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Balanced Scorecard – Measurable Business Success

Balanced Score Card

Balanced Scorecard – Measurable Business Success

Developed by Harvard School Graduates, Robert Kaplan and David Norton, the “Balanced Scorecard” is a management system that is used by both business and industry for strategic planning.

The Balanced Scorecard Brings the Companies Management to All Levels

Many government and not- for- profit organizations also use the body of this strategy to align their business activities. It is meant to improve both internal and external communications. An organization that utilizes these methods can monitor their performance against their goals for a score of how well they are doing overall. Forget the old-style profit and loss statements, this system can completely reorganize how a company can evaluate their performance.

The History of Balanced Scorecard

The “Balanced Scorecard” was developed as an overall performance measurement tool. It was the framework that added tactical non-financial performance processes to old-fashioned financial metrics. It allowed managers, and those at the executive level, to have a ‘balanced’ view of their companies’ performance. It sounds rather new-fangled and it is. It wasn’t until the 1990’s that the term “Balanced Scorecard” was used. However, these approaches have deep roots that go way back to the 1950’s. GE, or General Electric, was one of the first companies to use these types of performance measures to gather usable data. While they may be one of the first companies on record, they are certainly not the first ever to use the popular methods to this plan.

It is believed that more than half of the biggest United States companies are now using the “Balanced Scorecard” as a part of their everyday business practices. In countries like Europe and Asia, it is believed that more than half utilize the Scorecard approaches. In Africa and parts of the Middle East, this scheme is also growing with companies who need to get a firm handle on their performance and strategic management. Who gets the credit for getting this plan out to the masses? It was Harvard’s Business Review that really helped increase the popularity of this plan. They agree that this is by far one of the most influential and best business ideas that have happened in the past eight decades. Business plans and schemes come and go, but this is one that has stood the test of time.

It’s old yet it’s new, make sense? There has been much evolution of “The Balanced Scorecard” since its inception. Once used as a simple measurement framework, now it is used as a measurement plus a strategic planning system. This allows management to keep track of the things they need to make projections for the future. This also allows analysts a chance to identify what needs to be done, and it gives them the tools they need to execute their strategies. It lays everything out in black and white and it doesn’t take someone with a degree to follow the plan. It gives feedback, puts the company on a path and gives them the ability to show exactly where they are on a map, strategically speaking.

The Balanced Scorecard Provides The Feedback Needed

Why do so many companies like “The Balanced Scorecard”? Is it the fact that it’s a clear remedy to what corporations need? Using this written plan, companies can balance their financial outlook. So many think that “The Balanced Scorecard” is just a measurement system that allows a company to direct their vision and use strategy to put them into action. However, it also provides the feedback needed for a business’s internal and external outcomes. Armed with this data, they can improve their performance and overall results. When fully set up, this program will transform planning from a problematic academic exercise to the hub of the company. It will change how the company runs, how they pull their data and how the overall operation flows.

The Learning & Growth Perspective

Perceptions of the Balanced Scorecard suggest that one looks at the company from four diverse perspectives. Through these perspectives, it is easy to see what and where the company needs to focus their work. It also encourages developing a matrix to collect data and then finally analyzes it. Perceptions may change while looking at each defined area. The Learning & Growth Perspective is the first one that a company needs to assess. This viewpoint embraces worker training and group educational attitudes connected to both individuals and business self-improvement. When dealing with a business that has knowledge about their workers, the people will be the main resource.

Today’s climate is constantly changing, and many say technology is much to blame for this. It becomes of vital importance for workers to be constantly aware of changes and to be able to be taught. A company should be in a continuous learning mode. When a company stops teaching, their overall production will go down. Ever been or worked for a company that throws their employees into the middle of things without proper training? Chances are, these employees won’t last long. They will be frustrated and run down and won’t do a good job most of the time. Employers who spend time to develop their companies training center will be wise in doing so. They will have employees with tenure and their retention won’t be an issue. That’s what “The Balanced Scorecard” can do. Metrics should be there to help guide managers to focus their efforts on training. The employees are the most important asset a company has. No one person can do it alone; it must be a group effort from the top to the bottom. Both learning and growth are the foundation for any successful company that is filled with knowledgeable workers.

Learning is so much more than just training. For this program to work efficiently there must be mentors and tutor in position within the company. There must be an ease of communication, so that worker’s don’t feel intimidated to ask for help. Also technological tools are part of the high performance work systems. An environment that provides employees with the tools they need to succeed, but also allow them to have proper training is vital to the foundation of any establishment.

The Business Process Perspective

The internal business procedures are vitally significant. Just as imperative as having employees who feel valued and are well trained is the internal process. These are the things that make everything run smoothly behind the scenes. These processes are used as a gauge to see how well the company is running. It can measure whether or not the products and or services are meeting or exceeding customer’s expectations. What the customers thinks matters. This should be the mission of any customer service based company. These protocols must be strategically designed by the members of the company who are most familiar with the processes. While some parts can be developed by outside consultants, this is not one of those areas. Only those intimate with the day-to-day operations should tackle this part of “The Balanced Scorecard.”

The Customer’s Perspective

Customers should be the focus of any business. Without the customers, they’re would be no business. The old saying that they are the bread and butter of any establishment is certainly true. A recent philosophy has showed the importance of customers and their power to make or break a company. If the customers are not happy, they will go somewhere else for their products and or services. They will find a supplier who meets their needs and makes them content. It can be the smallest infraction that upsets a customer. This is when the chain effect goes into place. One disgruntled customer tells another who tells another. The last thing a company wants is negative publicity. Now, it is impossible to please every customer, as some just are not able to be pleased. However, as a general rule of thumb, the customer is always right. One angry customer can sway 50 or more people.

If the company is having poor customer reviews and performance ratings, then it can be an indication that the future will decline. While the current numbers may look well, the future is sure to fail with poor customer satisfaction ratings. A metrics for satisfaction is important too. The customers’ metrics should be analyzed into two groups: kinds of customers and kinds of process. This allows the company to generate processes for whether they are providing a product or service to those groups.

The Financial Perspective

When both Kaplan and Norton reviewed the data, they didn’t disregard the importance of having financial data. Having data that is accurate and timely, should be a top priority in any company. Managers and higher levels of management should be willing and able to do whatever it takes to provide this data. Oftentimes, there is much handling and processing of financial data. Having a corporate database implemented is a great way to have processing automated and centralized. Unfortunately, the point is that the emphasis currently on financials seems to be unbalanced when comparing with other perspectives. Things like risk assessment and cost benefit data need to be included in the financial related data. By expanding the financial category, it can give a company a more accurate overview.

Strategy Mapping and It’s Value

Maps have been used for generations to help people get from one place to another. The same can be said for strategic maps. These maps are brilliant communication tools that help corporate analysts to tell a story of the company. They will be able to show in large form the value and how they can transition from where they are at, to where they are going. With this map, they can show logical process with the step-by-step connections. These strategic objectives can show a cause and effect chain that helps the company to visualize their position. So many people are visual learners and this is an excellent tool to show the positioning of the organization. This method also allows the company to improve their Internals processes and objectives, as well as create desirable results for the customers and financial perspectives all at the same time.

Balanced Scorecard Is Not Software

While it sounds like “The Balanced Scorecard” is a nice software package that neatly takes care of everything, it is not. Most professionals think that to accomplish a program like this they must have software. However, once the Scorecard has been created and implemented, adding performance management software is wise. Software is helpful to get the performance information to the correct people when they need it the most. The automation helps to add structure and discipline to the Balanced Scorecard. It can help to transform the disparate data and turn it into information and knowledge that can be used. Communicating performance information is what “The Balanced Scorecard” is all about.

In conclusion, it’s not whether or not a company can use this program or not. Everyone who has implemented it has seen major results. There is nothing wrong with implementing something that so many other companies have found to be so useful. There’s no software to buy and no salesman to haggle with. From day one people start seeing changes, even if it’s only to their own thinking process.