What is the Balanced Scorecard?

What is the Balanced Scorecard? – The design of Balanced Scorecard concerns itself with the identification of a small number of financial and non-financial objectives related to strategy. It then looks at measures, setting targets for the measures and finally recording and monitoring them on a regular basis to determine success or failure. Only when this is in place can strategic initiatives/projects can be considered. It is in this area that the Balanced Scorecard approach differs from other strategic methodologies. It forces an organisation to think about how objectives can be measured first and then what initiatives can be put in place to satisfy the objectives. The basis behind this is to avoid creating initiatives/projects too early and measuring success based only on initiative/project completion.

There are two aspects of this activity that need to be brought out: 1. The scorecard identifies a number of financial and non-financial objectives. These objectives are few in number and are critical to the sustainability or growth the organisation. These objectives are related to four major categories to ‘balance’ the scorecard. 2. Measurement is a crucial part of the activity. Each objective must be measurable. These measures are often referred to as Key Performance Indicators (KPIs). They should include both leading and trailing measures. For more on this subject, download the guide. The ‘balance’ that a Balanced Scorecard achieves is brought about by a focus on financial and non-financial measure that can be attributed to four areas of an organisation that are described as Perspectives. These are: Financial, Customer, Internal Business Processes and Organisational Capacity.

The Balanced Scorecard is framework used to implement and manage strategy at all levels of an enterprise, business or organisation. It links objectives, measures, and initiatives to a strategy. The scorecard provides a view of an organisation’s overall performance. It integrates financial measures with other key performance indicators related to customers, internal business processes, and capacity, learning, and growth.   Watch the video and download a copy of the final drawing.