Using Balanced Scorecard

Using Balanced Scorecard

Using Balanced Scorecard

The Balanced Scorecard is a strategic planning and management tool used within business, industry and the public sector to align operational activities and help to achieve a high level of sustainable business success. Originated by Dr Robert Kaplan & David Norton, the guiding principle of the Balanced Scorecard is to create a performance framework of financial and non-financial measurements that collectively create alignment and balance within the organisation.

Historically business performance has been judged on financial achievements, most commonly profit. Within the manufacturing environment more detailed measures have been used taking their roots from standard costing models and focusing on cost per tonne, or margin variance to operating standard.

The concept of the balanced scorecard introduces three other perspectives that drive the success of a business. The first is Customer Perspective, taking your potential clients' views into account. The next is Internal Business Perspective which looks at how functions within your business are aiding or impairing your business success. The last in Learning & Growth Perspective, looking at the potential for your company to continue to evolve and improve.

Together with the financial perspective, these four elements form the basis of a balanced view of the company and subsequent alignment throughout the organisation. An understanding and monitoring of these perspectives highlights cause and effect relationships between them, whereby an action undertaken within learning and growth (Cause) ultimately could result in directly or indirectly impacting on the margin of the company (Effect).

A series of KPIS are defined that track these cause and effects, and it's these KPIs that fundamentally steer the business towards a greater performance. Typically a business may have 25 key measures covering all elements of its operations, however, it will also have many other KPIs that allow the managers to drill down into the performance of their own areas and better understand how performance is affecting the company's key measures.

As a theme of the Balanced Scorecard, Inspired Change has adopted the slogan of 'DRIVE' to denote the individual perspectives of the scorecard with a view to making the concept easier to understand and ultimately drive your business forward.

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