The Balanced Scorecard
The balanced scorecard (BSC)was designed by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more ‘balanced’ view of organizational performance.
The four perspectives:
Financial measures, while very important only tell the story of past events They are inadequate for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. . Four “perspectives” were proposed:
- Financial: encourages the identification of a few relevant high-level financial measures. In particular, designers were encouraged to choose measures that helped inform the answer to the question “How do we look to shareholders?”
- Customer: encourages the identification of measures that answer the question “How do customers see us?”
- Internal business processes: encourages the identification of measures that answer the question “What must we excel at?”
- Learning and growth: encourages the identification of measures that answer the question “How can we continue to improve and create value?”.
The BSC has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. 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.
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