Balanced ScoreCard

Balanced Score Card

What is a balanced scorecard? And how can it help align your business?

In any organization, the ability to align the company vision to that of their services, their employees, and their profits is a difficult balancing act. Every company is different and every person within that company is also different, having different thoughts and ideas when it comes to effectively leading the business in the right direction can create major alignment problems.

A balanced scorecard helps to align a business’ activities with that of the vision and strategic goals that the business has, as part of a well designed planning and management system. The balanced scorecard gives a plan for the day-to-day operations, viewing performance of the company, as well as how to measure performance.

Dr. Robert Kaplan and Dr. David Norton were the first to envision a way in which performance could be measured within a company that was separate from a financial measurement. This was to hopefully help managers and executives a better and balanced view of how the company was operating and performing. This work was actually built upon reporting that was going on at General Electric (GE) as well as French engineers in the 1950s; the phrase wasn’t actually coined until the 1990s.

What’s the difference between financial and non-financial?

There are of course many ways in which an organization is financially balanced. Financial reports are a standard practice within businesses and corporations, as they show money that has come in, and money that has gone out, over a specified amount of time. Finances are just one part, however, of a company’s vision and goals. Certainly, you didn’t start out in your business just to make money, did you?

A balanced scorecard is a measurement and a management tool that can help a business clarify their company’s vision and strategy, while also helping them find ways to carry out these into an action. It allows feedback for both internal and external processes to continually see improvements, performance, and results.

There are four different perspectives used with the balanced scorecard –

  • Learning & Growth: the people are the main resource; this helps managers find the right areas to train employees and help them in the company, with mentors and better communication.
  • Business Process: this is the internal business, which allows for managers to see how the business is doing, if products and services are meeting customers’ needs.
  • Customer: this is all about the customer and how to go about ensuring they are happy with your business’ products and services. An unsatisfied customer will take their business elsewhere, which can lead to business decline.
  • Financial: financial data is important; this step provides how the company will meet financial targets.

Alignment of the four quadrants is essential to achieving your organizations goals.

David Peterson

David G. Peterson is a business consultant and author of Handling the Remedy. He has extensive international experience managing projects and operations for large financial institutions. He has worked in North America, Europe, Middle East and Asia skillfully managing business and technical requirements, core systems enhancement and support, merger and acquisition integration's, business process reengineering, off-shoring and outsourcing.