ANSWER

Balanced Scorecard is a strategic planning and management system that was formalized in the 1990s by Dr. Robert Kaplan (of the Harvard Business School) and Dr. David Nortan.  The goal of Balanced Scorecard is to implement a performance measurement framework which provides strategic non-financial performance measures that when coupled with traditional financial metrics provides a more “balanced” view of the organization.  Using Balanced Scorecard a company can align daily business activities to the vision and strategy of the organization effectively transforming their strategic plan from a passive document into a plan which provides clear and measurable goals for all areas of the organization.

As described by Kaplan and Nortan, Balanced Scorecard retains the traditional financial measures, but financial measures reflect past events.  This alone is inadequate for guiding and evaluating a company’s future direction.  A company’s future success is driven through customer relationships, supplier relationships, employee development, process improvement, technology improvement, and innovation.

To improve in these areas Balanced Scorecard organizes the development of metrics and the tracking of progress against these metrics into four perspectives.

• The Learning and Growth Perspective
• The Business Process Perspective
• The Customer Perspective
• The Financial Perspective

The Learning and Growth Perspective focuses on the development of metrics around training of employees and education of the organization as a whole.  These metrics should be structured in a way to guide managers to focus their training funds where they will help most.  They should also drive other methods of learning such as mentoring and ensuring that knowledge can easily be communicated and shared throughout the organization.

The Business Process Perspective focuses on the development of metrics that allow managers to know how well the internal business processes are running and how well they meet the needs of the organization’s customers.

The Customer Perspective focuses on the development of metrics around customer satisfaction.  This perspective cannot be underestimated as it has been found that customer satisfaction is a leading indicator of the future performance of the company.  Over time, dissatisfied customers will seek out other organizations that can meet their needs better.

The Financial Perspective focuses on traditional financial metrics.  Companies often already place a heavy emphasis on financials which can lead to an unbalanced view of a situation.  While this perspective is very important, Balanced Scorecard aims to balance this perspective by considering it in conjunction with the metrics and data of the other perspectives.