Balanced Score Card

Balanced scorecard is used by organisations to align business activities to the vision and strategy of the organisation. This is a kind of performance monitor that tracks the organisations performance against strategic goals. The balanced scorecard approach is to give a clarification to their vision and provide them with prescription to balance up in areas where they are lacking. This process allows the organisation to collect feedbacks in order to improve in their performance and hence their results.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

The balanced score suggests that any organisation should be assessed from four perspectives.

1.     Learning and growth perspective :

     This involves training and corporate cultural attitudes related to both individual and corporate self-improvement. Knowledge repository is a great asset to a company. Continuous training activities should be held in order to be with the technology trends. According to Kaplan it involves “learning” more than “training”.

2.    Customer perspective:

Customer satisfaction and customer focus are the key indicators for a “good” running business. If there is a high churn rate of customers then it is evident that there is some malfunctionining happening from the suppliers’ side or maybe we are not offering products of high quality. This might cause further decline in profits of the company.

3.    Internal Business Processes perspective:

This mainly concerns with the conformance of the business processes with the customer requirements. The metrics for measuring this should be carefully developed by inhouse subject matter experts and cannot be leased out to consultants.

4.    Financial perspective:

     Sources of funding, cost benefit analysis and risk assessment all falls under this perspective. Company’s continuous funding and profit indicators shows that the company’s performance. However the company should also evaluate its projects in order to justify its funding. This is the reason why they go in for cost benefit analysis. Financial support is what makes a company functioning healthily.