The Balanced Scorecard – Align Your Business and Strategy
The Balanced Scorecard is not complex. It is a structured approach used to report on a set of financial and non-financial metrics on a regular basis. It is however, very powerful when used as a mechanism to implement a business strategy. This is the fundamental intent of a Balanced Scorecard. That is not to say the Balanced Scorecard cannot be used as a methodology to measure operational activities, indeed, when used at a department level providing input into the divisional level and then up to the corporate level it can become an essential mechanism to not only keep track of activities but also communicate strategy to the entire organisation/corporation.
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The balanced scorecard is a strategic planning and management method used to align business activities to the vision and strategy of an organisation, improve internal and external communications, and monitor organisational performance against strategic goals.
Originally published by Dr. Robert Kaplan and Dr. David Norton as a paper in 1992 and then formally as a book ‘The Balanced Scorecard’ in 1996. Both the paper and the book spread the knowledge of the Balanced Scorecard leading to its widespread success.
The design of Balanced Scorecard concerns itself with the identification of a small number of financial and non-financial measures, setting targets for the measures and then measuring them on a regular basis to determine success or failure. There are two aspects of this activity that need to be brought out:
- The scorecard measures financial and non-financial measures. These measures are few in number and are the critical measures for the business, usually referred to as Key Performance Indicators (KPIs). They also must include both leading and trailing measures (see Chapter ‘Key Performance Indicators in our downloadable guide opposite).
- Measurement is only part of the activity. The measures must also have associated initiatives (to change the measure positively) and actions (to correct activities when things do not go to plan).
The ‘balance’ that a Balanced Scorecard tries to achieve is brought about by a focus on financial and non-financial measure that can be attributed to four areas of business that have been described as Perspectives. These are; Financial, Customer, Internal Business Processes and Learning & Growth.
The balanced scorecard is a strategic planning and management method used to align business activities to the vision and strategy of an organisation, improve internal and external communications, and monitor organisational performance against strategic goals. Read our guide.