What is Balanced Scorecard
The Balanced Scorecard is a strategic planning and management tool that is widely used to align business processes to the vision and strategy of the organization. It also contributes to improving internal and external communications, and to comparing organization performance with the strategic goals. It was created by Robert Kaplan and David Norton in the 20th century as a system to measure organizational performance with the combination of non-financial performance measures to traditional financial metrics. This helps top management obtain a more balanced view of the overall performance of their organization. In other words, it provides performance metrics, helps top management identify and measure what matters, and assists executives to execute their strategies successfully.
How does the Balanced Scorecard Work
The Balanced Scorecard translates an organization’s strategic plan from a set of documented measures and desired goals into an action plan that includes tangible steps to be taken on a daily basis. It enables organizations to assess their performance by taking into account four perspectives:
- Financial: helps an organization identify a few relevant high-level financial measures, taking into account how it looks to shareholders.
- Customer: helps an organization choose a set of measures which may describe how it is seen by customers.
- Internal Business Processes: helps an organization choose measures to identify areas where excellence is its desired target.
- Learning and Growth: helps an organization choose measures to understand if it can improve and create value.
Six Reasons for Implementing Balanced Scorecard
In the last few years, competition has become increasingly fierce among companies, and globalisation has led them to a rapid change in their strategy. As a result, organizations have found it more and more difficult to implement their strategy successfully. An increasing number of public, non-profit and commercial organisations worldwide have decided to rely on the Balanced Scorecard to run their business efficiently and achieve their targets. The BSC is something more than the mere combination of a set of measures and targets. Indeed, its comprehensive approach makes strategy a continuous process affecting all levels of an organization, involving both top management and employees.
The Balanced Scorecard will help your organization:
- increase its focus on strategy and results
- improve organizational performance by measuring what matters
- align organization strategy with the work people do on a day-to-day basis
- focus on the drivers of future performance
- improve communication of the organization’s Vision and Strategy
- prioritize projects and initiatives.