The Balanced Scorecard: Measures That Drive Performance
One of the main problems of managers in the business world is how to evaluate the company’s achievements fast and effectively. The main factor that influences the job performance is the employees’ behavior. There is the traditional approach which does not give qualitative results.
The business research conducted by Kaplan and Norton (1992) made it possible to create the other model for effectively measurement of the business performance that is based on four areas: financial perspective, customer perspective, internal business perspective and innovation and learning perspective; thus, the business performance is evaluated from different sides and carefully weighted from different perspectives.
Four areas upon which the Balanced Scorecard is built
The organizational effectiveness directly depends on the employees’ behavior. There are great many of different approaches and strategies that may measure the job performance with the aim to evaluate whether it is effective or not.
Traditional financial measures are not effective, so Kaplan and Norton (1992) created a modern model of measuring performance standards. The measurement system is called the Balanced Scorecard and includes four areas: financial perspective, customer perspective, internal business perspective and innovation and learning perspective. There four arias are the main parameters according to which job performance is weighted.
Each area carefully analyzes its own goals and measures items that are particular only to this sphere of interests. The main goal of financial perspective area is to measure the financial operations, whether they are effective and profitable. Customer perspective allows evaluating the business from the consumers’ side, how they see the company.
The internal perspective measures the opportunities of the company and evaluates the best sides of the company, states what it can do better. Innovation and learning perspective measures the opportunities to continue learning and training on the manufacturing and implementation of the innovative technologies in the company (Kaplan & Norton, 1992).
How should each of the four areas of the Balanced Scorecard be weighted?
Financial perspective, customer perspective, internal business perspective and innovation and learning perspective are the four areas that should be equally weighted while measuring the organizational business by means of the Balanced Scorecard. These four areas are like the details of one mechanism and it is impossible to weight one area better while forgetting about the other.
The system will work effectively and profitably only in the case of complex analysis (Schutta, 2006). If you will stress the measurement of the financial perspective and will reduce your attention while other perspectives analysis, the results will not be objective and trusted as some parameters were worse evaluated.
The avoidance of some perspectives may lead to unexpected results while Balanced Scorecard. First of all, the analysis will be based on wrong results and it will be impossible to trust such research. Moreover, if the results were accepted, the wrong conclusions would be made that may harm the business in general.
Therefore, it may be concluded that to see the whole picture of the business performance the Balanced Scorecard method should be implemented. Moreover, all four areas should be weighted equally, as it is inadmissible to pay more attention to one perspective while ignoring the other.
The financial perspective, customer perspective, internal business perspective and innovation and learning perspective must be carefully evaluated for the measuring of the organizational performance with the aim to improve the job effectiveness in future.
Kaplan, R. S. & Norton, D. P. (1992). The Balanced Scorecard: Measures That Drive Performance. Harvard Business review. 70(1): 172-180.
Schutta, J. T. (2006). Business performance through lean six sigma: linking the knowledge worker, the twelve pillars, and Baldrige. New York: American Society for Qualit.
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