Balanced Scorecard

Definition

The balanced scorecard is a strategic management and performance measurement framework that aligns business activities to the vision and strategy of an organization. It provides a balanced view of organizational performance by considering financial, customer, internal business processes, and learning and growth perspectives.

5 Must Know Facts For Your Next Test

1. The balanced scorecard was developed by Robert Kaplan and David Norton in the early 1990s as a way to measure organizational performance beyond just financial metrics.
2. The four perspectives of the balanced scorecard (financial, customer, internal business processes, and learning and growth) provide a holistic view of the organization's performance.
3. Key performance indicators (KPIs) are used within the balanced scorecard to measure progress towards strategic objectives.
4. The strategy map is a visual tool that helps organizations understand the cause-and-effect relationships between the various components of their strategy.
5. Implementing a balanced scorecard can help organizations align their day-to-day operations with their long-term strategic goals.

Review Questions

• Explain how the balanced scorecard helps organizations develop a strategic plan.
  • The balanced scorecard provides a framework for translating an organization's vision and strategy into a set of performance measures across four key perspectives: financial, customer, internal business processes, and learning and growth. By defining specific objectives and KPIs within each of these perspectives, the balanced scorecard helps organizations develop a comprehensive strategic plan that aligns all business activities to the achievement of their overall strategic goals.
• Describe how the strategy map component of the balanced scorecard supports the development of a strategic plan.
  • The strategy map is a visual tool that helps organizations understand the cause-and-effect relationships between the various components of their strategy. By illustrating how different strategic objectives are linked together, the strategy map provides a clear roadmap for how an organization can achieve its overall vision. This visual representation helps guide the development of the strategic plan by highlighting the key drivers of success and the interdependencies between different parts of the organization.
• Evaluate the role of the balanced scorecard in ensuring the successful implementation of a strategic plan.
  • The balanced scorecard plays a critical role in ensuring the successful implementation of a strategic plan by providing a comprehensive performance measurement framework. By defining specific KPIs and targets within each of the four perspectives, the balanced scorecard helps organizations track progress towards their strategic objectives and make data-driven decisions to course-correct as needed. Additionally, the balanced scorecard promotes alignment between an organization's day-to-day operations and its long-term strategic goals, enabling more effective execution of the strategic plan.

Related terms

Strategic Planning: The process of defining an organization's strategy, or direction, and making decisions on allocating its resources to pursue this strategy.

Key Performance Indicators (KPIs): Quantifiable measures used to evaluate the success of an organization in meeting its strategic and operational goals.

Strategy Map: A visual representation of the cause-and-effect relationships between the various components of an organization's strategy.