Balanced scorecard methodology is the method used to implement a balanced scorecard model in a business. The business balanced scorecard bsc is used as a strategic planning tool to drive change for the purpose of ensuring long term survival and profitability.
Strategic planning for the future in an organization is nothing new but the balanced scorecard brings a different approach. In the past the tendency was for management to make the decisions driven primarily on financial outcomes. Where the balanced scorecard differs in concept is the understanding that actions in one department, sector etc have ramifications throughout the business. Changes are not made in isolation but rather all aspects of the business are intertwined. Changes in some areas will drive outcomes in other areas.
The balance score card method
Business survival depends on income so those providing the income, be they fee paying students, customers etc are crucial and really need to be nutured. The better the customer experience the more likely they are to return and spend more. In other words the financial outcome depends on the customer outcome so customer satisfaction leads to better financial outcomes.
What is done to enhance the customer experience from the process and innovation perspectives will drive the customer perspective outcomes and ultimately the financial perspective outcomes. Thus the process and innovation perspectives are the drivers and lead perspectives whilst the customer and financial perspectives are outcomes which lag behind the drivers.
Making a scorecard model
Essentially you plan the changes and then set about implementing them. Who will be responsible, what performance metrics will you use to measure progress towards target and at what stage will it be considered successful.
A balanced scoreboard model starts with a long term vision. Where do you see the purpose for the company’s existence in the future. The next consideration is what do you need to do to get there? What Strategies do you need to make the vision a reality. Balance scorecard strategies are not opened ended pipe dreams they are characterised by definite targets within specified time limits. The strategy is the umbrella of the "doing" roadmap. An example of a corporate strategy might be to increase turnover by 15%
One of the fundamentals of balanced scorecard is that knowledge and suggestions are drawn from those actually doing the job as well as the senior executives so that the entire company is involved in discussions. You have the collective input of all involved so that from the outset everyone feels very much part of the team and has responsibilty for their particular piece of the pie. Each participant is fully aware of why they are doing something and how their contribution is crucial to the successful outcome.
The next consideration is how to achieve this strategy in a balanced way. The basis of scorecard is that the perspectives are interconnected i.e instead of looking at doing something just from a single aspect or perspective you need to consider each strategy from all perspectives. Generally companies have four key balanced scorecard perspectives – Financial, Customer, Internal and Innovation. With balanced scorecard methodology, for example, Financial objectives cannot be achieved at the expense of the other perspectives. To ensure the balanced approach you consider objectives (what to do) in each perspective for each strategy. One or several objectives are assigned into each of the key perspectives that the company wants to consider. The objectives define what will be done to achieve a strategy.
So now you know where you are heading (strategy) and what you need to do (objectives) from each of your perspectives to get there. Next it has to be determined how the day-to day operations will be monitored and controlled so that at any point in time the measure of success or otherwise is evident. To measure success you need to decide on goals and how to monitor progress towards these goals. This is where performance measurement or balanced scorecard metrics comes in. Every objective needs targets and measures – targets so that there is a basis for comparison of results over the duration of the project and measures for rating the results relative to the target to enable analysis of progress. Are we on target, below target, above target etc. Measurements can be both financial and non-financial, could be completion dates, percentages etc
The balanced scorecard is really a performance scorecard. It provides a structured approach to driving change in your organization and evaluating the achievements of the whole organization, its employees, its departments and its sectors. Performance measurement and management is an integral part of balance scorecard methodology.
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