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Balanced Scorecard (BSC)

The Balanced Scorecard (BSC) is an integrated key performance measurement system to align the business activities with the vision and strategy of the referring enterprise.

The BSC monitors the organization performance against the strategic goals and measures the execution of the strategy. This is achieved through defining goals, attaching relevant performance measures including target values, the definition of initiatives and the integration into the target agreement and planning.

With the help of the BSC it is possible to have a consolidated view of all crucial perspectives that are needed for the achievement of the strategic goals. This performance management approach provides feedback about both the internal processes and the external outcomes.1)

The four perspectives of the BSC

Usually, the BSC suggests the view on an organization through four perspectives: 3 non-financial topics and one financial topic.2)

These perspectives provide relevant feedback on how well the strategic plan of a company is executed. Every perspective has its own metrics, data and Key Performance Indicators (KPIs) which need to be developed, collected and analyzed.

The 4 perspectives are:

  • the Financial perspective
  • the Customer perspective
  • the Internal Business Process perspective
  • the Learning and Growth perspective

Key Performance Indicators (KPI) in each perspective

The following KPIs are only examples 3) - each company can decide which KPIs to choose.

Financial perspective

  • Return On Investment (ROI)
  • Financial Results
  • Cash Flow

Customer perspective

  • Customer satisfaction rate
  • Customer percentage of market

Internal Business Process perspective

  • Number of activities per function
  • Duplicate activities across functions
  • Process automation

Learning and growth perspective

  • Incidence rate
  • Turnover of employees
  • Training/Learning opportunities

History of the Balanced Scorecard (BSC)

The concept of the Balanced Scorecard (BSC) originates from a research project at the Harvard Business School (headed by R. S. Kaplan and D. P. Norton) implemented at the beginning of the 1990s. The objective was to develop an innovative performance measurement that went beyond monetary performance components. It supplies only a conceptual framework that can be structured around the specific company and can thus be applied universally.4)

References

  • Robert S. Kaplan, David P. Norton: The BSC: Translating Strategy into action, 1996, Mcgrag-Hill Professional, Boston/Massachusetts, 1996.
  • Robert S. Kaplan, David P. Norton: The Balanced Scorecard - Measures that Drive Performance. In: Harvard Business Review. 1992.
  • Robert S. Kaplan, David P. Norton: Putting the Balanced Scorecard to work. In: Harvard Business Review. 1993.

Martina Mattes 2011/04/28 16:17

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concepts/balanced_scorecard.txt · Last modified: 2014/10/19 13:38 (external edit)