Balanced Scorecard – Its time to look at your business.
The trendy term word to use in today’s business environment is “balanced scorecard” , but what is it and what can it do for my business? This article explains what a balanced scorecard is and in addition attempts to describe the concept in plain English.
A Performance Measurement Tool
In simple terms a balanced scorecard is best described as a performance management
tool to help executives focus on the key elements that are driving their business.
Usually the executive has a small number of key elements they are monitoring; these
can be both non-
The Scorecard
One of the elements of a balanced scorecard is that it describes in detail the measures
that are in place, there is no room for vague descriptions which staff struggle to
understand. It is designed to give a broader over view of the business and can relate
from anything such as Human Resources to sale performance. The great thing about
introducing them for relevant areas of your business is that they can co-
Balanced Business
Want to ensure that your strategy and vision are actually integrated into your day to day business, then the scorecard approach is the one for you. The scorecard encourages businesses to introduce a clear vision to their staff and by staff reacting to the objectives detailed in the scorecard, they are in turn contributing to the effectiveness of the business strategy.
Performance
The balanced scorecard approach takes into consideration the various areas within your company and the knock on effects that one department has on another. You could of course have great success in one department but this could be at significant detriment to another area, thus the balanced effect takes this into consideration and therefore all areas achieve their objectives. It is a key factor that information (data) is required in order for this business approach to work (see my article on business analytics).
Customer Satisfaction
What every company wishes to achieve is customer satisfaction whilst maintaining a good profit line. The balanced scorecard builds on this as a major influence of its outcome. The theory is heavily built on previous methodologies such as continuous improvement, Total Quality Management and other such like theories.
Strategic
The scorecard consists of four primary segments, the explanation and clarification of the strategy of the organisation, putting in place the measures that will contribute to the realisation of the company’s strategy and setting targets; the alignment of strategic objectives and finally acting upon learning and feedback.
The Organisation
Strategic Performance Management automates the creation and deployment of a Balanced
Scorecard – enabling managers to update the scorecard at regularly scheduled intervals.
The balanced scorecard consists of four sections: clarifying and translating vision
and strategy; communicating and linking strategic objectives and measures; planning,
setting targets, and aligning strategic initiatives; and enhancing strategic feedback
and learning. In addition to the strategic management processes, two kinds of business
processes may be identified: Mission-
Conclusion
If you are looking to implement the Balanced Scorecard then what you need to do is
look at your strategy and what key measures will help you achieve that strategy.
Look at your business and create a selection of key measures (with targets) that
will contribute to your businesses success, these can be financial or non-
Nigel Penhearow was a Business Operations Director for a major blue chip company
based in the UK. He now holds the position as Category Sales Director. He is a member
of various Institutional bodies and has given various speeches in the UK and the
USA on business analytics, key performance measurement and best business practice.
More information can be found on his web site www.operations-