A General Guide on a Balanced Scorecard

July 10, 2012 by  Filed under: Management 

Today, in order to succeed in any business it is imperative to have a strategy, no matter how big or small your company is. Strategic vision is what protects companies from financial disasters. Well, to be honest nothing protects business from a recession. However, if company top managers expect problems and have lots of instruments in their toolboxes to resolve potential problems, such companies may suffer only minor losses. At the same time, strategy execution implies constant monitoring. This is where Balanced Scorecard comes into play.

Balanced Scorecard or BSC has been developed by people who are now considered strategic management geniuses – Norton and Kaplan. Participation fees in seminars lead by these gurus are over 4,000-5,000$. However, the point is that these guys were the first to offer an interesting idea – to measure financial performance it is imperative to take into account non-financial factors. Sure, financial measures are all important in any company, since the ultimate goal of every commercial organization is making profits. At the same time, financial performance directly depends on non-financial indicators. Thus, by mixing financial and non-financial measures that are split in 4 categories (financial, customer, internal processes, learning and growth), Norton and Kaplan introduced Balanced Scorecard.

It should be mentioned that the implementation process is not easy, although the general concept of BSC is quite simple and understood. Perhaps, the biggest mistake in Balanced Scorecard implementation is hoping that this framework will resolve all problems at once. Sure, it’s too good to be true. Unfortunately, there are no performance evaluation and strategic management systems that can work on autopilot and turn a mediocre company into an industry flagman.

As mentioned above, the concept of BSC is quite simple. There are key performance indicators (KPIs) which are regularly measured to use obtained information in analysis. Monitoring of strategy implementation is incredibly important. Often, a strategy is being implemented for several years. Once the company deviates from a strategy or market environments change, it is imperative to introduce changes to strategy or take counter measures. This is where BSC helps. It alerts company managers and shareholders on potential problems. As stated previously, it is easy to solve problems at initial stages, before they evolve into huge financial troubles that may mean a sudden death in business.

One of the major concerns in BSC implementation is choosing software and getting knowledge. Sometimes, managers, even having efficient software, cannot make the initial steps in implementing this system. Indeed, getting started with BSC is not easy. Thus, it is important to seek services of consulting companies or individual experts in Balanced Scorecard having hands-on experience in using this framework.

Bear in mind that there are no standard approaches to BSC, since every business is individual, thus, requiring unique BSC approaches. At the same time, analysis of case studies, templates and sample BSC project can be helpful for inexperienced managers. It is important to have at least minimal BSC related knowledge to succeed with this framework. So, start your self education now.

Interested in Balanced Scorecard Middle East companies? Need assistance with implementation of BSC? We are here to help!

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