Balanced Scorecard Defined
A Balanced Scorecard is a performance management tool used by executives and managers to manage the execution of organizational activities and to monitor the results of actions. Fundamentally a balanced scorecard provides a summary level view of organizational performance at a quick glance and includes key performance indicators (KPIs) across four main areas or perspectives:
Financial Perspective: KPIs for productivity, revenue, growth, usage, and overall shareholder value.
Customer Perspective: KPIs for customer acquisition, customer satisfaction rates, market share, and overall brand strength.
Internal Process Perspective: KPIs for resource usage, inventory turnover rates, order fulfillment, and quality control.
Learning / Growth Perspective: KPIs for employee retention, employee satisfaction, and employee education, training, and development.
Balanced Scorecard – Four Perspectives
The balanced scorecard concept was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a framework for managing and measurement organizational performance. The concept added strategic non-financial performance measures to traditional financial metrics to provide executives and managers a more ‘balanced’ and ‘holistic’ view of organizational performance. Over time the balanced scorecard has evolved from its early use as a simple performance measurement tool to a complete strategic planning and management system. The latest version of the balanced scorecard transforms an organization’s strategic plan from a passive document into the active actions the organization needs to perform on a daily basis. Additionally, it provides a framework that not only provides performance measurements, but helps planners identify what should be performed and what should be measured.
Adapted from Microsoft Technet and Balanced Scorecard Institite.
Thank you for this post.
It is interesting that I find most business users that are looking to have their first dashboards built are clueless on the things that they should measure. Certainly Kaplan and Norton provided a decent framework. However, I find that many business build the “balanced” scorecards in silos. many different departments determine the KPIs that they deem as important without having those KPIs cascaded down throughout the organization. All balanced scorecards should begin with a copy of the company’s annual report. From there you can determine your strategic plan > strategic KPIs > departmental KPIs. But this requires a strong leadership team that is passionate about data — and many companies just aren’t up for that task. They just want their pretty dashboards.