced perspective of their milestones. It does not seek to replace the traditional management strategies but rather add value to them (Tate 2000, S675). It facilitates the organizations to focus on relevant information that would help develop the critical areas of business. It provides a link between the inputs, processes, and output by ensuring that these components are managed effectively.
The balanced scorecard is important in evaluating the IT function of an organization but remains a subject of discussions in the business arena. The importance of corporate information technology has been emphasized across the years because it culminates to increased productivity. The four domains explained by the balanced scorecard have enabled businesses to focus on understanding their key areas that can drive performance (Tate 2000, p. S676). The conventional methods of performance measurement ensure that the organizational objectives dealing with financial issues are effectively addressed. They focus on financial results to achieve a competitive advantage while overshadowing the importance of other aspects such as internal processes or customer satisfaction. In the context of the IT firm, the IT budget may be highlighted as the most important financial metric.
The value and risk of the projects must be evaluated to ensure that the desired objectives are attained. User orientation is measured by focusing on the internal customer of the IT department. The metrics implemented to solve user orientation focus on creating preferred supplier relationships or partnerships with the end user. The use of subjective measures should also be implemented to ensure that compliance audit is conducted in order to highlight user involvement (Tate 2000, p. 677). Operational excellence is achieved through the development of new information systems that improve efficiency in different IT processes in the organization. Despite the need to provide high-quality services to the end users, the processes must exhibit cost effectiveness. The performance measures should be implemented by comparing them to the industry standards in order to remain competitive.
Application of the balanced scorecard can be done through customization of the needs of different departments or organizations. The top management should understand the concept of the IT balanced scorecard by collecting data in each of the key strategic areas of business. The balanced scorecard should be based on important principles in order to address different problems within the organization. It should be used to build cause and effect relationships within the internal and external elements of the organization. It should also include sufficient performance drivers that would enable excellence to be sustained and flaws to be eliminated. It should focus on other elements of business but remain a key link to financial measures. It is important to develop a company-specific IT balanced scorecard based on a standardized model.
Identification of the Potential Areas for Application to a Wholesale Organization
Learning and Growth
The balanced scorecard seeks to establish a framework in which employee development would be enhanced. Employee training is prioritized to ensure that they improve their skills, knowledge, and attitudes towards organizational growth. Knowledge is perceived as an important resource because it facilitates them to be creative and innovative in their responsibilities. Self-improvement is important because they become competent to deal with different challenges in the workplace. The modern business environment prompts organizations to focus on employee development in order to deal with dynamism. It is important for employees to be placed in a system that facilitates continuous learning (Nazemi & Khajavi 2010, p. 320). They need to be ready for any changes in customer preferences and job specifications. Metrics are implemented in the organization to guide managers and ensure that they can identify flaws in the employees. Proper identification of the employees’ mistakes ensures that they devise a strategic plan to address these issues. The management will be in a position to plan for their training needs to ensure that they remain competent. Learning is perceived as an important step, and the employees are assigned different mentors to influence their attitudes. They learn to accommodate each other’s behavior through an elaborate communication network. High-performance systems are devised to facilitate employees to contribute to the decision-making process. Employees learn to be flexible depending on the schedules in the organization. The organization becomes an area of continuous improvement of life, skills, and expertise…
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