Balanced Scorecard
The term Balanced Scorecard is has multiple meanings. The initial meaning, when it was first popularized in early 90s, was of an approach for generating a performance report, by grouping performance measures by perspectives, the most commonly used being: Financial, Customer, Internal Processed and Innovation and Learning. Gradually, this management tool evolved to become the foundation of a performance management system that uses strategic, operational and individual performance plans as the basis for a communicating, monitoring and improving organizational performance.
Its main components are the Destination Statement, the Strategy Map and the list of KPIs structured in 4 perspectives: Financial, Customer, Internal Processes, People, Innovation and Learning.
The four perspectives offer a balance between short-term and long-term objectives, between outcomes desired and performance drivers of those outcomes, and between hard objective measures and softer, intangible measures:
- The financial perspective. In the private sector, these measures have typically focused on profit and market share. Managers must answer the question, How do satisfy the finanical expectations of our stakeholders?
- The customer perspective. Managers must know if their organization is satisfying customer needs. They must determine the answer to the question: How do customers see us?
- The internal business perspective. Managers need to focus on those critical internal operations that enable them to deliver their work program. They must answer the question, What must we excel at?
- The innovation and learning perspective. An organization's ability to innovate, improve, and learn ties directly to its value as an organization. Managers must answer the question, Can we continue to improve and create value for our services?
Our expertise in Balanced Scorecard related methodologies enable us to provide both implementation services and post-implementation audits.
Benefits of using the BSC
- It improves the bottom line by reducing process cost and improving productivity and mission effectiveness.
- Enables the alignment of operational activities to the strategic plan. It permits -- often for the first time -- real deployment and implementation of the strategy on a continuous basis.
- Measurement of process efficiency provides a rational basis for selecting what business process improvements to make first.
- It allows managers to identify best practices in an organization and expand their usage elsewhere.
- The visibility provided by a measurement system supports better and faster budget decisions and control of processes in the organization. This means it can reduce risk.
- Visibility provides accountability and incentives based on real data, not anecdotes and subjective judgements. This serves for reinforcement and the motivation that comes from competition.