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Balanced Scorecard

 

Description
The Balanced Scorecard is a strategic performance management tool used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. Design of a Balanced Scorecard is about the identification of a small number of financial and non-financial measures and attaching targets to them, so that when they are reviewed it is possible to determine whether current performance 'meets expectations'. These measures typically include the following categories of performance:
• Financial: revenues, earnings, return on capital, cash flow
• Customer: market share, customer satisfaction measures, customer loyalty
• Internal Business Processes: productivity rates, quality measures, timeliness
• Learning and Growth: percent of revenue from new products, employee suggestions, rate of improvement index, morale, knowledge, turnover, use of best demonstrated practices

 

Methodology
To construct and implement a Balanced Scorecard, managers should consider the following:
• Asses – Assessment of the organization’s Mission and Vision, challenges (pains), enablers, and values.
• Strategy – Elements of the organization’s strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed.
• Objectives – The strategic elements developed are decomposed into Strategic Objectives.
• Strategy Map – The cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map.
• Performance Measures – Performance Measures are developed for each of the enterprise-wide Strategic Objectives
• Initiatives – Strategic Initiatives are developed that support the Strategic Objectives.
• Cascade – The enterprise-level scorecard is ‘cascaded’ down into business and support unit scorecards
• Evaluate – Evaluation of the completed scorecard is done.

 

Usage
A Balanced Scorecard is used to:
• Clarify or update a business’s strategy
• Link strategic objectives to long-term targets and annual budgets
• Track the key elements of the business strategy
• Cascade strategic initiatives that follow "best practices" methodologies through the entire organization
• Facilitate organizational change
• Enables more open channels of communications
• Track and monitor competencies and provide training and staffing that is appropriate to achieve enterprise goals

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