Tuesday, September 7, 2010

Introduction to Balanced Scorecard(BSC)

The balanced scorecard (BSC) is a strategic planning and performance management tool. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework. This added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.
The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
 It is extensively used in business and industry, government, and nonprofit organizations worldwide to align business activities. It improves internal and external communications, and monitor organization performance against strategic goals.
It is perhaps the best known of several such frameworks.  It was widely adopted in English speaking western countries and Scandinavia in the early 1990s.
The four "perspectives" proposed were:
Financial: encourages the identification of a few relevant high-level financial measures. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated.
Customer: Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs.
Internal Business Processes: This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission).
Learning and Growth: This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode.

Balance Scorecard