What is a Balanced Scorecard?
A strategic and management system that is used extensively in business and industry, government, and non-profit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. This is a tool to be 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. The characteristic of the balanced scorecard and its derivatives is the presentation of a mixture of financial and non-financial measures each compared to a ‘target’ value within a single concise report. The report is not meant to be a replacement for traditional financial or operational reports but a succinct summary that captures the information most relevant to those reading it. It is the method by which this ‘most relevant’ information is determined (i.e., the design processes used to select the content) that most differentiates the various versions of the tool in circulation. The balanced scorecard also gives light to the company’s vision and mission. These two elements must always be referred to when preparing a balance scorecard.
The Balanced Scorecard was slightly amended. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the “marching orders” for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
“The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: (1) The Learning & Growth Perspective, (2) The Business Process Perspective, (3) The Customer Perspective, and (4) The Financial Perspective.
Example of Balanced Scorecard:
The balanced scorecard is not a piece of software. Unfortunately, many people believe that implementing software amounts to implementing a balanced scorecard. Once a scorecard has been developed and implemented, however, performance management software can be used to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information.
In conclusion, the balanced scorecard helps companies organize what’s valuable for them by translating even the vague facts into recordable and analyzable data which could be calculated. Through this tool, the company could make necessary adjustments and modifications up to the extent of their beliefs (mission, vision, and values) which could be very detrimental if left unaided.