However, an over emphasis on achieving and maintaining short-term financial results can cause companies to over invest in short-term fixes and to under invest in long-term value creation, particularly in the intangible and intellectual assets that generate future growth. The pressure for short-term financial performance often causes companies to reduce the resources spent on new product development, process improvements, human resource development, Information technology, databases and systems as well as customer and market development. In the short run, the financial accounting model reports these spending cutbacks as increases in reported income, even when the reductions have cannibalized a companys stock of assets and its capabilities for creating future economic value. In short, these organizations use the financial and non-financial performance only for tactical feedback and control of short-term operations.

Linking Strategy with Performance Measures

The essential thrust of the balanced score card is based on the fundamental proposition that within organizations what gets measured gets done however, organizations dont always get what they measure. If measurement, by itself, had that much impact on human behavior, then anyone that had weighing scales would never get fat.

An appropriate measurement system is one that energizes employees in the context of what the organization is trying to do. Thus, the logical starting point for the development of any performance measurement system for an organization must be a clear statement of mission, objectives and resultant strategy. An organizations mission is its basic function in society and is the reason why the organization exists. Related to this are the objectives to be achieved and they represent a precise statement of purpose for a specific period. Basically a strategy is a shared understanding about how the organizations mission is to be achieved in a competitive environment. Strategic thinking will focus on customers and competitors as well as internal capabilities and resources. It will include reference to the firms competitiveness, quality of output and levels of customer service. In turn, specified performance measures allow all employees understand what the strategy is and how their performance is linked to that overall strategy. The relationship between Mission, Objectives, Strategy and Performance Measures is depicted in Fig.1.

There are at least three reasons why organizations should, and often do, measure their performance:

1. To align mission, strategy, values and behavior
2. To improve the right things
3. To numerically define the meaning of success

The 4 perspectives of the Balanced Scorecard

The Balanced Scorecard method of Kaplan and Norton is a strategic approach, and performance management system, that enables organizations to translate a company's vision and strategy into implementation, working from 4 perspectives:

1. Financial perspective.
2. Customer perspective.
3. Business process perspective.
4. Learning and growth perspective.

This allows the monitoring of present performance, but the method also tries to capture information about how well the organization is positioned to perform in the future.