A Summary of the Balanced Scorecard

The article Using the Balanced Scorecard as a Strategic Management System

offers an insight into how the use of the balanced scorecard can be used to strategically align the entire operations of a business. This alignment takes a strategic augmentation since it considers an organization’s financial measures and plans alongside measures that consider the organization’s relationship with its customers, key internal controls and thereof providing an avenue for learning and growth.

The above leads to an organization shifting its focus from short-term goals and focusing on creating a new strategy that links its short-term and long-term goals. To achieve this, the article indicates that an organization has to: translate its vision into operational measures, communicate and link the organization’s strategy throughout the organization, link the organization’s short-term financial budgets to its long-term strategies, and offering an avenue where feedback and review of performances are employed as tools towards improvement.

The balanced scorecard offers a framework that an organization needs to follow over a period of time. As such, the organization’s management and/or owners need to clarify the vision of the organization into a strategy that will be easily understood and communicated to the entire organization as a first step. This will be followed by ensuring that the ‘new’ strategy is communicated from top management level to unit managers, supervisors and other middle management level who will be educated on not only the new strategy but the framework that will be used to ensure the organization meets its long-term strategy. In addition, the framework will be developed specifically for the different business units where each unit will be required to identify the units’ strategy, and thus have its own scorecard.

As a follow-up on the above, the organization is required to conduct business planning as a means of eliminating programs, units, and investments that do not add value to the strategy of the organization as a fourth step. Finally, the organization’s top-level management is expected to review the scorecards of each business unit using personal scorecards which provide evidence on how the units are performing as concerns the organizational strategy.

From the above summary, three issues are pertinent in that the balanced scorecard should be viewed as a framework that seeks to create an avenue where value is created for investors by ensuring that its operations are centered on achieving its strategy. In addition, the image of the organization is controlled not only to its employees but to its suppliers and customers by ensuring that communication creates a unified objective for all who interact with the company as well as ensuring that the organization continues to improve its innovations and internal processes.

The above arises from the fact that without a strategy, a company will mostly seek to achieve only short-term goals and objectives. As such, complacency may arise from the top to lower levels in different units of the organization, and thus no growth in the operations of the business. Further, by ensuring communication and links exist as concern the organizational strategy; an organization may be able to build an image that its employees, customers, and suppliers will identify as unique to a specific organization. Finally, the aspect of business planning allows for both innovation and internal processes of the organization to be dynamic and as such, allowing for employees inputs to be included in the day-day operations. This will create an avenue where employee morale is high which will lead to increased customer satisfaction.

Reference

Kaplan, R. S., & Norton, D. P. (1996, January-February 1996). Using the Balanced Scorecard as a Strategic Management System. Harvard Business Review, pp. 49-57.