Also known as the “balanced score card,” this is a measure used to measure the results of strategic planning for management and takes into account the non-material aspects of corporate performance, such as customer satisfaction.
The balanced scorecard is used to determine and improve business performance levels and the final results generated by them. with the aim of creating a clear picture of how the company will perform in the future. It is also used to provide feedback and suggestions to companies about their business results and helps monitor and measure the success of the company’s strategy to determine its level of performance.
The balanced scorecard also helps in evaluating the company’s management team to show their ability to achieve the company’s goals. Other employees within the company can rely on the balanced scorecard in order to know the extent to which they contribute to the growth of the business or their suitability for job promotions. In addition, the balanced scorecard approach allows managers to more easily identify the aspects of the business that they need to monitor closely and highlight work areas that need improvement and development.
In order for the company to use the balanced scorecard in its business, it must have a goal that it seeks to achieve and reach. Without any goal, the company will not be able to know what it wants to achieve and will not be able to make accurate measurements of its business.
Advantages of the balanced scorecard model
- Through the balanced scorecard, sources of training and knowledge related to performance are sought. Here, the quality of information obtained by employees is determined, as is the extent to which they effectively use this information with the aim of converting it into a competitive advantage for the company.
- Through it, business operations are evaluated by verifying the quality of product manufacturing in the company, as operational management processes are analyzed to track any gaps, delays, or waste during the production process.
- As customers provide feedback and suggestions about the products and services provided by the company, the information collected about them helps measure the extent of customer satisfaction with the quality and price of the product for them.
- The company’s financial data helps to know its financial performance, which is represented by sales, expenses, sources of income, and so on.
History of the Balanced Scorecard
The balanced scorecard was first developed by Dr. Robert Kaplan and Dr. David Norton in an article published in the Harvard Business Review in 1992.
The Balanced Scorecard was designed as an alternative to the traditional methods of measuring corporate performance, which were based on performance measurement systems designed at General Electric in the 1950s and a system designed by French accountants in the 1930s known as the Tableau de bord.
In a series of articles and books, Kaplan and Norton have expanded the concept of the balanced scorecard into a strategic planning system, providing guidance that companies must follow while measuring performance and turning their goals into action plans.
The main themes that the balanced scorecard focuses on
- Financial perspective: According to this perspective, the company’s goal is to ensure that it obtains a return on the investments it makes and to manage the main risks involved in running the business, as the goals can be achieved here by meeting the needs of all shareholders, customers, suppliers, and all business participants, because they are an integral part of the business and they want to ensure that the company generates revenue on a consistent and continuous basis and that the company strives to improve profitability and develop new revenue streams. Steps taken to achieve these goals may include introducing new products and services, improving the value of the company, and reducing the costs of doing business with it.
- Customers: Customers monitor how the company provides value to them and how it can increase their level of satisfaction with its products or services, as customer satisfaction is an indicator of the company’s success, which in turn will affect its profits.
- Internal business processes: so that these processes determine the quality of the company’s work, as the balanced scorecard takes into account the measures and objectives that can help the company work more effectively and also helps to evaluate the company’s products and services and determine whether they comply with the standards he desires customers to see or not.
- Organizational capabilities: The organizational capacity is important in improving goals and objectives to achieve positive results at work, as employees in the company’s departments are required to demonstrate their high performance in terms of leadership, organizational culture, and the application of necessary knowledge and skills.
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