What Is A Balanced Scorecard?

The term “scorecard” is becoming more and more common in the business community.  But what is a balanced scorecard?  To give a little background, the balanced scorecard is a management methodology that was introduced by Robert Kaplan and David Norton in the 1990’s.

A balanced scorecard serves as a strategic management system that translates corporate Vision and Strategy into action, communicates and ties together strategic objectives and measures, helps establish corporate targets and aligns initiatives, and increases feedback and learning.

The balanced scorecard approach proves very effective in tracking and establishing “key performance indicators” (or KPI’s”) from different business units within the enterprise.  Business units may include operations, finance, or human resources and allows them to track the metrics that allow those organizations to help achieve their corporate strategy.

Balanced scorecards consist of four generally accepted target areas:

1.     Financial – How do our shareholders identify financial success?
2.    Customer – How do we appear to our customers in achieving our vision?
3.    Process – What processes you must be exceptional at with customers, and shareholders?
4.    Growth/Learning – How will we sustain the ability to change and improve over the long term?

In practice the balanced scorecard recognizes that corporate performance measurement is not done by individual function, but a combination working together.  The approach highlights the “links” or measures that impact Functional Areas across business functions.

While the balanced scorecard is a good process, other scorecard and scorekeeping system exist that may be a better option depending on your needs.

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Brian Miyasaki