Balanced scorecard

Definition

A balanced scorecard is a strategic planning and management tool that organizations use to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals. It incorporates financial and non-financial performance indicators, providing a more comprehensive view of business success by considering factors like customer satisfaction, internal processes, and learning and growth. This approach supports the evolution of human resource management by integrating key performance indicators with overall strategic objectives.

5 Must Know Facts For Your Next Test

1. The balanced scorecard framework was introduced by Robert Kaplan and David Norton in the early 1990s as a way to help organizations better measure their performance.
2. It emphasizes a balance between short-term financial measures and long-term strategic objectives, allowing companies to see how daily operations contribute to overall goals.
3. By using multiple perspectives—financial, customer, internal processes, and learning & growth—organizations can identify strengths and weaknesses across different areas.
4. The balanced scorecard helps HR departments align their talent management practices with strategic objectives, ensuring that employee performance supports organizational goals.
5. Implementing a balanced scorecard can lead to improved communication and understanding of organizational objectives among all employees, fostering a more collaborative work environment.

Review Questions

• How does the balanced scorecard enhance the alignment of human resource management with an organization's strategic goals?
  • The balanced scorecard enhances alignment by integrating key performance indicators for HR practices into the broader strategic framework of the organization. It ensures that HR initiatives, such as talent acquisition and employee development, directly support the organization's overall objectives. By measuring performance through multiple perspectives, HR can identify areas where improvements are needed to achieve strategic success.
• Discuss how the balanced scorecard can be utilized to set performance goals and standards within an organization.
  • The balanced scorecard can be utilized to set performance goals by providing a structured approach to define objectives across four key perspectives: financial, customer, internal processes, and learning & growth. Each perspective allows organizations to establish specific performance standards that align with their strategic vision. By setting measurable targets within these areas, companies can evaluate progress and make informed adjustments to strategies as needed.
• Evaluate the impact of implementing a balanced scorecard on organizational performance and employee engagement.
  • Implementing a balanced scorecard can significantly impact organizational performance by providing a holistic view of success through various performance metrics. It encourages employees at all levels to engage with organizational goals, as they can see how their individual contributions align with broader objectives. This alignment fosters a sense of purpose and ownership among employees, ultimately leading to higher levels of engagement, job satisfaction, and improved overall performance across the organization.

Related terms

Key Performance Indicators (KPIs): Specific metrics used to evaluate the success of an organization in achieving its objectives.

Strategic Planning: The process of defining an organization's strategy or direction and making decisions on allocating resources to pursue this strategy.

Performance Management: A systematic process of improving organizational performance by developing the performance of individuals and teams.