Tell me more about balanced scorecards. What are they, and how are they used?
Answer
Businesses and organizations use balanced scorecards as a way to measure their performance on a variety of internal metrics. Based on the 1992 work of Robert Kaplan and David Norton, basic balanced scorecards generally examine four perspectives in an attempt to offer a more accurate assessment of business performance than financial measures alone:
- customer
- internal business
- innovation and learning
- financial (Hill, 2012).
Still, organizations can and should use additional performance indicators based on their unique needs, reassessing their balanced scorecard regularly to ensure alignment with their strategic vision. While the development of a company's balanced scorecard generally begins as a top-down, leadership driven initiative, insight from department-specific staff should be incorporated to ensure goals and metrics align appropriately to their individual areas (Hill, 2012).
Companies go on to use dashboards to synthesize the data they collect for the purpose of ongoing review and analysis of their performance against their chosen scorecard objectives and measures. Find more information in our related FAQ on dashboards.
Figure 1. Balanced Scorecard basic example. Taken from: Balanced Scorecard. (2012). In S.D. Hill (Ed.), Encyclopedia of Management (7th ed., pp. 38-42). Detroit, MI: Gale. Retrieved from https://link.gale.com/apps/doc/CX4016600023/GVRL?u=mnarasmuss&sid=GVRL&xid=6c8ed77
References:
Balanced Scorecard. (2012). In S.D. Hill (Ed.), Encyclopedia of Management (7th ed., pp. 38-42). Detroit, MI: Gale. Retrieved from https://link.gale.com/apps/doc/CX4016600023/GVRL?u=mnarasmuss&sid=GVRL&xid=6c8ed77
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