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There are many tools available to businesses to help them manage the performance of their business. One very popular tool is the balanced scorecard.

Balanced Scorecard

The balanced scorecard is a strategic tool used to coordinate the various operational areas of your business to achieve its mission and goals.  It uses both non-financial and financial measures to give managers a broad view of business performance.

The advantages of developing a balanced scorecard for your business include:

• Increased focus on the implementation of a long-term business strategy.
• Improves overall business performance by considering the interaction of all business operational areas.
• Improves communication between all operational areas of your business.
• Prioritises business objectives and initiatives.

Balanced scorecard perspectives

The balanced scorecard has four organisational perspectives:

• Financial: this focuses on the financial health of the business such as the ability to collect accounts receivables when they fall due and pay debtors on time.

• Customers: defines goals related to the value of the business to its customers such as customer satisfaction and market share.

• Internal processes: this focuses on the key business activities that add value to the business and its products. Examples include increasing the number of new products the business sells and improving production process quality.

• Learning and growth: this defines the goals for the intangible assets of the organisation that complement internal business processes, for example, maintaining employee skills.

To assist in writing and coordinating these perspectives it may be helpful to first determine the business mission, its goals and its strategies.

Each balanced scorecard perspective consists of defining:

• Business objectives: these are the goals that need to be worked towards.

• Measures: for each business objective there needs to be a measure. These are the key performance indicators used to determine how the achievement of the goal should be measured.

• Targets: for each measure there needs to be a target. This is a critical success factor to help management determine when a business goal has been achieved.

• Initiatives: are strategies to achieve each target