Balanced scorecard

Balanced Scorecard (BSC) is a strategic planning and management system used by organizations to communicate what they are trying to accomplish, align the day-to-day work that everyone is doing with strategy, prioritize projects, products, and services, and measure and monitor progress towards strategic targets. Developed in the early 1990s by Dr. Robert Kaplan and Dr. David Norton, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective.

Overview

The Balanced Scorecard suggests that an organization is viewed from four perspectives, and to develop objectives, measures (KPIs), targets, and initiatives (actions) relative to each of these points of view. The four perspectives of the Balanced Scorecard are:

1. Financial Perspective: How do we look to shareholders?
2. Customer Perspective: How do customers see us?
3. Internal Process Perspective: What must we excel at?
4. Learning and Growth Perspective: Can we continue to improve and create value?

The Balanced Scorecard links performance measures. For each of the perspectives, the Balanced Scorecard helps to focus on what to measure and what actions to take. It's a system that aligns business activities to the vision and strategy of the organization, improves internal and external communications, and monitors organization performance against strategic goals.

Implementation

Implementing the Balanced Scorecard involves several steps:

1. Clarification of Vision and Strategy: To make sure that everyone in the organization understands the strategic direction. 2. Communication and Linking: Communicating the Balanced Scorecard throughout the organization and linking it with individual performance plans. 3. Business Planning: Setting targets and aligning strategic initiatives. 4. Feedback and Learning: Reviewing performance and learning from the analysis.

Benefits

The benefits of implementing a Balanced Scorecard include:

- Improved strategic alignment - Enhanced communication of the organization's vision and strategy - Better strategic planning - Increased organizational performance by measuring what matters - Improved decision making

Challenges

While the Balanced Scorecard has many benefits, there are also challenges in its implementation:

- Developing a Balanced Scorecard can be time-consuming. - It requires a cultural change within the organization to focus on both financial and non-financial measures. - Maintaining and updating the Balanced Scorecard can be challenging as strategies evolve.

Conclusion

The Balanced Scorecard is a powerful tool for aligning company activities to the vision and strategy of the organization, improving team performance by focusing on strategic tasks and results, and providing a comprehensive view of business performance. With careful implementation and ongoing commitment, the Balanced Scorecard can help organizations to navigate towards their strategic goals effectively.