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What is a Balanced Scorecard? (BSC)
The Balanced Scorecard (BSC) is a strategic management concept first developed by Dr. Robert Kaplan & David Norton. The Balanced Scorecard was developed after recognizing the fact that only measuring financial business factors did not give management a good view of how the business was doing. Thus, a number of other perspectives, apart from the financial perspective, are needed to get a more 'balanced' view of the whole business.
With the help of the Balanced Scorecard concept, businesses and organizations can break down vision and strategy into actions and indicators. The Balanced Scorecard provides feedback on how the business is doing, in all areas and levels of the business.
Kaplan and Norton describe why the Balanced Scorecard is innovative:
"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 Scorecard can be adapted to use different perspectives, or focus areas. These may have different names in different types of organizations, some organizations may have more and some may have fewer, but these are the basic focus areas suggested by IC Community:
- Financial focus
- Customer focus
- Human focus
- Process focus
- Renewal & Development focus
These focuses are used to categorize strategic objectives, success factors, actions and indicators.
The Balanced Scorecard builds on some of the key concepts of previous management ideas such as Total Quality Management (TQM) and Six Sigma. Some of these concepts are; customer-defined quality, continuous improvement, employee empowerment and measurement-based management and feedback.
The art of measuring
How can I improve what I can't measure? The truth is, you can't. One of the main difficulties of creating a good Balanced Scorecard is finding good measurements. Traditional financial measurements are usually easy to find. Measuring employee satisfaction and other softer factors are usually more difficult, but also very important.
To make the process of finding measurements easier, IC Community uses the SMART-principle to define targets for measurements:
- Specified & Visible
- Measurable
- Accepted
- Realistic
- Timed
Managing the Balanced Scorecard
A Balanced Scorecard can be just a bunch of papers sitting in a binder where no one will ever read or update them, or perhaps the usage is limited to a certain level or department in the organization. Or, a Balanced Scorecard System can be used to manage and communicate the Balanced Scorecard to the whole organization.
Benefits of a Balanced Scorecard System
- Always available
- Available everywhere (web-based)
- Available for everyone (not just top management or accounting)
- Easy to update
- Easy to communicate
- Automatic data import
- Automatic alerts and reminders
- Automatic graphs, reports and illustrations
- Automatic aggregation and calculations
- Computer aided analysis
The Dolphin Navigator System™
IC Community is the developer and distributor of the Dolphin Navigator System, a adaptable and feature-rich Balanced Scorecard System.
Read about the Dolphin Navigator System™ »
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