Strategic Measurement Tools. Management Assignment.

Strategic Measurement Tools
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Strategic Measurement Tools
Strategic management tools enable an organization to archive a specific objective or a set of objectives. This essay purposes to compare the pros and cons of Economic Value Added, Return of Investment, Balanced Scorecard and HR Scorecard.
Economic Value Added
The Economic Value Added is used to indicate profitability and financial performance based an organization’s residual wealth. It represents the excess profit generated by a business and presented in cash. A business that is doing well has a positive EVA whereas, one that is losing money is represented by a negative EVA. This measurement tool has four main advantages: It helps the company to monitor problematic areas and take the necessary actions resolve them. Secondly, it improves the company’s administration since a high EVA guarantees the managers a high bonus thus giving them an incentive to work (Parikh, 2020). Thirdly, EVA revolves around the idea that business should cover both operating and capital costs hence presents the employees, owners and shareholders with a clear image of the company. Fourthly, it aids the board to identify the best person to effectively run the organization. However, there are two disadvantages of EVA: Firstly, it is difficult to compute. Secondly, it does not consider inflation.
Return of Investment
Return of Investment is a performance measure used to analyze the efficiency of a business investment by contrasting the gain of different investments. For instance, it can be used to compare the cost invested in marketing and the costs channeled to innovation. ROI has the following advantages: First and foremost, it guarantees a better measure of profitability. The managers of different divisions know their work will be judged based on how well they used the available resources to make profits; this encourages them to fully utilize company assets. Secondly, it helps an organization to achieve its goals. Each division has different goals. ROI ensures that there is goal compatibility in the organization. Thirdly, it helps in comparative analysis (Your Article Library, 2020). ROI helps in comparing the different business units in terms of asset utilization and profitability unlike in EVA where the organization’s assets are only added. It can also be used to compare firms as long as the firms are of proportional size and belong to one same industry. Fourthly, it is the most important measure of performance of an investment division it entails other performance aspects of the unit of business. A good ROI means that the investment yielded satisfactory results in fields such as; cost management, marketing and promotional study. However, this strategy has the following disadvantages: ROI can influence a division manager to only select investments sh...