Balanced scorecard
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The Balanced Scorecard (BSC) is a performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.
By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests. This tool is also being used to address business response to climate change and greenhouse gas emissions.
Organizations were encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on.
The underlying rationale is that organizations cannot directly influence financial outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations should instead also measure those areas where direct management intervention is possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of "balance" in selection of performance measures. In practice, early Scorecards achieved this balance by encouraging managers to select measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth."
Contents[hide]
1 History
2 Use
2.1 Original methodology
2.2 Improved methodology
2.3 Popularity
2.4 Variants, alternatives and criticisms
3 The four perspectives
4 Key performance indicators
4.1 Financial
4.2 Internal business processes
4.3 Learning and growth
5 Software tools
6 See also
7 References
8 Sources
//
[edit] History
In 1992, Robert S. Kaplan and David P. Norton began publicizing the Balanced Scorecard through a series of journal articles. In 1996, they published the book The Balanced Scorecard.
Since the original concept was introduced, Balanced Scorecards have become a fertile field of theory, research and consulting practice. The Balanced Scorecard has evolved considerably from its roots as a measure selection framework. While the underlying principles were sound, many aspects of Kaplan & Norton's original approach were unworkable in practice. Both in firms associated with Kaplan & Norton and elsewhere, the Balanced Scorecard has changed so that there is now much greater emphasis on the design process than previously. There has also been a rapid growth in consulting offerings linked to Balanced Scorecards at the level of branding only. Kaplan & Norton themselves revisited Balanced Scorecards with the benefit of a decade's experience since the original article.
[edit] Use
Implementing Balanced Scorecards typically includes four processes:
Translating the vision into operational goals;
Communicating the vision and link it to individual performance;
Business planning;index Setting
Feedback and learning, and adjusting the strategy accordingly.
The Balanced Scorecard is a framework, or what can be best characterized as a “strategic management system” that claims to incorporate all quantitative and abstract measures of true importance to the enterprise. According to Kaplan and Norton, “The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success”.
Many books and articles referring to Balanced Scorecards confuse the design process elements and the Balanced Scorecard itself. In particular, it is common for people to refer to a “strategic linkage model” or “strategy map” as being a Balanced Scorecard.
Although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that the Balanced Scorecard itself has no role in the formation of strategy. In fact, Balanced Scorecards can comfortably co-exist with strategic planning systems and other tools.
[edit] Original methodology
The earliest Balanced Scorecards comprised simple tables broken into four sections - typically these "perspectives" were labeled "Financial", "Customer", "Internal Business Processes", and "Learning & Growth". Designing the Balanced Scorecard required selecting five or six good measures for each perspective.
Many authors have since suggested alternative headings for these perspectives, and also suggested using either additional or fewer perspectives. These suggestions were notably triggered by a recognition that different but equivalent headings would yield alternative sets of measures. The major design challenge faced with this type of Balanced Scorecard is justifying the choice of measures made. "Of all the measures you could have chosen, why did you choose these?" This common question is hard to ask using this type of design process. If users are not confident that the measures within the Balanced Scorecard are well chosen, they will have less confidence in the information it provides. Although less common, these early-style Balanced Scorecards are still designed and used today.
In short, early-style Balanced Scorecards are hard to design in a way that builds confidence that they are well designed. Because of this, many are abandoned soon after completion.
From Wikipedia, the free encyclopedia
Jump to: navigation, search
The Balanced Scorecard (BSC) is a performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.
By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests. This tool is also being used to address business response to climate change and greenhouse gas emissions.
Organizations were encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on.
The underlying rationale is that organizations cannot directly influence financial outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations should instead also measure those areas where direct management intervention is possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of "balance" in selection of performance measures. In practice, early Scorecards achieved this balance by encouraging managers to select measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth."
Contents[hide]
1 History
2 Use
2.1 Original methodology
2.2 Improved methodology
2.3 Popularity
2.4 Variants, alternatives and criticisms
3 The four perspectives
4 Key performance indicators
4.1 Financial
4.2 Internal business processes
4.3 Learning and growth
5 Software tools
6 See also
7 References
8 Sources
//
[edit] History
In 1992, Robert S. Kaplan and David P. Norton began publicizing the Balanced Scorecard through a series of journal articles. In 1996, they published the book The Balanced Scorecard.
Since the original concept was introduced, Balanced Scorecards have become a fertile field of theory, research and consulting practice. The Balanced Scorecard has evolved considerably from its roots as a measure selection framework. While the underlying principles were sound, many aspects of Kaplan & Norton's original approach were unworkable in practice. Both in firms associated with Kaplan & Norton and elsewhere, the Balanced Scorecard has changed so that there is now much greater emphasis on the design process than previously. There has also been a rapid growth in consulting offerings linked to Balanced Scorecards at the level of branding only. Kaplan & Norton themselves revisited Balanced Scorecards with the benefit of a decade's experience since the original article.
[edit] Use
Implementing Balanced Scorecards typically includes four processes:
Translating the vision into operational goals;
Communicating the vision and link it to individual performance;
Business planning;index Setting
Feedback and learning, and adjusting the strategy accordingly.
The Balanced Scorecard is a framework, or what can be best characterized as a “strategic management system” that claims to incorporate all quantitative and abstract measures of true importance to the enterprise. According to Kaplan and Norton, “The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success”.
Many books and articles referring to Balanced Scorecards confuse the design process elements and the Balanced Scorecard itself. In particular, it is common for people to refer to a “strategic linkage model” or “strategy map” as being a Balanced Scorecard.
Although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that the Balanced Scorecard itself has no role in the formation of strategy. In fact, Balanced Scorecards can comfortably co-exist with strategic planning systems and other tools.
[edit] Original methodology
The earliest Balanced Scorecards comprised simple tables broken into four sections - typically these "perspectives" were labeled "Financial", "Customer", "Internal Business Processes", and "Learning & Growth". Designing the Balanced Scorecard required selecting five or six good measures for each perspective.
Many authors have since suggested alternative headings for these perspectives, and also suggested using either additional or fewer perspectives. These suggestions were notably triggered by a recognition that different but equivalent headings would yield alternative sets of measures. The major design challenge faced with this type of Balanced Scorecard is justifying the choice of measures made. "Of all the measures you could have chosen, why did you choose these?" This common question is hard to ask using this type of design process. If users are not confident that the measures within the Balanced Scorecard are well chosen, they will have less confidence in the information it provides. Although less common, these early-style Balanced Scorecards are still designed and used today.
In short, early-style Balanced Scorecards are hard to design in a way that builds confidence that they are well designed. Because of this, many are abandoned soon after completion.
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