Unit 5 DB Managerial Accounting

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Unit 5 DB Managerial Accounting

A balanced scorecard is a tool used in strategic management of an organizations performance. It is a report backed up by methods of design and relevant tools that is used by managing personnel to keep an eye on their staff by monitoring how they execute their respective obligations. A balanced scorecard is able to blend in financial as well as non-financial measures which are then compared to set or rather targeted values in the report. This way the results of its implementation could be observed and analyzed to show its effect on the company.

On the other hand, Economic Value Added strategy measures and estimates the economic profit of an organization. In other words, estimated value added is the value arrived at after subtracting the cost incurred to finance the total capital of the organization from the profit made. Using Economic Value Added methods to measure the performance in an organization requires the staff to work hard in order for the organization to earn enough profit. Such that, on application of Economic Value Added strategy the organization still achieves it’s targeted economic profit.

The ability of a balanced scorecard to recognize and work concurrently with the vision and mission statements of the company makes it the better option to use as a performance measure. This is because it not only focuses on improving the performance of the staff but also uplifts and plays a big role in achievement of the company’s goals. Furthermore, the Economic Value Added method demands for better performance of the staff unlike the balanced scorecard that motivates its staff to work hard towards achievement of the set targets.

References

Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard. Harvard Business Review

Press.

Young, S. D., & O’Byrne, S. F. (2000). Economic Value Added and Value-Based Management.

McGraw-Hill.