Balanced Scorecard
Description

The balanced scorecard (BSC) is a strategic planning and management instrument that is used to reconcile existing activities with the visions and strategic goals of an organization, improve information exchange as well as monitor the performance of the organization. The BSC is thus a performance measurement and evaluation tool aligned to the corporate strategy, which, besides financial key figures (e.g. profitability), also takes “soft” factors (social and environmental variables, image, knowledge, etc) into account that can, in future, influence the financial key figures.

This type of performance measurement usually happens in private companies (!) – from the following four perspectives:

The financial perspective in which profitability, sales and sales growth, capital ratios etc are considered.

The customer perspective, which includes key figures that describe the competitive situation such as customer satisfaction, market share, etc.

The internal process perspective that identifies the processes relevant to success (for reaching customer and financial targets) and should secure the efficiency of the organization. Key figures such as labor efficiency, process costs or even throughput times can be relevant here.

The employee or development perspective in which the required capabilities and core competencies are reviewed in order to reach the goals (which are defined by the other perspectives). Important key figures here include employee satisfaction and absences.

The typical goal of private companies is to maximize profits. The financial perspective is often driven into the background in public administrations and non-profit organizations and represents “only” one of several target dimensions.  The fulfillment of the specific, statutory or political mandate (or the target dimension of “task completion”) is focused on instead. In addition, the orientation to citizens or addressees (or the target dimension “customer satisfaction”), employee orientation (or the target dimension “employee satisfaction”), as well as the efficient and economic use of resources (or the target dimension “economy”), are particularly relevant for public administrations and non-profit organizations.

A successful BSC is based on meaningful key figures, which are continuously recorded and updated. For this reason we have the early indicators, which can indicate in advance how an organization will develop in the future and the late indicators, which represent the past situation and thus provide information as to whether the organization has reached the goals it has set.