Management: Balanced Scorecard

A balanced scorecard is a management methodology that was primarily developed by Dr. Robert Kaplan of the Harvard Business School. It is “What companies should measure in order to balance the financial perspective” as stated by Dr. Kaplan. The balanced scorecard method is to clarify vision and strategy by providing feedback in two part on internal business processes and external outcomes.

One of the goals of the balanced scorecard is to appeal to both traditional businesses and accommodate businesses of today, the business full of knowledge workers, the businesses built around the Internet and the Information Age. The balanced scorecard aims to create future value through investment in customers, support activities, employees, processes, technology and innovation.

There are four perspectives in the balanced scorecard, they are, Learning and Growth, Business Processes, Customers, and the Financial Perspective. Each perspective can be evaluated in with the indicators Objectives, Measures, Targets, and Initiatives. We will discuss each perspective independently in brief.

1. Learning and Growth Perspective: This perspective of the balanced scorecard is inclusive of employee training, corporate cultural attitudes of both the individual and company, and individual and corporate self-improvement. “Learning is more then training” it includes mentors, tutors, communication and a positive work environment (Dr. Robert Kaplan) and high performance work systems, including internal Intranets.
2. The Business Process Perspective: This perspective is to allow managers to have a quick way to know how their business is running. The business process perspective determines whether products and services conform to customer requirements, if they are mission oriented and how the support processes are doing. This is very similar to the value chain presented by Porter (see Porter’s Value Chain).
3. The Customer Perspective: This is solely based around the customers perception of the value that they receive, their perceived value and how focused the company is on the customer. It is simple, customer focus and satisfaction. Poor performance in this area is the leading indicator of a decline even if the current financial future looks good.
4. The Financial Perspective: Financials, risk assessment and cost benefit data should come out of this perspective. There should be good tools that give you good data quickly. Financials should not have to pass through many hands before you have them.

Those are the basics of a balanced scorecard. Once the indicators are built in and the logical flow of your company then you will have the ability to start doing performance evaluations based on the balanced scorecard management methodology.