The Balanced Scorecard (BSC)
The balanced scorecard is a strategic planning and performance management tool that assists organisations in clarifying and translating their vision and strategy into action. It was created in the early 1990s by Robert Kaplan and David Norton and has since become one of the world’s most prominent performance management systems.
The balanced scorecard is founded on the premise that organisations should focus not just on financial success but also on other critical areas such as customer satisfaction, internal business processes, and learning and growth. Organisations may gain a more complete view of their entire success by measuring performance in these four categories.
The balanced scorecard has four perspectives:
Financial viewpoint: This perspective assesses the financial performance of the organisation, such as revenue, profit, and return on investment.
Customer viewpoint: This perspective assesses how successfully an organisation meets its customers’ demands, such as customer satisfaction, customer loyalty, and market share.
Internal business process view: This perspective assesses how effectively the organisation’s internal processes, such as product creation, production, and customer service, are linked with its strategy.
Perspective on learning and growth: This perspective assesses the organisation’s potential to improve and innovate through factors such as employee satisfaction, staff training, and research and development.
Organisations develop a few key performance indicators (KPIs) that will assess their success in that area from each viewpoint. KPIs should be explicit, quantifiable, attainable, timely, and relevant.
A balanced scorecard is not something that should be done only once. As the organisation’s strategy and performance evolve, they should be examined and revised on a regular basis. Organisations may use the balanced scorecard to gain a comprehensive view of their entire performance and discover opportunities for improvement.
The Advantages of the Balanced Scorecard
Organisations can profit from the balanced scorecard in a variety of ways, including:
Improved strategic alignment: The balanced scorecard assists organisations in aligning their strategy and day-to-day operations. Organisations may guarantee that their strategy is being executed throughout the organisation by concentrating on the four viewpoints.
Improved decision-making: The balanced scorecard provides a framework for organisations to make better decisions. Organisations may see how their actions affect their overall success by measuring performance from four perspectives.
Improved communication: The balanced scorecard assists businesses in communicating their strategy and performance to workers, customers, and other stakeholders. Organisations may guarantee that everyone is on the same page by employing a consistent language and framework.
Improved performance: The balanced scorecard may assist organisations in improving their performance by identifying areas for improvement and measuring progress over time.
How to Use the Balanced Scorecard
The balanced scorecard can be used in a variety of ways. The stages below offer a high-level summary of the procedure:
Define the vision and strategy of the organisation: The first stage is to define the vision and strategy of the organisation. This will assist in ensuring that the balanced scorecard is aligned with the broader aims of the organisation.
Identify the key performance indicators (KPIs) that will be used to assess performance from each viewpoint: The next stage is to identify the key performance indicators (KPIs) that will be used to measure performance from each perspective. KPIs should be explicit, quantifiable, attainable, timely, and relevant.
Set goals for the KPIs: Targets should be set for each KPI after they have been identified. Goals should be hard but attainable.
Collect data and monitor performance: The next stage is to collect data and monitor performance in relation to the goals. This information may be used to identify areas where the organisation excels and areas where it needs to improve.
Corrective action should be taken based on the data in order to enhance performance. This might imply altering the strategy, KPIs, or objectives.
The balanced scorecard is an effective instrument for assisting organisations in improving their performance. Organisations may apply the balanced scorecard and begin to reap the advantages by following the steps mentioned above.
The Balanced Scorecard (BSC)