Balanced scorecard

Definition

The balanced scorecard is a strategic planning and management system that organizations use to communicate their goals, track their performance, and align their activities with their strategy. It provides a framework for translating an organization's vision and strategy into measurable objectives across four perspectives: financial, customer, internal processes, and learning and growth. This approach helps organizations ensure that they are not only focused on short-term financial outcomes but also on long-term value creation.

5 Must Know Facts For Your Next Test

1. The balanced scorecard was developed by Robert S. Kaplan and David P. Norton in the early 1990s as a way to provide a more comprehensive view of organizational performance beyond just financial metrics.
2. It encourages organizations to consider how their internal processes, customer satisfaction, and employee learning contribute to achieving financial goals.
3. Using a balanced scorecard can help identify areas for continuous improvement by providing insights into performance gaps across different perspectives.
4. The implementation of a balanced scorecard can lead to better strategic alignment, ensuring that all departments work towards common goals.
5. Organizations that utilize a balanced scorecard often experience improved decision-making and enhanced communication around strategic priorities.

Review Questions

• How does the balanced scorecard promote continuous improvement within organizations?
  • The balanced scorecard promotes continuous improvement by providing a structured way to measure performance across multiple perspectives, not just financial results. By evaluating customer satisfaction, internal processes, and employee development alongside financial metrics, organizations can identify specific areas needing enhancement. This comprehensive view encourages teams to develop targeted strategies for improvement based on real data, fostering a culture of ongoing development.
• In what ways can the balanced scorecard facilitate effective portfolio selection and prioritization in an organization?
  • The balanced scorecard aids in effective portfolio selection and prioritization by linking projects and initiatives to the strategic objectives of the organization. By assessing potential projects against the four perspectives of the balanced scorecard—financial, customer, internal processes, and learning and growth—decision-makers can prioritize initiatives that align most closely with their strategic goals. This alignment ensures that resources are allocated efficiently and effectively to projects that will drive the organization's success.
• Evaluate how the balanced scorecard aligns project management activities with overall organizational strategy and objectives.
  • The balanced scorecard aligns project management activities with organizational strategy by providing a clear framework for measuring project success based on strategic objectives. By establishing specific metrics related to financial performance, customer impact, internal processes, and learning opportunities, project managers can ensure their initiatives contribute meaningfully to broader organizational goals. This alignment fosters accountability among teams and ensures that every project undertaken is directly connected to advancing the company's mission and vision.

Related terms

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

Strategic Objectives: Specific, measurable goals that an organization aims to achieve within a defined timeframe as part of its overall strategy.

Performance Measurement: The process of evaluating the efficiency and effectiveness of actions and strategies to ensure alignment with organizational goals.