What is the balanced scorecard
1. term: The balanced scorecard is a link between strategy development and implementation. In their concept, the traditional financial key figures are supplemented by a customer, an internal process and a learning and development perspective.
2. origin: Against the background of increasingly louder criticism of the one-dimensionality of financial performance indicator systems in the USA, in the early 1990s, under the direction of R.S. Kaplan and D.P. Norton carried out a research project with twelve US companies. The aim was to adapt the existing key figure systems to the increased requirements of the company.
2. Different perspectives: In the concept of the balanced scorecard, the traditional financial key figures are supplemented by a customer, an internal process, and a learning and development perspective (see figure “Balanced Scorecard - Perspectives”); Leading indicators or performance drivers thus come alongside key earnings figures:
The financial perspective shows whether the implementation of the strategy contributes to improving results. Key figures from the financial perspective are e.g. the achieved return on equity or economic value added. The key financial figures play a double role. For one, they define the financial performance expected from a strategy. On the other hand, they act as final goals for the other perspectives of the balanced scorecard. Key figures from the customer, internal process, and learning and growth perspective should generally be linked to the financial goals via cause / effect relationships.
The Customer perspective reflects the company's strategic goals in relation to the customer and market segments in which it wishes to compete. For the identified customer and market segments, key figures, targets and measures are to be developed.
Task of internal process perspective is to map those processes that are primarily important to achieve the goals of the financial perspective and the customer perspective. A representation of the entire value chain is helpful here.
The key figures of the Learning and growth perspective describe the infrastructure that is necessary to achieve the goals of the first three perspectives. Kaplan and Norton particularly emphasize the need to invest in the future. A distinction is made between three main categories: qualification of employees, performance of the information system as well as motivation and goal orientation of employees.
The balanced scorecard thus presents itself as a structured, balanced collection of key figures that are primarily to be understood diagnostically.
3. Balanced scorecard as a management system: According to Kaplan and Norton, the balanced scorecard is not just a new system of indicators; as a management system, it should rather be the link between the development of a strategy and its implementation. The authors currently state considerable deficits in this area: visions and strategies cannot be implemented; There is no link between the strategy and the objectives of the departments, teams and employees; the strategy is not linked to resource allocation; "Tactical" prevails instead of "strategic" feedback. All obstacles should be overcome by using the balanced scorecard:
The development process of a balanced scorecard in upper management should lead to clarification and consensus with regard to the strategic goals.
The balanced scorecard is intended to contribute to the uniform targeting of the actors in the company through three mechanisms: communication and training programs, linking the balanced scorecard with goals for teams and individual actors as well as linking with incentive systems.
In addition to human resources, financial and material resources must also be aligned with the corporate strategy. Four steps should help: the formulation of ambitious goals, the identification and focusing of strategic initiatives, the identification of critical company-wide strategies and their connection with the annual resource allocation and budgeting.
According to Kaplan and Norton, the traditionally hierarchical process for strategy formulation and implementation is characterized by an inadequate feedback process. The feedback takes place only on the operational level as "single-loop learning". With the help of the balanced scorecard, on the other hand, the feedback should be related to the strategy and promote a strategic learning process characterized by “double-loop learning”.
According to Kaplan and Norton, the balanced scorecard should support the strategic management process in the company or serve as a framework for this process. Your success in corporate practice shows both the high need to supplement monetary control parameters and the recognized urgency to better interlink strategies with operational business. For the first aspect, the proposed four perspectives of the balanced scorecard form a viable approach, as they ultimately map the entire value chain. For the aspect of strategy implementation, the balanced scorecard competes with other concepts (e.g. implementation of a strategic intent, concentration on a core skill or Hoshin planning).
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