Wednesday, June 11, 2014
- Developed in the early 1990’s by Dr. Robert Kaplan and David Norton."The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, 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."
- The Balanced scorecard is a management system that enables organizations to clarify their vision and strategy and translate them into action.
- Provides an organization with feedback of both the internal business processes and external outcomes, which allows for continuous improvement of strategic performance and results.
- Nerve center of an
enterprise
- The balanced scorecard is
centered on four performance metrics or perspectives:
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Customers
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Internal processes
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Financial
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Learning and growth
- When implemented properly, each one of
these perspectives contains four sub-parts consisting of
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Objectives - what the strategy is to achieve in
that perspective
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Measures - how progress for that particular
objective will be measured
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Targets - refer to the target value that the
company seeks to obtain for each measure
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Initiatives - what will be done to facilitate
the reaching of the target
- The term “scorecard”
signifies quantified performance measures and “balanced” signifies the system
is balanced between:
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Short-term and long term objectives
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Financial and non-financial measures
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Lagging and leading indicators
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Internal and external performance perspectives
- Uses of the balanced
scorecard:
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To set objectives
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To determine measures
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To predict outcomes
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To determine initiatives
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To gain the big picture
- Balanced scorecard is a performance management system that can be used in any size organization.
- Allows management to
measure financial and customer results, operations, and organization potential.
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