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Balanced Scorecard
Balanced Scorecard
Balanced Scorecard
Balanced Scorecard
Strategic management professionals often work also with the quite analytical model called
QSPM model. Understanding the Product Life Cycle and Porter's Five-Forces model is also
very important.
Customer perspective,
Internal-business processes,
Learning and growth,
Financials.
The first step in the balance scorecard framework is to analyze these four perspectives.
However, balanced scorecard does not end there, it goes further. Balanced scorecard also
develops metrics and methods for collecting data to calculate them. After data is collected
and metrics calculated, each of the four perspectives can be analyzed relative to each
other.
Balanced scorecard provides feedback around both the internal business processes and
external outcomes in order to continuously improve strategic performance and results.
Perspective 1: Customer
Customers are the ones who pay the bills; therefore, it is important to keep them satisfied
so that they not only come back but also spread the word and bring new customers too.
Every business should be constantly asking the question:
"How well are we meeting the needs of our customers, and how can we make them more
satisfied?"
Balanced scorecard brings this question into action items. Balanced scorecard includes the
question, methods for how we measure results, and an analysis of how our results meet our
goals. This is an example of how the Customer perspective can be handled in the balance
scorecard framework:
Balanced scorecard can translate this into concrete targets, metrics, and methods. Below
you can find an example of how balance scorecard addresses the Internal-business process
perspective:
"How well are we positioned to ensure that goals are met in the future?"
And again, balance scorecard can help translating this question into action steps. Below is
an example of how balanced scorecard can handle the Learning and growth perspective.
Perspective 4: Finance
Everything is about the bottom line. A business needs to align its priorities with activities
that bring in revenue, and it has to be done in an efficient way. Decision makers need to ask
the question:
And this can be translated into detailed action steps, measures, and goals in the balanced
scorecard framework as well. Here is an example:
Metric: The Sales department expenditures as a proportion of
company expenditures.
Target 1: The Sales department expenditures will be less than
20% of the total company expenditures.
Target 2: The Sales department expenditures will grow at the
same or lower rate than revenues from sales.
Method: Total expenditures of company and revenues from sales
figures will be obtained from the corporate accounting system.
Expenditures for the Sales department will be obtained from
intradepartmental book-keeping system. These two figures will
be used to calculate the percent.
The balanced scorecard method transforms an organization’s strategic plans and goals
from mere statements into execution plans and "orders". This can be done at a very
granular level if needed. Balanced scorecard provides a framework that not only provides
performance measurements, but it also helps planners identify what should be done and
how it should be measured. Balanced scorecard enables executives to truly execute their
strategies.
The balanced scorecard method today is often implemented as a full strategic planning and
management system where data is fed directly from accounting and company IT systems
into the model to calculate metrics and compare them with strategic goals and plans.
The SWOT analysis method and IFE/EFE matrix is one step closer to analyzing a business
from inside.
Balanced scorecard is two steps closer, it focuses very much on internals but also deals
with external factors.