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Balanced Scorecard

Overview Balanced Scorecard

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A Balanced Scorecard is not only a framework for measuring business performance, but a full strategic planning and management system that organizations can use to identify their vision and strategy, define business objectives and align the business activities accordingly. It enables executives to translate strategies into actions and to actually monitor the accomplishment of strategic goals.

History

The BSC goes back to works by Robert S. Kaplan and David P. Norton in the early 1990s at Harvard University. The basic concept is based on the idea of a logical or physical object or system receiving information or material from its environment (input), processing that information or material (process), returning it to its environment in modified form (output), and finally receiving a tangible or intangible reply (return/outcome/impact /result) in the form of an effect.

The four perspectives of a Balanced Scorecard

Kaplan & Norton have introduced four different perspectives based on which the activities a company can be assessed:

  • Financial perspective
    (How does our company look to shareholders?)
  • Customer perspective
    (How do customers see our company?)
  • Process perspective
    (How well do we manage our operational processes?)
  • Learning and growth perspective
    (Can our organization continue to improve and create value? How can we learn and grow?)

These four perspectives assist executives and business leaders in planning and implementing their strategies and achieving the business objectives defined and thus play a major role in the success of a company.

Example of a Balanced Scorecard

Figure 1: Example of a balanced scorecard

With ARIS it is possible to quickly define strategic company objectives and determine the cause-and-effect relationships from all strategically relevant perspectives.

Benefits of using Balanced Scorecard

The benefits of running your business based on a Balanced Scorecard can be summarized as follows:

  • A Balanced Scorecard helps you align business activities to the vision and strategy of your organization and to define appropriate success factors for all levels of your company.
  • A Balanced Scorecard provides management with a comprehensive overview of all business activities.
  • The method of Balanced Scorecard improves internal and external communication and facilitates the understanding of business objectives and strategies at all levels of your organization.
  • An important step of the Balanced Scorecard approach is feedback and learning. Based on this step, the strategy can be adjusted where necessary.
  • A Balanced Scorecard can help you break down the vast amount of information provided by IT systems to the required essentials.

ARIS Community & BSC

Now go on and discuss the subject of Balance Scorecard with other users, experts, or beginners in our Business Strategy group. If you haven't joined the ARIS Community yet, do it now! ;-)

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