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What is a Balanced Scorecard?

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  • Written By: Troy Holmes
  • Edited By: W. Everett
  • Last Modified Date: 11 September 2016
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In business, a balanced scorecard (BCS) is a management strategy that applies to areas of customer satisfaction, financial management, existing business processes, and learning and growth efforts for an organization. The results of the scorecard are used as indicators for aligning business activities against the strategy of the organization. This approach attempts to improve both internal and external communications, while monitoring the overall organizational performance against it's strategic goals.

The balanced scorecard strategy was first introduced by Dr. Robert Kaplan and Dr. David Norton as a way to measure performance that added three additional performance measures to the traditional financial metrics of an organization. This framework was designed to give executives a more realistic view of an organization's overall performance. While financial information gives a status of an organization, it is typically historical in nature. The balanced scorecard equally weighs future performance indicators like customer satisfaction and modernization efforts in an attempt to assess the true state of an organization.

Customer Relationship Management (CRM) is a process included within the balance scorecard framework. CRM is designed to assist an enterprise in identifying and targeting the best customers of an organization. This process attempts to improve customer satisfaction and reduce marketing time by identifying the most profitable customers of a company.

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The most profitable customers will typically be provided with the highest level of service. Most large enterprise organization use CRM techniques within their call centers. This software presents information to the call center analyst before he answers the phone, which allows him to market products based on information within the customer profile.

Business process management is another fundamental element of BCS. Key metrics are created within the balanced scorecard framework based on existing business processes. These metrics provide information to managers to assist in gauging the effectiveness of products and services based on customer feedback. Some simple examples of business process management could include order completion time and wait time for customers with call centers. By measuring and improving the existing business processes of an organization, future gains can be more realistically obtained.

One of the most unique areas of the BCS strategy is future modernization efforts based on learning and growth of the workforce. The learning and growth area of a business is important to monitor as it defines the future of the organization. Within the balanced scorecard this facet includes employee professional training and corporate goals related to both individual and corporate modernization improvements. Because of the rapidly changing technology environment it is important for organizations to monitor the capabilities of the current workforce

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