The balanced scorecardmeasures that drive performance. An empirical study of the effectiveness of the balanced scorecard. Setting measures and targets that drive performance, a. Their original balanced scorecard significantly advanced the notion that effective performance measurement must provide a view of both. Initiatives are the engine that put the strategy into action, and address the identified gaps between the stretched targets set for scorecard measures and the current performance of those measures kaplan and norton, 1996. Developed by robert kaplan and david norton, the balanced scorecard is an extremely influential management tool that remains enduringly popular with companies around the world. Norton, of the balanced scorecard, a means of linking a companys current actions to its longterm goals. The balanced scorecard requires specific measures of what customers getin terms of time, quality, performance and service, and cost. The image below shows the interconnectivity relationships among different types of performance measures. The key problem that kaplan and norton identified in the business of the day was that many companies tended to manage their businesses based solely on financial measures. The balanced scorecardmeasures that drive performance robert s.
Kaplan born 1940 is baker foundation professor at harvard business school, united states, and cocreator, together with david p. Balanced scorecard is a strategy performance management tool a semistandard structured report, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. The balanced scorecard has been translated and effectively implemented in. The balanced scorecard was developed in the early 1990s by two guys at the harvard business school.
And it complements those financial measures with three sets of operational measures related to customer satisfaction, internal processes, and the organizations ability to learn and improvethe activities that drive future financial performance. The name balanced scorecard comes from the idea of looking at strategic measures in addition to traditional financial measures to get a more balanced view of performance. Performance measures kpis are critical to tracking progress of an organizations strategy. And it complements those financial measures with three sets of operational measures related to customer satisfaction, internal processes, and the organizations ability to learn and improve the activities that drive future financial performance. Balanced scorecard is a strategy performance management tool a semistandard structured report, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions the phrase balanced scorecard primarily refers to a performance management report used by a management team, and typically.
More than providing information on whether or not business targets are achieved, balanced scorecard also clarifies the impact on corporate strategy. During a yearlong research project with 12 companies at the leading edge of performance measurement, we devised a balanced scorecarda set of measures that gives top managers a fast but. Norton harvard business school publishing, 2000 industrial productivity 8 pages. Senior executives understand that their organizations measurement system strongly affects the behavior of managers and. The concept of balanced scorecard has evolved beyond the simple use of perspectives and it is now a holistic system for managing strategy. Nine steps to success balanced scorecard institute. The phrase balanced scorecard primarily refers to a performance management. The balanced scorecard includes financial measures that tell the results of actions already taken. Its this focus on both highlevel strategy and lowlevel measures that sets the balanced scorecard apart from other performance management methodologies. The balanced scorecard tracks all the important elements of a companys strategyfrom continuous improvement and partnerships to teamwork and. Using the balanced scorecard to strategically allocate resources. Since then, they have written numerous books together focusing on aspects of. Apr 01, 2005 the complete guide to analyzing and maximizing a companys balanced scorecard presenting the next step for balanced scorecard implementation, balanced scorecard diagnostics provides a stepbystep methodology for analyzing the effectiveness of a companys balanced scorecard and the tools to reevaluate balanced scorecard measures to drive maximum performance.
David hume, a treatise of human nature, of personal identity, section six, part iv, book i, pp. Balanced scorecard for performance measurement figure 1 shows the original structure for the balanced scorecard bsc. Executives know that a companys measurement systems strongly affect employee behavior. But the traditional financial performance measures that worked. The following paragraphs attempt to clarify some of these issues. Identifying and setting up initiatives is an important step of the balanced scorecard implementation process. Balanced scorecard measures that drive performance bartleby. They realize that no single measure can protives understand that their organizations measure vide a clear performance target or focus attention on. The balanced scorecard has been translated and effectively implemented in both the nonprofit and public sectors. The balanced scorecard translates a companys vision and strategy into a coherent set of performance measures. Describe the balanced scorecard and explain how it is used.
Introduction the balanced scorecard is a strategic planning and management system that was developed by dr. Kaplan the purpose of the balanced scorecard is to harmonise the corporations strategy, operational objectives and performance measures so that they can be controlled to achieve goals. The balanced scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization by monitoring performance against strategic goals. Strategic performance measures are the foundation of effective strategy managementthe key to taking the balanced scorecard, or any performance system, from the theoretical to the applied. Balanced scorecard basics balanced scorecard institute. The balanced scorecard, referred to as the bsc, is a framework to implement and manage strategy. Transforming the balanced scorecard from performance measurement to strategic management. Translating strategy into action, published in 1996. The four perspectives of the scorecardfinancial measures, customer knowledge, internal business processes, and learning and growthoffer a balance between shortterm and longterm objectives, between outcomes desired and performance drivers of those outcomes, and. Balanced scorecard is a strategic management tool, used in both strategy formulation, organisational alignment and performance management brudan, 2010. The four perspectives of the scorecardfinancial measures, customer knowledge, internal business processes, and learning and growthoffer a balance between shortterm and longterm objectives, between outcomes desired and performance drivers of those outcomes. Discover delightful childrens books with prime book box, a subscription that delivers new books every 1, 2, or 3 months new customers receive 15% off your. Solution for how the balanced scorecard concept and system can help companies to drive and measure performance and deliver its corporate responsibility.
The complete guide to analyzing and maximizing a companys balanced scorecard presenting the next step for balanced scorecard implementation, balanced scorecard diagnostics provides a stepbystep methodology for analyzing the effectiveness of a companys balanced scorecard and the tools to reevaluate balanced scorecard measures to drive maximum performance. The four perspectives of the scorecard financial measures, customer knowledge, internal business processes, and learning and growthoffer a balance between shortterm and longterm objectives, between outcomes desired and performance drivers of those outcomes, and between hard. The scorecard includes financial measures that reveal the results of actions already taken, as well as three sets of operational measures that show customer satisfaction, internal processes, and the organizations ability to learn and improve. Norton the balanced scorecard tracks all the important elements of a companys strategyfrom continuous improvement and partnerships to teamwork and global scale. The initial book on the balanced scorecard methodology appeared just as business process reengineering was taking off in the early 1990s.
Operational measures focus on the use of resources, processes and production output. The bsc retains financial metrics as the ultimate outcome measures for company success, but supplements these with metrics from three additional perspectives customer, internal process, and learning and. More than just a measurement system, the balanced scorecard is a management. It balances financial measures with performance measures and objectives related to all other parts of the organisation. The four perspectives of the scorecard financial measures, customer knowledge, internal business processes, and learning and growthoffer a balance between shortterm and longterm objectives, between outcomes desired and performance drivers of those outcomes. Nine steps to success tm bsis awardwinning framework for strategic planning and management, nine steps to success, is a disciplined, practical, and tested approach to developing a strategic planning and management system based on the balanced scorecard. A balanced scorecard for an entire organization will be broader and more general in terms of goals and measures than a balanced scorecard designed for a division manager. Ecls balanced business scorecard after a figure in kaplan and nortons the balanced scorecardmeasures that drive performance. The balanced scorecard bsc is a performance measur ement system which was developed by kaplan and norton in 1992 in order to address the limitations of the use of the traditi onal financial.
A balanced scorecard is a performance metric used in strategic management to identify and improve various internal functions of a. Since then, they have written numerous books together focusing on aspects of the balanced scorecard concept. Conceptual foundations of the balanced scorecard 3. The balanced scorecard measures that drive performance. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. It gives organizations a way to connect the dots between the various components of.
They show how to use measures in four categories financial performance. In this classic article from january 1992, authors robert kaplan and da. The balanced scorecard is a powerful tool that can aid managers in translating strategy into action. Kaplan 2006 the purpose of the balanced scorecard is to harmonise the corporations strategy, operational objectives and performance measures so that. Apr 17, 2015 the balanced scorecard includes financial measures that tell the results of actions already taken, and it complements those financial measures with three sets of operational measures related to customer satisfaction, internal processes, and the organizations ability to learn and improve the activities that drive future financial performance. Their goal was to provide organizations with a clear understanding of what to measure in order to improve performance and results balanced scorecard institute 2014. Balanced scorecard topic gateway series essentially, the bsc is a management system that enables an organisation to identify and clarify its vision and strategy, and translate them into action. And it complements those financial measures with three sets of operational measures related to. The balanced scorecard includes financial measures that tell the results of actions already taken, and it complements those financial measures with three sets of operational measures related to customer satisfaction, internal processes, and the organizations ability to learn and improvethe activities that drive future financial performance. Balanced scorecard 4 perspectives of the balanced scorecard.
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