2.2 Balanced Scorecard

The Balanced Scorecard (BSC) is a strategic planning and management system that organizations use to visualize and clarify what they are trying to achieve. Also it is supposed to measure and monitor progress towards strategic targets. Companies use it to adjust the daily work that everyone is doing to the strategy and to prioritize projects, products, and services.

The system connects the dots between big picture strategy elements such as mission or purpose, vision, core values, strategic focus areas – like themes, results and goals – and the more operational elements such as objectives, measures, targets, like the desired level of performance, and initiatives like projects that help the company to reach their targets.

The Balances Scrorecard  suggests to view the organization from four perspectives, and to develop objectives, measures, targets, and initiatives (actions) relative to each of these points of view: 

2.2.1 The perspectives

Financial: this perspective looks at organizational financial performance and the use of financial resources

Customer/Stakeholder: this perspective views organizational performance from the point of view the customer or other key stakeholders that the organization is designed to serve

Internal Process: this perspective views the organizational performance through the lenses of the quality and efficiency related to the product or services or other key business processes

Organizational Capacity (originally called Learning and Growth): views organizational performance through the lenses of human capital, infrastructure, technology, culture and other capacities that are key to breakthrough performance

2.2.2 Strategy mapping

One of the strongest elements in the Balanced Scorecard methodology is the use of strategy mapping to visualize and communicate how value is created by the business. A strategy map is a simple graphic that shows a logical, cause-and-effect connection between strategic objectives. As a whole, improving performance in the objectives found in the Organizational Capacity perspective enables the organization to improve its Internal Process perspective, which, in turn, enables the organization to create desirable results in the Customer and Financial perspectives.

Illustration 1: Balanced Scorecard – Strategy Map. own creation

For each objective on the strategy map, at least one measure or Key Performance Indicator (KPI) will be identified and tracked over time. Key Performance Indicators show progress toward a desirable outcome. Strategic Key Performance Indicators visualize the implementation and effectiveness of an organization's strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency.   

Good KPI provide an objective way to see if strategy is working, offer a comparison that measures the degree of performance change over time and focus employees' attention on what matters most to success. Moreover they allow measurement of accomplishments, not just of the work that is performed, they provide a common language for communication and help reduce intangible uncertainty.

In summary it can be said that the balanced scorecard is a strategy performance management tool that can be used by managers in companies to control and to deal with the complexities within the business. 

Subpages (1): Organization