The balanced scorecard is a management system that helps organizations align their activities with their strategic objectives. It provides a framework for tracking and assessing progress and performance against key metrics in four areas: financial, customer, process, and people. The balanced scorecard was developed in the early 1990s by Robert S. Kaplan and David P. Norton as a way to overcome the shortcomings of traditional financial measures in capturing an organization’s true value drivers. Since then, it has been adopted by businesses and other organizations around the world as a tool for strategy implementation and execution.
The balanced scorecard is not just a management system, but also a way of thinking about organizations and their performance. It provides a comprehensive view of an organization, going beyond financial measures to include other important factors such as customer satisfaction, employee engagement, and process effectiveness. The balanced scorecard approach can be applied to any organization, regardless of size or industry. When used properly, it can help organizations achieve their strategic objectives and create value for all stakeholders.
There are four main elements to the balanced scorecard:
1. Financial perspective: This perspective measures an organization’s financial performance in terms of profit, cash flow, and shareholder value.
2. Customer perspective: This perspective measures an organization’s performance from the customer’s point of view, in terms of satisfaction, loyalty, and retention.
3. Process perspective: This perspective measures an organization’s performance in terms of its key processes, such as product development or order fulfillment.
4. People perspective: This perspective measures an organization’s performance in terms of its human capital, in terms of employee skills, knowledge, and engagement.
The balanced scorecard is a powerful tool for management because it provides a comprehensive view of an organization’s performance. It helps organizations align their activities with their strategic objectives and track progress against key metrics. When used properly, the balanced scorecard can help organizations achieve their strategic objectives and create value for all stakeholders.