What is a balanced scorecard?

Balance scorecard is the strategic performance management system used by many types of organizations like private and public by converting the current daily activities into vision and strategy to improve internal control, improve the customer relationship as well as shareholders satisfactions.

Balance scorecard was created by Drs. Robert Kaplan (Harvard Business School) and David Norton which is developed framework into four different perspectives. These fours perspective have to be balanced and none of which is overweight.

A balanced scorecard is the most well know performance management tool as it is easy to use and a sense of good measurement.

It is the ready-framework performance system and management just has to identify the critical success factors for each perspective, financial perspective, internal business perspective, customer perspective, learning, and innovation.

Not like performance prism which requires management to identify all of the critical success factors by themselves, balance scorecard, provide the pre-framework.

Financial perspective

Financial perspective concerns mainly with financial factors which the companies need in order to survive, and satisfy with its major stakeholders—shareholders.

Managements have to identify what are those financial measurements. Mostly, those financial measurements come from profitability ratio, investment ratios, and liquidity ratios.

Pick up all of the important financial measurement ratios and then set the measurement against the required rate, competitor, or industry.

Keep in mind that the concept of a balanced scorecard requires the companies to keep competitive finance factors that why management has to measure its.

Mostly, those financial measurements come from profitability ratio, investment ratios, and liquidity ratios.

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Pick up all of the important financial measurement ratios and then set the measurement against the required rate, competitor, or industry.

Keep in mind that the concept of a balanced scorecard requires the companies to keep competitive finance factors that why management has to measure its.

Learning and Innovation:

Learning and Innovation: No company could survive without innovations. These required competitive staff, up-to-date system, and equipment.

Management has to identify what are the learning and innovation in the organization that could help the organization itself stay competitive in the market. Pick those factors up, and measure them against the required rate.

Customers’ perspective:

Customers’ perspective: It is one of the most important factors that most of the organization concern with. balance scorecard, this factor concern with what are the customers’ requirements, how much are we currently satisfying them?

The system has to design to make sure that the information about the customer’s satisfaction could flow to management. Identify the gap between the customer requirement and what we currently provide them.

This is mostly close by business process perspective, or internal control perspective.

Internal control perspective:

Internal control perspective is very importance and this perspective mostly recognize by many performance management tools.

After identifying the gap of satisfaction that the company currently provides and what the customers expect from us, the company has to close it.

This probably done by review all the processes are strategic importance to the company and then improve those processes. It could be done by Business Process Re-Engineering.

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Hope this post helps you to understand more about a balanced scorecard.