The Balanced Scorecard is a performance management approach that focuses on various overall performance indicators, often including customer perspective, internal-business processes, learning and growth and financials, to monitor progress toward organization’s strategic goals. Each major unit throughout the organization often establishes its own scorecard which, in turn, is integrated with the scorecards of other units to achieve the scorecard of the overall organization
What exactly is a Balanced Scorecard? A definition often quoted is: ‘A strategic planning and management system used to align business activities to the vision statement of an organization’. More cynically, and in some cases realistically, a Balanced Scorecard attempts to translate the sometimes vague, pious hopes of a company’s vision/mission statement into the practicalities of managing the business better at every level.
A Balanced Scorecard approach is to take a holistic view of an organization and co-ordinate MDIs so that efficiencies are experienced by all departments and in a joined-up fashion.
To embark on the Balanced Scorecard path an organization first must know (and understand) the following:
The company’s mission statement
The company’s strategic plan/vision
The financial status of the organization
How the organization is currently structured and operating
The level of expertise of their employees
Customer satisfaction level
The following table indicates what areas may be looked at for improvement (the areas are not exhaustive and are often company-specific):
balanced scorecard – factors examples
|Finance||Return On Investment
Return on Capital Employed
Financial Results (Quarterly/Yearly)
|Internal Business Processes||Number of activities per function
Duplicate activities across functions
Process alignment (is the right process in the right department?)
|Learning & Growth||Is there the correct level of expertise for the job?
|Customer||Delivery performance to customer
Quality performance for customer
Customer satisfaction rate
Customer percentage of market
Customer retention rate
Once an organization has analysed the specific and quantifiable results of the above, they should be ready to utilise the Balanced Scorecard approach to improve the areas where they are deficient.
The metrics set up also must be SMART (commonly, Specific, Measurable, Achievable, Realistic and Timely) – you cannot improve on what you can’t measure! Metrics must also be aligned with the company’s strategic plan.
A Balanced Scorecard approach generally has four perspectives:
- Internal business processes
- Learning & Growth (human focus, or learning and development)
Each of the four perspectives is inter-dependent – improvement in just one area is not necessarily a recipe for success in the other areas.
balance scorecard implementation
Implementing the Balanced Scorecard system company-wide should be the key to the successful realisation of the strategic plan/vision.
A Balanced Scorecard should result in:
- Improved processes
- Motivated/educated employees
- Enhanced information systems
- Monitored progress
- Greater customer satisfaction
- Increased financial usage
There are many software packages on the market that claim to support the usage of Balanced Scorecard system.
For any software to work effectively it should be:
- Compliant with your current technology platform
- Always accessible to everyone – everywhere
- Easy to understand/update/communicate
It is of no use to anyone if only the top management keep the objectives in their drawers/cupboards and guard them like the Holy Grail.
Feedback is essential and should be ongoing and contributed to by everyone within the organization.
And it should be borne in mind that Balanced Scorecards do not necessarily enable better decision-making!
originally posted as Page in 2006 – Reposted in Home Page – June 2011