EVA vs Balanced Scorecard: Which one to Choose?

Access your KPIs online;
Measure your success;

Navigation: All Balanced Scorecard Articles > BSC software

Understanding the EVA vs balanced scorecard topic is crucial as picking the wrong tools for your business venture can lead to downfall. Both EVA and BSC are performance measurement tools, only that EVA focuses more on finances and estimation while BSC handles customer related issues, internal and external events, future visualizations and cash flow. Check additional information about EVA vs Balanced Scorecard.

It sometimes appears confusing for people when they try to distinguish the EVA vs balanced scorecard relationship, but the truth is that, it is actually quite simple. BSC is a multiple indicator while EVA is just an individual one. Now, you may ask: why make a separate one if balanced scorecards can serve as an indicator for all business aspects? That is because EVA and BSC has their own different goals.

To further distinguish EVA vs balanced scorecard, you must know first what serves as what. BSC's goal is to help the organization direct them to the right track in order to reach their goals while EVA is to add value to the company. Simply put, Economic Value Added is all about finances and profit, while balanced scorecard based managements keeps tracks of all the personnel's actions and the execution of activities by the staff which will allow them to measure and examine the consequences that could arise. So how will you be able to pick when it comes into EVA vs balanced scorecard based managements that can take you far off from being wrong?

It is important to pick the right tool for an organization in order for it to develop, expand and stay afloat amidst the chaotic and competitive business world. There are certain factors that can affect your decision when it comes to EVA vs balanced scorecard based management. It is crucial to know which principles do these two strategies are based upon. These EVA vs balanced scorecard principles are listed below:

Balanced scorecards' principles or BSC are based on:

-The cause and effect relationship

-Turning strategic vision into executable steps

While Economic Value Added or EVA's principles are based on:

-Profit and more profit

-The indicator mathematic formula which is = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)

Given the principles listed, we can now mark out the effectiveness of EVA vs balanced scorecard. Since BSC is all about expansion and development, it is safe to say that it is a more effective management base if the organization has minimal required capital. If human resource and employment capital is their focus and customer satisfaction success is their target, it is best to use BSC as it has its own dedicated section for that and the results that will be acquired through internal processes can be linked to financial outcomes.

On the other hand, if a company or organization has its significant capital amount, it is crucial to compare what you return and receive. This is one of the most significant differences in EVA vs balanced scorecard based managements. Maximization of profit from the goods delivered is one of EVA's goals, therefore, an EVA based management is the best for this situation. Another thing is that, if you invest a good amount for marketing and research, it only means that you intend to produce quality products but you are also prepared to lose a good amount for a while and at the same time expecting a decent profit. EVA is also the best management base if you are seeking expansion through potential investors and buyers.

It is easy to recognize EVA vs balanced scorecard based management because it is obvious that BSC is the most appropriate system to apply if you only have a small business, while EVA, on the other hand is the most suitable system for big companies who are usually concerned more about value.

If you are interested in EVA vs Balanced Scorecard, check this link to find out more about balanced scorecard vs dashboard. Also, you can check other articles in BSC software category.

Balanced Scorecard Toolkit includes step-by-step manuals, documents, presentations, check lists designed to help business professionals with successful development and implementation of Balanced Scorecard. Learn more about BSC Toolkit.