What is a balanced scorecard?
Posted: Wed Dec 11, 2024 4:13 am
In 1992, Robert Kaplan and David Norton first referred to the balanced scorecard . Their study, published in the Harvard Business Review, became a worldwide reference for achieving objectives and business management. Although their model has been enriched over time, it continues to be studied in programs such as the Masters in Business and Technology at the European University.
What is the balanced scorecard and what is it used for?
The balanced scorecard is a management model that allows the translation of business strategy into a series of interrelated objectives that are linked to advertising database specific action plans and measured through different indicators . This ensures that members of an organization, from managers to employees, work with a view to achieving business objectives.
Form a global image of the current situation of the organization.
Concretize the company's mission, vision and values through specific actions that can be measured and monitored.
Align the different areas and activities of the company based on its strategic objectives.
Improve internal communication by integrating information from different departments and keeping it visible so that all efforts are focused on achieving business objectives.
Optimize organizational processes and provide a logical structure to the company, so that it ends up generating long-term value.
The 4 key perspectives in the balanced scorecard
Kaplan and Norton proposed a balanced scorecard as a management system to go beyond the financial perspective with which managers used to make decisions and evaluate the performance of their companies . According to the creators of the balanced scorecard , paying attention only to economic aspects implies neglecting the intangible assets that make up a company, from the potential of its workforce to its relationships with customers or its innovative capacity.
This limited view of the business would prevent us from noticing and taking advantage of interesting opportunities to create value. For this reason, it is essential to implement the balanced scorecard taking into account four basic perspectives:
Financial perspective
Every business needs to be profitable and generate profits, so financial objectives play a leading role in the balanced scorecard . The company, therefore, must set goals such as improving its profit margin, reducing costs and increasing sales.
Customer perspective
In this case, the company also considers customer needs and market demands. It must ask itself how it can satisfy its customers while achieving benefits. The balanced scorecard usually focuses on improving customer service, expanding market share, or increasing brand recognition.
Internal processes perspective
It includes the processes that must be implemented to meet strategic objectives of a financial and customer-related nature. It involves determining internal operational objectives that allow the organization to optimize its processes, increase quality or take more efficient advantage of its operational capacity.
Learning and growth perspective
In this case, more intangible and much broader aspects of performance are incorporated, such as human capital, organizational culture, leadership or the technological capital available to the organization.
Obviously, to correctly apply the balanced scorecard, the company must have a clear mission, vision and values , since only then will it achieve a coherent business strategy. Then it can determine the objectives that support its mission and become a means to achieve it. Finally, it must choose the performance indicators , which are the means that the organization has to check whether the defined strategic objectives are being met.
If you want to continue to delve deeper into the balanced scorecard and everything related to CX optimization and analytics, you can train not only with our postgraduate courses, but also with the Business and Technology courses at the European University. You will acquire the necessary knowledge to comprehensively manage the customer experience.
What is the balanced scorecard and what is it used for?
The balanced scorecard is a management model that allows the translation of business strategy into a series of interrelated objectives that are linked to advertising database specific action plans and measured through different indicators . This ensures that members of an organization, from managers to employees, work with a view to achieving business objectives.
Form a global image of the current situation of the organization.
Concretize the company's mission, vision and values through specific actions that can be measured and monitored.
Align the different areas and activities of the company based on its strategic objectives.
Improve internal communication by integrating information from different departments and keeping it visible so that all efforts are focused on achieving business objectives.
Optimize organizational processes and provide a logical structure to the company, so that it ends up generating long-term value.
The 4 key perspectives in the balanced scorecard
Kaplan and Norton proposed a balanced scorecard as a management system to go beyond the financial perspective with which managers used to make decisions and evaluate the performance of their companies . According to the creators of the balanced scorecard , paying attention only to economic aspects implies neglecting the intangible assets that make up a company, from the potential of its workforce to its relationships with customers or its innovative capacity.
This limited view of the business would prevent us from noticing and taking advantage of interesting opportunities to create value. For this reason, it is essential to implement the balanced scorecard taking into account four basic perspectives:
Financial perspective
Every business needs to be profitable and generate profits, so financial objectives play a leading role in the balanced scorecard . The company, therefore, must set goals such as improving its profit margin, reducing costs and increasing sales.
Customer perspective
In this case, the company also considers customer needs and market demands. It must ask itself how it can satisfy its customers while achieving benefits. The balanced scorecard usually focuses on improving customer service, expanding market share, or increasing brand recognition.
Internal processes perspective
It includes the processes that must be implemented to meet strategic objectives of a financial and customer-related nature. It involves determining internal operational objectives that allow the organization to optimize its processes, increase quality or take more efficient advantage of its operational capacity.
Learning and growth perspective
In this case, more intangible and much broader aspects of performance are incorporated, such as human capital, organizational culture, leadership or the technological capital available to the organization.
Obviously, to correctly apply the balanced scorecard, the company must have a clear mission, vision and values , since only then will it achieve a coherent business strategy. Then it can determine the objectives that support its mission and become a means to achieve it. Finally, it must choose the performance indicators , which are the means that the organization has to check whether the defined strategic objectives are being met.
If you want to continue to delve deeper into the balanced scorecard and everything related to CX optimization and analytics, you can train not only with our postgraduate courses, but also with the Business and Technology courses at the European University. You will acquire the necessary knowledge to comprehensively manage the customer experience.