| The Balanced Scorecard | |
last updated 2011 Sept 21
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For the students of Prof.
W. Tim G. Richardson, Toronto, Canada
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"The balanced scorecard is a strategic planning and management system" |
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The
"Balanced Scorecard Basics"
"It
was originated by Drs. Robert Kaplan (Harvard Business School) and David
Norton as a performance measurement framework that added strategic non-financial
performance measures to traditional financial metrics to give managers
and executives a more 'balanced' view of organizational performance."
While
Kaplan and Norton invented the term "Balanced Scorecard", the concept of
having a systematic way of measuring performance goes back to some of the
giant sized manafacturing companies, such as General Electric. As
the competitive environment became more intense, companies like General
Electric needed to find specific ways to "measure" the consequence of what
they were doing to ensure that they could produce products and services
most efficiently, and therefore save money and time and resources.
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Evolution
It has happened, with a number of professors that invent some process or system, that it becomes "commercialized", meaning people want to teach companies fow to do things a certain way to fit the theory, and they end up creating "product" that can be sold - usually based on a method of going thorugh certain steps The "Balanced Scorecard" has similarly morphed into situation where there is a "full strategic planning and management system" which consultants can use to help companies that want to have their perfromance measured such that they can make improvements to be more efficient and effective. |
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The
"Balanced Scorecard Basics"
"The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:" |
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The
Learning & Growth Perspective
"This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement." Learning and Growth is particularly important for IT companies were the knowledge-worker organization depends on having the brightest and best educated people to be competitive in developing and marketing new products and services. Lifetime learning is a big part of the way that companies treat knowledge workers who constantlyhave to be updated due to the fast moving changes in the technological environment. |
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Lifetime learning has also led to a fast growth in "alternative education" such as MSCE instead of M.Sc. as well as the proliferation of certification within industry associations and certification of competency with leading software and systems., such as Learning is not just being trained on new systems and new software, it also includes " things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." |
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The
Customer Perspective
When
the Competitive
Environment is intense - meaning a lot of people competing against
you to serve your customers, and a lot of competition for resources to
produce your product, it gives and advantage to the customer
Companies operating in an intense competitive environment therefore have to be very attentive about serving the customer and satisfying customers in order to maintain and grow their business. Terms
such as CRM Customer Relationship Management and CLV (Customer Lifetime
Value), Customer Retention are used to describe what companies do to handle
information about customer activities and maintaining good relations which
lead to long term purchase arrangement.
Customer Retention
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The
Customer Perspective and the influence of web based businesses
"The
Internet is shifting power—irreversibly—from sellers to buyers. Thanks
to the Internet, B2C consumers and B2B purchasing agents can more efficiently
explore more shopping options and more easily educate themselves. Customers
have an abundance of options; and now they can get information about products
or services that interest them in a much shorter amount of time."
Web based businesses are challenged because customers have
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The
Financial Perspective
"number crunching" and the use of statistics has been popular for many years among business leaders in order to figure out the things a company is doing well and the things that need improving. We don't need more financial
information - there is already too much.
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The difference
between information and intelligence
Most people know that all cell phones sold since 2004 have GPS capability which may or may not be activated depending on the jurisdiction. Here is an example
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The
Business Process Perspective
"This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). " The key part to whether this part of the scorecard is useful is based on the point that "These metrics have to be carefully designed by those who know these processes most intimately" Oneof my (WTGR) biggest criticisms of MBA experts on telling a business how to operate , is that their business advice is
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