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The balanced scorecard is a strategic planning and management system that is
used extensively in business and industry, government, and non profit
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.
Balance Score card is the management tool that looks beyond short term
financial position of an organisation as a measure of its performance. By
incorporating a variety of perspectives into its organisational outlook its gives a
more holistic view of performance.
It was originated by Dr. Robert Kaplan (Harvard Business School) and Dr. David
Norton as aperformance measurement framework to give managers and
executives a more 'balanced' view of organizational performance.
The aim is to make consensus around the organization’s vision and
For employees to act on words in vision and strategy statements,
those statements must be expressed as an integrated set of
Communicating And Linking
The scorecard gives managers a way of ensuring that all levels of
organisation understand the long term strategy and that both
departmental and individual objectives are aligned with it.
Balanced Scorecard helps managers to allocate resources and set priorities to
those initiatives that move them towards their Vision.
Feedback And Learning
It emphasises on whether a company, it’s departments, or it’s individual
employees have met their goals or not.
Balanced Scorecard Perspective
Each perspective of the Balanced Scorecard
includes objectives, measures of those
objectives, target values of those measures and
Objectives – to be achieved. Ex. Profitable
Measures – parameters used to measure the
progress towards achieving objective. Ex.
Profitable growth measured by net margin
Targets – targets for the measures. Ex. 5% growth
in net margin
Initiatives – actions to achieve targets. Ex. More
Objectives Measures Targets Initiatives
Methodology of Balance Scorecard
Articulate the business’s vision and strategy
Identify the performance categories that best link the business’s vision and strategy to its results
(such as financial performance, operations, innovation, employee performance)
Establish objectives that support the business’s vision and strategy
Develop effective measures and meaningful standards, establishing both short-term milestones
and long-term targets
Ensure companywide acceptance of the measures
Create appropriate budgeting, tracking, communication and reward systems
Collect and analyse performance data and compare actual results with desired performance
Take action to close unfavourable gaps
Balanced Scorecard Example
For any manufacturing company, to improve its profitability.
Source : Bain n Company
Uses of Balance Scorecard Method
Clarify or update a business’s strategy
Link strategic objectives to long-term targets and annual budgets
Track the key elements of the business strategy
Incorporate strategic objectives into resource allocation processes
Facilitate organizational change
Compare performance of geographically diverse business units
Increase companywide understanding of the corporate vision and strategy
Structured approach to analyse the perspectives
Align organisation strategy with daily operation basis
Work for the long term objectives through short term actions
The balanced scorecard is not a piece of software. Unfortunately, many people
believe that implementing software amounts to implementing a balanced
Automation adds structure and discipline to implementing the Balanced
Scorecard system, helps transform disparate corporate data into information
and knowledge, and helps communicate performance information.