Balanced Scorecard
Balanced Scorecard
Put your visions into practiceWhat is Balanced Scorecard?
Balanced Scorecard (BSC) is a concept helping you translate
strategy into action. BSC starts from the company vision and
strategies, from here critical success factors are defined.
Measures are constructed that aid target-setting and performance
measurement in areas critical to the strategies. Hence, Balanced
Scorecard is a performance measurement system, derived from vision
and strategy, and reflecting the most important aspects of the
business. The Balanced Scorecard (BSC) concept supports strategic
planning and implementation by federating the actions of all parts
of an organization around a common understanding of its goals, and
by facilitating the assessment and upgrade of strategy.
Traditional performance measurement, focusing on external
accounting data, was quickly becoming obsolete and something more
was needed to provide the information age enterprises with
efficient planning tools. For this purpose Kaplan & Norton
introduced four different perspectives from which a company's
activity can be evaluated:
Financial perspective (how do we perceive our shareholders?)
Customer perspective (how do we perceive our customers?)
Process perspective (in what processes should we excel to
succeed?)
Learning and innovation perspective (how will we sustain our
ability to change and improve?)
Figure 1:Create a Balanced Scorecard: You have to identify a
vision. Where is the organization going? By identifying strategies
you learn about how you will get there. Define Critical Success
Factors and perspectives, which means you have to ask what do we
have to do well in each perspective. Thereafter ask how do we
measure that everything is going the expected way? Then it is
necessary think about evaluating your Scorecard. Consider how do we
ensure that we are measuring the right things? Based on this work
you should create action plans and plan reporting and operation of
the Scorecard. How do we manage the Scorecard? Which persons should
have reports and what should the reports look like?
Figure 2:The picture shows a very general example of a
Scorecard. Where are we going? The vision: "We should dominate the
market." How? By focusing on cost efficiency, high quality and by
investing in new technologies. In which perspectives should we
excel at what? Responsibilities and action plans for achieving
targets set are defined. You can easily create a Scorecard, but to
create a manageable scorecard is a completely different thing!
Benefits
The benefits of applying Balanced Scorecard can be summarized as
follows:
Balanced Scorecard helps align key performance measures with
strategy at all levels of an organization.
Balanced Scorecard provides management with a comprehensive
picture of business operations.
The methodology facilitates communication and understanding of
business goals and strategies at all levels of an organization.
The balanced scorecard concept provides strategic feedback and
learning.
Balanced Scorecard helps reduce the vast amount of information
the company's IT systems process into essentials
