The balanced scorecard can accommodate only short-term performance metrics. only long-term performance metrics. both short- ?and long-term performance metrics. neither short- ?or long-term performance metrics.
The Correct Answer and Explanation is :
The correct answer is: both short- and long-term performance metrics.
Explanation:
The balanced scorecard is a strategic management framework that allows organizations to track and measure performance from multiple perspectives, aligning business activities with the organization’s vision and strategy. It was developed by Robert Kaplan and David Norton in the 1990s, and it aims to provide a more comprehensive view of organizational performance beyond just financial metrics. The balanced scorecard includes four main perspectives: Financial, Customer, Internal Processes, and Learning & Growth.
In its design, the balanced scorecard integrates both short-term and long-term performance metrics to ensure a balanced view of an organization’s health and progress. Here’s how each type of metric plays a role:
- Short-term Performance Metrics: These are typically operational in nature and focus on immediate results. They help monitor day-to-day activities and immediate outcomes that are necessary for the ongoing operations of the business. Examples include monthly sales, customer satisfaction scores, or production efficiency. Short-term metrics are critical for ensuring that an organization is meeting its current objectives and maintaining operational effectiveness.
- Long-term Performance Metrics: These metrics focus on the future health and growth of the organization. They are strategic and typically take a longer time to manifest results. Examples include employee training and development, innovation capabilities, market share, and brand recognition. Long-term metrics help organizations maintain a sustainable competitive advantage and ensure alignment with the company’s strategic vision.
By including both short-term and long-term metrics, the balanced scorecard ensures that organizations not only focus on immediate performance but also develop the capabilities and strategies necessary for long-term success. This balanced approach reduces the risk of short-term thinking that may undermine the organization’s ability to thrive in the future, while also addressing immediate operational concerns.