The Balanced Scorecard Evaluation, a performance measurement system, designed to help organizations continually improve, provides a clear roadmap of what managers need to measure to achieve both systematic balance and a healthy bottom-line.
The Balanced Scorecard can help an organization understand its history. This can be helpful in planning for future prosperity. Before the Balanced Scorecard, many organizations relied solely upon financial performance indicators to guide their decision-making and investment.
Limitations of Financial Performance Indicators
Today experts agree, financial performance indicators cannot tell a complete story of what a company’s true assets and opportunities may be. Today, the Balanced Scorecard is used extensively throughout the world by business, government, and the non-profit sector.
Drs. Robert Kaplan and David Norton
The Balanced Scorecard was created by Harvard University professors Drs. Robert Kaplan and David Norton. These men decided to study the most successful businesses in the world to try and unlock the secrets of their success.
Top Performers & Similar Processes
Kaplan and Norton learned that top performing organizations tended to have similar processes in place. They further learned that top performing organizations had clearly identified strategies that helped them be successful. These strategies could be broken down into four key areas that helped managers look at different parts of the business so that they could put different performance measurements in place. Without question, companies that were using what Kaplan and Norton later coined “the Balanced Scorecard” were much more successful than organizations that didn’t have formalized procedures in place for setting goals and measuring performance.
Measurable Goals and Outcomes
The Balanced Scorecard is based on having measurable goals and outcomes for: finances, operations and productivity, learning and innovation, and customers and markets. Kaplan and Norton discovered that these four areas were important to measure because, by identifying these four key areas, manager wouldn’t focus on only one area of interest – usually the finances. So, by putting a structure in place that could help managers identify four key performance areas organizations were able to gain a sense of balance.
Elaine Allan, BA, MBA
Technology & Business Blogger