The balanced scorecard is a strategic planning and management system used(*) to align business activities to the vision and strategy of the organization, improve internal and external communications and monitor organization performance against strategic goals.
The balanced scorecard suggests we view 4 critical perspectives of our business:
Learning & growth: includes training, learning, corporate culture and attitudes, self growth. Individuals are the main repository of knowledge of an organisation and the critical resource. Communication among workers is key, as is avoiding brain drain.
Business process: Metrics based on internal business processes allow management to monitor how well the business is running and wether it’s products/services are well accepted by clients.
Customer: Indicators on customer satisfaction and tools to improve and monitor customer relations are critical
Financial: Timely and accurate financial data is still a key to manage the business. Data should be centralised and of fast and easy access, but financial data should not be the only indicator, thus the original intention of the word “balanced”.
It was ideated and first detailed by Robert Kaplan and David Norton. Image courtesy of Metrus
(*) Used in business and industry, government, and non-profits worldwide
Tags: balanced scorecard, business metrics, financial planning, Kaplan, learning, metrics, non-profit, Norton, personal growth, planning, strategic management, strategy, training
January 21, 2008 at 7:34 pm
this is the most complete version. i am a convinced follower of this best practices.
however, i learnt that there is another much more radical and the first one to do: BSC based on two metrics, one is market share of your product, another one is profit of your product.
if you grow in both metrics, this is really fine, the paradise
if you decrease in one of both, you need it to address it by looking at your strategic goals and check what your competitors are doing
if you decrease in both of them, change things immediately
everything else in BSC goes behind this first analysis…
January 21, 2008 at 9:22 pm
Yes! Much better that the “official version”. Thanks a lot. I truly think if you control those 2 you’re in shape ;)
Market share & Profit. The Holy Duo :)
As my father used to say: “there is no such thing as good or bad business: there is well run and poorly run business” ;-) LOL
January 22, 2008 at 12:16 am
I think your Market Share and Profit metrics simplify the issue a little too much. With a BSC you can look at the drivers of these two measures if you choose those two to be your financial metrics.
I agree with the idea of keeping a simple Scorecard, but Norton and Kaplan’s work and the 15 years of results that have followed have proven that organizions profit from looking at more than just their financials. Our organization has built a simple and easy to use BSC reporting application that you should check out.
Ted, VP Palladium Group.
January 24, 2008 at 5:23 pm
Ted please!! this is a non-commercial blog ;-)
May 15, 2008 at 11:53 pm
[...] spring I’ve noticed that it is worth of considering to integrate strategy maps and balanced scorecard thinking for above described method. At least a simple strategy map is good solution to communicate [...]
May 26, 2008 at 3:09 am
“It was ideated and first detailed by Robert Kaplan and David Norton.”
Hmm, not sure that I can agree with this statement. See the following for another point of view:
http://www.schneiderman.com/Concepts/The_First_Balanced_Scorecard/BSC_INTRO_AND_CONTENTS.htm
Also, be careful how you use a balanced scorecard: http://alignment.wordpress.com/2007/02/12/is-a-balanced-scorecard-bad/
November 25, 2008 at 1:22 pm
Could not agree more:-)) We will experience together to establish the whole system and see how it will influence our business..
May 14, 2009 at 12:33 pm
Can you please help me on implementing the balance scorecard on leader performance to create a transparency culture