Balanced Scorecard Dissertation Text

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The intellectual elite ndash managers and engineers ndash used their analytical skills to design products and processes, select and manage customers, and supervise day to day operations. The second group was composed of the people who actually produced the products and delivered the services. This direct labour work force was a principal factor of production, which performed its tasks under supervision of the first group. Today automation and productivity have increased the number of people performing analytic functions: engineering, marketing, management and administration.

In other words, information age has brought about the concept of knowledge management. The balanced scorecard is a management system not only a measurement system that enables organisations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. Robert kaplan harvard business school and david norton as a performance measurement framework that added strategic non financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.

While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of general electric on performance measurement reporting in the 1950 rsquo s and the work of french process engineers who created the tableau de bord ndash literally, a dashboard of performance measures in the early part of the 20th century. More than half of major companies in the us, europe and asia are using balanced scorecard approaches, with use growing in those areas as well as in the middle east and africa. A recent global study by bain amp co listed balanced scorecard fifth on its top ten most widely used management tools around the world, a list that includes closely related strategic planning at number one.

Balanced scorecard has also been selected by the editors of harvard business review as one of the most influential business ideas of the past 75 years. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The ldquo new rdquo balanced scorecard transforms an organization rsquo s strategic plan from an attractive but passive document into the marching orders for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. This new approach to strategic management was first detailed in a series of articles and books by drs. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective.

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The balanced scorecard is a management system not only a measurement system that enables organizations to clarify their vision and strategy and translate them into action. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise. Kaplan and norton describe the innovation of the balanced scorecard as follows: the balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long term capabilities and customer relationships were not critical for success.

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These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. Norton, ldquo using the balanced scorecard as a strategic management system, rdquo harvard business review january february 1996: 76. The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: the learning amp growth perspective this perspective includes employee training and corporate cultural attitudes related to both individual and corporate self improvement. In a knowledge worker organization, people the only repository of knowledge are the main resource.

In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge worker organization. Kaplan and norton emphasize that 'learning' is more than 'training' it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools what the baldrige criteria call high performance work systems.

the business process perspective this perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements the mission. These metrics have to be carefully designed by those who know these processes most intimately with our unique missions these are not something that can be developed by outside consultants. Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data.

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With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the unbalanced situation with regard to other perspectives. There is perhaps a need to include additional financial related data, such as risk assessment and cost benefit data, in this category. Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step by step connection between strategic objectives shown as ovals on the map in the form of a cause and effect chain. Generally speaking, improving performance in the objectives found in the learning amp growth perspective the bottom row enables the organization to improve its internal process perspective objectives the next row up , which in turn enables the organization to create desirable results in the customer and financial perspectives the top two rows. Reference: the institute way: simplify strategic planning amp management with the balanced scorecard.

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