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All About Balanced Scorecard

Updated: May 2, 2021

What Is a Balanced Scorecard?

A balanced scorecard is a strategic management performance metric that is used to identify and improve various internal business functions and their resulting external results. Balanced scorecards are used to give and measure feedback to organizations. Data collection is critical to providing quantitative results as managers and executives gather and interpret information and use it to make better decisions for the organization.

•Who Uses the Balanced Scorecard (BSC)?

BSCs are used extensively in business and industry, government and non-profit organizations worldwide. More than half of the major companies in the US, Europe and Asia are using BSC, increasing use in those regions as well as in the Middle East and Africa. A recent global study by Bain & Co. ranked the Balanced Scorecard fifth among its top ten most widely used management tools worldwide. The BSC has also been selected as one of the most influential business ideas of the last 75 years by the editors of the Harvard Business Review.

• Perspective of balanced scorecard

The BSC suggests that we examine an organization from four different perspectives to help develop objectives, measures (KPIs), goals, and initiatives relative to those ideas.

Financial (or studioship): looks at the financial performance of an organization and the use of financial resources.

Customer / stakeholder: looks at the organizational performance of the organization of the customer or key stakeholders designed to provide service.

Internal process: looks at the quality and efficiency of the organization's performance related to products, services, or other key business processes.

Organizational competence (or learning and development): human capital, infrastructure, technology, culture, and other capabilities that are key to successful performance.

•Features of Balanced Scorecard

From the diagram above, you will see that there are four approaches to a balanced scorecard. Each of these four approaches should be considered in relation to the following factors.

When it comes to defining and assessing the four approaches, the following factors are used:

Purpose - It refers to the objectives of the organization such as profitability or market share.

Measures - Based on the objectives, measures will be taken to measure the progress of achieving the objectives.

Goal - It can be department-based or overall as a company. There will be specific goals that are set to achieve the measures.

Initiative - These can be classified as actions that are taken to accomplish the objectives.

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