By Dr Marko Saravanja
The Balanced Scorecard is a widely-used model for performance management in both the public and private sectors. Historically, organisational performance in the private sector was measured on financial results and all other aspects of performance have been perceived as unimportant. The Balanced Scorecard model introduces new perspectives that drive organisational performance, such as customer perspective, internal business processes perspective, and innovation and learning perspective.
This model suggests that managers need to be proactive and focus strategically on factors that generate sustainable success in the long run instead of being focused on short-term bottom-line financial performance only. The model considers the interests of the most important stakeholders, that is, shareholders, customers and staff, and links them with key organisational success factors in the areas of finance, quality and learning.
The following are four key steps for implementing the Balanced Scorecard.
1. Define goals and measures
- Goals: e.g. profit, growth
- Measures: e.g. cash-flow management, cost reduction, margin improvement, turnover
- Goals: e.g. increased customer satisfaction, retention or acquisition
- Measures: e.g. complaints, customer satisfaction, marketshare
- Goals: e.g. efficient processes, technological improvements, staff inspiration
- Measures: e.g. improved supply chain management, waste reduction
Innovation and learning
- Goals: e.g. new products or services, staff development and training
- Measures: e.g. number of people trained, number of new products or services, investment in research and development
- Define activities, responsibilities, timeframes, costs, and targets
- Communicate to staff
- Measure performance regularly
- Publicise results
- Evaluate the results
- Take corrective actions or
- Reward performance and celebrate achievement
© Dr Marko Saravanja, Regenesys Management