What are major differences between portfolio analysis and balanced scorecard?

Question

The difference should be in relation to developing an effective organizational strategy

Answer 1

Portfolio analysis deals only with financial performance

The Balanced Scorecard seeks to measure a business from the following perspectives:

* Financial perspective - measures reflecting financial performance, for example number of debtors, cash flow or return on investment. The financial performance of an organization is fundamental to its success. Even non-profit organizations must make the books balance. Financial figures suffer from two major drawbacks:
o They are historical. Whilst they tell us what has happened to the organization they may not tell us what is currently happening, or be a good indicator of future performance.
o It is common for the current market value of an organization to exceed the market value of its assets. Tobin's-q measures the ratio of the value of a company's assets to its market value. The excess value can be thought of as intangible assets. These figures are not measured by normal financial reporting.
* Customer perspective - measures having a direct impact on customers, for example time taken to process a phone call, results of customer surveys, number of complaints or competitive rankings.
* Business process perspective - measures reflecting the performance of key business processes, for example the time spent prospecting, number of units that required rework or process cost.
* Learning and growth perspective - measures describing the company's learning curve -- for example, number of employee suggestions or total hours spent on staff training.

Purpose of the Balanced Scorecard

Kaplan and Norton found that companies are using the scorecard to:

* Clarify and update strategy
* Communicate strategy throughout the company
* Align unit and individual goals with strategy
* Link strategic objectives to long term targets and annual budgets
* Identify and align strategic initiatives
* Conduct periodic performance reviews to learn about and improve strategy