BALANCED SCORECARD
What is it?
The Balanced Scorecard is the evolution of the principle that surged on the industrial era “you get what you measure” or “to measure is to control and evolve”. Companies used these statements to rely on metrics to discover what could be improved. However, the focus of the metrics was only on the financial performance of the enterprise. They used “return-on-investment” or “earnings-per-share” to define their next actions to support the business and make sure it survives. This is not wrong, and could have functioned some years ago but now companies have other technological advances, skills they try to master and even different commitments than only to produce more income with every quarter. Also, financial metrics give a look to the past, it is difficult to take them as a guide for the future that can help correct actions immediately. That is why the Balanced Scorecard was created, complementing the financial metrics with operational, internal processes and improvement activities measures which in the end will impact the first mentioned (Kaplan, 1992).
It is ideal because it resumes the most important metrics and presents them in a single document, which helps managers narrow down the normal overload of measures present within an organization. It also connects the different objectives the company has that may not be easy to relate: customer satisfaction, improving quality, improving the processes while cutting down costs, launching new products. It also contains a system feature: the manager can directly see how an action taken impacts all of the areas related in the scorecard. The visibility and transparency is better and prevents from implementing one sided solutions. Finally, it takes your goals and turns them into actions that can make them happen, making you able to consolidate a strategic plan (Smith, 2020).
As examples, Veolia Water implemented the balanced scorecard with the help of the Balanced Scorecard Institute and as a result was able to transform organizational strategy to measurements all employees could understand. They boosted organizational performance, broke down communication barriers among business units and departments since now everyone was working towards common goals and prioritized money and time effectively. They also created an e-course that familiarized employees with the balanced scorecard and showed them how their personal goals aligned with it. Ultimately, it helped Veolia to develop a framework for measuring the progress of its geographically diverse facilities while helping to maximize resources (VeoliaWater, nd). AT&T Canada also used the Balanced Scorecard, but to reduce losses and find financial stability. They aligned their objectives and moved from a system in which the goals were inherent to the owner to a clear consensus of strategy between all shareholders. These allowed for the workforce to concentrate on providing high-quality standardized services and the company could shift from survival goals to sustained growth.
REFERENCES
Kaplan, R. (1992) Harvard Business Review: “The balanced scorecard-Measures that drive perfection”. Last retrieved on october 13th from: https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2
Smith, r. (nd) ClearPoint Strategy: “20 companies using the balanced scorecard and why”. Last retrieved on october 13th from: https://www.clearpointstrategy.com/companies-using-the-balanced-scorecard/
Veolia Water (nd) “Veolia Water Uses Balanced Scorecard to Drive North American Strategy.” Las retrieved on october 13th from: https://balancedscorecard.org/wp-content/uploads/2019/08/BSI-case-study-veolia-water-na.pdf
Balanced Scorecard Collaborative (nd) “AT&T Canada Case Study”. Last retrieved on october 13th from: AT&T.