What is Balanced Scorecard concept
History and standings
In the beginning of 1990th Harvard Business School professor Dr. Robert S. Kaplan and business consulting specialist David P. Norton began reporting their research materials referring to absolutely new business concept. Their theory called Balanced Scorecard (BSC).
Actually BSC is not just a new logic of measurement but it is a control and executive corporate system which allows company to perform precise planning as well as to create clear strategy. It also provides linking between internal business processes and company’s environmental characteristics which is needed to rich advanced strategic effectiveness and the whole company’s success. According to Balanced Scorecard the business needs to turn strategic planning process into one of the key functions. A precise theory that turns into exact measured values – that is what BSC concept stands for.
New concept for a new age
Kaplan and Norton proved that those traditional financial measures as return on investment and the period of return could not show the overall business performance image. According to BSC concept traditional finance measures presented an old and incomplete sight of view what caused incorrect business planning and strategy in long time period. Revealing weaknesses and uncertain details of previous concepts for company’s management authors had offered to create more characteristics that could measure performance not only in financial sphere but in some other options. They believe those characteristics could help to gain balance in overall activity of the company.
According to Kaplan and Norton balanced scorecard concept considers financial values as an important part of business performance measure but just part of it. Financial parameters only reflect a course of previous events. It might be enough for old style industrial companies to which such factors as long term investments and non-material features (like customer relations development, business process optimization and others) were just wasting of money. But now when industrial century had been changed by information technology age it becomes impossible to clearly measure current companies. Today’s companies understand the meaning of long time investments into such “abstract” perspectives as customers, suppliers, staff, business processes, technologies and innovations. As a result Kaplan and Norton offered to add more characteristics referring to the new perspectives that could satisfy the aims of company from the age of information.
Balanced Scorecard consept’s methodology
Balanced Scorecard methodology stands for basic factors referring to company’s activities. Those directions and perspectives as customers’ satisfaction, executive and financial activities are presented as the list of measures. Managers receive and analyze those measures in order to understand the dynamics of values comparing to the plan and strategic goals. Fully implemented system realizes data to be input and controlled step by step starting with the lowest position and finishing with the highest. Ideal systems means that every staff member has their own clearly formulated goal he or she is responsible for in order to rich the whole company’s strategic goals.
