A Balanced Scorecard is a management system used to ensure that the strategic goals of a company are measured, monitored and improved upon by translating them into actionable performance objectives. The endpoint is to follow through with the goals of the organization and meet them at the end of a specific time.
Developed by Kaplan and Norton in 1993, the balanced scorecard is not only used to assess the financial performance of the organization but also the key performance indicators of customer service, internal business process and growth achieved by the organization. With these, organizations can make better and more informed decisions about their business and how they can improve on it.
It is called a balanced scorecard because it covers the main areas required for general strategic growth for any organization. So, it covers four main dimensions or perspectives of an organization. They include:
Financial Analysis: Here, the HR team considers if their actions are directly improving the finances of the organization. With a financial analysis, the organization can understand the short-term and long-term performance of the organization as a result of the actions undertaken in the financial year.
Customer Service Analysis: This analysis focuses on how well customers are served and attended to. With this perspective, the organization tries to find out the perception of the customers towards the organization. They also try to find out the customer satisfaction and retention level of the organization.
Internal Business Process Analysis: This perspective helps the organization understand if the internal process adds value for customers and stakeholders. Here, the organization evaluates the efficiency of production processes, how they were processed and even the cost per product.
Learning and Growth Analysis: Here, the organization focuses on the rate at which the organization is growing, changing, and improving. This analysis focuses on any new technology, method or even product introduced into the organization. It also considers the training programs provided for its employees and how it is affecting and improving the business.
Balanced scorecards are essential in organizations because they bring together different elements of a company’s competitive advantage in a single report. Also, with all the different perspectives together, it helps the management determine if one aspect of growth has been achieved at the expense of the other. This way, an organization has a holistic view of the growth and achievements of the organization.
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