Balanced Scorecard

Overview

The balanced scorecard is a management tool that provides a comprehensive view of an organization’s performance. It was developed by Drs. Robert Kaplan and David Norton in the early 1990s and has since become a widely-used performance management framework. The balanced scorecard looks at an organization from four perspectives: financial, customer, internal processes, and learning and growth.

pros

Pros of the balanced scorecard:

Comprehensive view of performance: The balanced scorecard provides a holistic view of an organization’s performance, allowing managers to see how their efforts are impacting multiple areas of the business.

Link between strategy and results: The balanced scorecard helps to align an organization’s strategies and objectives with actual results, making it easier to see if the organization is on track to achieve its goals.

Improved communication and collaboration: By using the balanced scorecard, organizations can clearly communicate their objectives and strategies to all employees, and encourage collaboration and teamwork to achieve these goals.

Focus on key drivers of success: The balanced scorecard helps organizations focus on the key drivers of success, such as customer satisfaction, innovation, and employee development. This helps to ensure that resources are allocated to the areas that will have the greatest impact on the organization’s success.

cons

Cons of the balanced scorecard:

Complexity: The balanced scorecard can be a complex tool to implement and use effectively. It requires a significant investment of time and resources, and can be difficult for managers to understand and use effectively without proper training.

Difficulty in defining measures: Defining appropriate measures and indicators for each perspective of the balanced scorecard can be challenging, especially for non-financial measures such as customer satisfaction or employee morale.

Implementation difficulties: Implementing the balanced scorecard effectively requires a significant change in the way an organization operates and measures performance. This can be a significant challenge, especially for organizations that are resistant to change.

Resource-intensive: Implementing and maintaining the balanced scorecard requires a significant investment of resources, including time, money, and personnel. This can be a barrier for smaller organizations or those with limited resources.

Closing

In conclusion, the balanced scorecard is a valuable tool for organizations that want to improve their performance and achieve their goals. However, like any management tool, it has its pros and cons. It’s important for organizations to carefully consider the advantages and disadvantages of the balanced scorecard before implementing it, and to invest the resources necessary to ensure its success.

When to use

When not to use

How to Use

See Also

References