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August 7, 2009
The balanced scorecard (BSC) is a strategic planning and management system used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals.
Why we need Balanced Scorecard?

Increase focus on strategy and results

Improve organizational performance by measuring what matters

Align organization strategy with the work people do on a day to day basis

Focus on the drivers of future performance

Improve communication of the organizations Vision and Strategy

Prioritize Projects / Initiatives

4 process area in BSC
Define the measurement architecture -when a company initially introduces the balanced score card, it is more manageable to apply it on the strategic business unit level rather than the corporate level. However, interactions must be considered in order to avoid optimizing the results of one business unit at the expense of others.
Specify strategic objectives– the top three of four objectives for each perspective are agreed upon. Potential measures are identified for each objective.
Choose strategic measures measures that are closely related to the actual performance drivers are selected for evaluating the progress made toward achieving the objectives
Develop the implementation plan target values are assigned to the measures.  An information system is developed to link the top level metrics to lower-level operational measures. The scorecard is integrated into the management system.

A Balanced Scorecard defines what management means by “performance” and measures whether management is achieving desired results. The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised. These measures typically include the following categories of performance:

Financial performance (revenues, earnings, return on capital, cash flow);

Customer value performance (market share, customer satisfaction measures, customer loyalty);

Internal business process performance (productivity rates, quality measures, timeliness);

Innovation performance (percent of revenue from new products, employee suggestions, rate of improvement index);

Employee performance (morale, knowledge, turnover, use of best demonstrated Practices).


To construct and implement a Balanced Scorecard, managers should:

Articulate the business vision and strategy;

Identify the performance categories that best link the business vision and strategy to its results (e.g., financial performance, operations, innovation, employee performance);

Establish objectives that support the business vision and strategy;

Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets;

Ensure companywide acceptance of the measures;

Create appropriate budgeting, tracking, communication, and reward systems;

Collect and analyze performance data and compare actual results with desired performance;

Take action to close unfavorable gaps.

Common uses
A Balanced Scorecard is used to:

Clarify or update a business strategy;

Link strategic objectives to long-term targets and annual budgets;

Track the key elements of the business strategy;

Incorporate strategic objectives into resource allocation processes;

Facilitate organizational change;

Compare performance of geographically diverse business units;

Increase companywide understanding of the corporate vision and strategy.

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