What is a Balanced Scorecard?

What is a Balanced Scorecard? The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.

The methodology examines performance in four areas:

  1. financial analysis – the most traditionally used performance indicator, includes assessments of measures such as operating costs and return-on-investment;
  2. customer analysis looks at customer satisfaction and retention;
  3. internal analysis looks at production and innovation, measuring performance in terms of maximizing profit from current products and following indicators for future productivity;
  4. learning and growth analysis explores the effectiveness of management in terms of measures of employee satisfaction and retention and information system performance.

Once an organization has analysed their performance in each of the four areas above, they should be ready to utilise the Balanced Scorecard approach to improve the areas where they are deficient.

Implementing the Balanced Scorecard system company-wide should be the key to the successful realisation of the strategic plan/vision. A Balanced Scorecard should result in:

  • Improved processes
  • Motivated/educated employees
  • Enhanced information systems
  • Monitored progress
  • Greater customer satisfaction

What is a balanced scorecard to management?
For the management, the balanced scorecard helps in aligning the whole of the organisation goals with those of individual project, departments, activites and employees. Specific benefits:

  • Communicating objectives clearly to the organization
  • Tracking objectives and getting timely and consistent status reports
  • Improving business performance through priority management
  • Identifying successful initiatives and eliminating poorly performing ones
  • Fosters communication and team work
  • Balancing strategic thinking with operational agility
  • Saving on time spent on administrative activities
  • Making educated decisions through quantitative management
  • Defining and maintaining a clear accountability framework
  • Preventing crisis through active risk management

What is a balanced scorecard to an employee?
The balanced scorecard gives employees a better understanding of the company strategy – the are able to see their direct role in the achievement of company objectives. Motivating employees to deliver your strategy is therefore a key benefit of the balanced scorecard.