Balanced Scorecard

Balanced Scorecard Put your visions into practice

What is Balanced Scorecard? Balanced Scorecard (BSC) is a concept helping you translate strategy into action. BSC start s 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 t his 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.