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What is a Balanced Scorecard?

The balanced scorecard, abbreviated: BSC, is an English term for a balanced report sheet. It is primarily a concept for measuring and documenting the activities of a company with regard to the company's vision and strategy and is thus an instrument of strategic management.

The model is described as balanced because it combines different perspectives: the financial perspective, internal business processes, customer perspective, learning and development. These elements help to make business decisions. External and internal influencing factors, past and future oriented, as well as soft and hard factors (e.g. quantitative versus qualitative indicators) can be considered evenly by this multi-layered representation. In this way, they ensure a fair inclusion of the entire value chain. In each of these areas, the relevant parameters for the strategy and vision are examined and their performance is checked. Each individual area is subdivided into goals, key figures and optimization measures.

The financial perspective questions whether the strategy implementation promises a financial advantage for the company. In particular, the economic value added (EVA) is an important indicator for improving a company's return on equity. The financial indicators provide the other perspectives with a foundation of quantitative, internal performance indicators. They are oriented towards the past, since they must be based on already existing values, such as the last annual turnover of a department.

Through the internal business processes, the focus is placed on key figures for the complete value chain of a company. Accordingly, these are also internal parameters, which, however, do not necessarily have to be oriented towards the past in comparison to the financial perspective. Examples of key figures include manufacturing and procurement costs, product development time, but also the success of a marketing activity (e.g. number of company magazines circulating externally) and the response time for customer complaints.

The customer perspective connects the company with the customers. In this way, the evaluation sheet is supplemented by an external influencing factor - the customer. This raises the question of which customer and market segments should be regarded as the target of the company's activities.

The last perspective - learning and development - is strongly future-oriented. All measures and investments in the future of the company are therefore considered. This includes above all the further development of employees.

The balanced scorecard can now be created in four steps:

  1. development of the strategy and vision
  2. strategic reorientation of the company and communication of objectives
  3. create targets and make them tangible through intermediate targets
  4. building feedback and learning processes for iterative improvement

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