BalanceScorecard

The long-term success of any organization is determined by the capabilities and the competencies it has developed. One of the tools for organizational Appraisal that is gaining immense popularity is the Balanced Scorecard, developed by Robert S Kaplan and David P Norton in 1992. This innovative tool is unique in two ways compared to the traditional performance measurement tools. They are: • It considers the financial indices as well the non-financial ones in determining the corporate performance level • It is not just a performance measurement tool but is also a performance management system. In the words of the proponents of this tool “the Balanced Scorecard retains traditional measures. But, financial measures tell the story of past events, an adequate story for industrial age companies for which investment in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technologies and innovation.” These words give the idea behind the development of this framework. Today’s businesses require a better understanding of their customers ( both existing and potential ) and their needs, better streamlined processes and highly skilled people for ensuring future survival and sustainable growth. This shows that the focus of action has rightly considered the non-financial aspects apart from the financial indices. This tool is the end result of sustained efforts to find an ideal tool to measure performance and provide a link to strategy and action. The decisions about the future actions form the key to success of any enterprise in this fast-changing business environment. The aim of the Balanced Scorecard is to direct, help manage and change in support of the longer-term strategy in order to manage performance. The Scorecard reflects what the company and the strategies are all about. It acts as a catalyst for bringing in the ‘change’ element within the organization. This tool is a comprehensive framework which considers the following perspectives and tries to get answers to the following questions – 1. Financial Perspective - How do we look at shareholders? 2. Customer Perspective - How should we appear to our customers? 3. Internal Business Processes Perspective - What must we excel at? 4. Learning and Growth Perspective - Can we continue to improve and create value? Hence, from the above lines we can say that this tool has considered not only the financial results to be important but also those factors which actually drive an organization towards future successes as mentioned earlier. The tool has given stress on the other areas which are required to ‘balance’ the financial perspective in order to get a total view about the organizational performance and improve the same.