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Balanced Scorecard Vs. Economic Value Added

Autor:   •  March 1, 2011  •  Essay  •  468 Words (2 Pages)  •  3,570 Views

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The balanced scorecard is a preferred method because it can be used in conjunction with other performance systems. The balanced scorecard (BSC) is a system that coordinates and operates with goals and objectives of the company. A main objective of this system is to direct the organization on the right path in order to reach the company's goals. BSC includes the objective of adding value to the company's goals. BSC first came about after studies of multiple methods was evaluated regarding performance efficiency. The BSC method is based on several factors: One, cause and effect; two, relation of indicators which the company can measure within certain periods and also indicate which of these can be evaluated right away; and three, subordination of indicators regarding financial results.

BSC has the capability to target all actions at implementing strategic goals and objectives. BSC encourages staff to contribute to the changes of objectives through communication and motivation. BSC also has the ability to link budgets and strategies with the assistance of analysis, this is to make the flow continuous. BSC also helps to create motivation for staff of all education and experience levels.

The economic value added method is an estimate of profits which is calculated by using the net operation profit after taxation, minus the capital value. The economic value added (EVA) is generally used to measure the efficiency in which the organization uses resources. EVA shows the difference between investments returns and the cost of resources. The EVA method goes farther into development than the BSC method. EVA is a financial management system that offers a firm basis for decision making, as well as the capability to make, monitor, and measure decisions, while adding value to investments. The main objective of EVA is to add value to the company. EVA became a tool of return on investments and return on capital employed. The main objectives

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