Balanced Scorecard

Balanced Scorecard

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History

Robert S Kaplan and David P Norton published series of articles on "Balanced Scorecard" in 1993. They published a book titled "The Balanced Scorecard" in 1996

Important Organizational System

  • Strategic management approach.

  • Performance management approach.

  • Operational activities of an organization are aligned with organization's top level vision, strategy and objectives.

  • Executes and monitors the organizational strategy and objectives by using a combination of financial and non-financial measures.

  • Financial outputs are measured along with what influenced the financial objectives like the investments in customers, suppliers, employees, processes, technology, and innovation.

  • So a balance is maintained between financials and the other factors of business.

Perspectives

View an organization from the four perspectives given below:

  • Learning and Growth

  • Business Processes

  • Customer

  • Financial

Process of Implementation

Put the vision and strategy of the organization in the center and work out all the other details from the above-mentioned four perspectives around them. Under each perspective ask questions as given against each bullet below and decide objectives, measures, targets and initiatives for that specific perspective.

  • Financial perspective: What should we do to succeed financially with reference to our stake holders? What will be our objectives? How will we measure? What are the quantifiable targets then? What initiatives should we adopt to go about achieving them?

  • Customer perspective: How should we relate to our customers to meet the top level vision and in line with strategies? Then decide about objectives, measures, targets and initiatives as we did for financial perspectives.

  • Business processes perspective: What business processes we should be best at and improve in order to satisfy the stake holders and customers? Subsequently decide the objectives, measures, targets and initiatives in businesses processes area.

  • Learning and growth perspective: How will we ensure sustenance to learn, improve and grow to meet the vision? Then, work out the objectives, measures, targets and initiatives for this.

These processes should be followed at each hierarchical level of an organization. The appraisal of departments and people can be done by scoring out the actual performances planned. Also, corrective actions can be initiated in time.

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