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The Balanced Scorecard (BSC) is a Strategic Performance Management tool that was developed by Robert Kaplan and David Norton in the early 1990s. Kaplan and Norton were both professors at the Harvard Business School and they developed the Balanced Scorecard as a way to help organizations better align their activities with their strategic goals and objectives. Learn more about Balanced Scorecard.
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Balanced Scorecard Best Practices
Balanced Scorecard Overview Integrating Digital Transformation with Balanced Scorecard Adapting Balanced Scorecard for Agile Organizations Enhancing Sustainability and Corporate Social Responsibility (CSR) in Balanced Scorecard Balanced Scorecard FAQs Recommended Documents Flevy Management Insights Case Studies
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The Balanced Scorecard (BSC) is a Strategic Performance Management tool that was developed by Robert Kaplan and David Norton in the early 1990s. Kaplan and Norton were both professors at the Harvard Business School and they developed the Balanced Scorecard as a way to help organizations better align their activities with their strategic goals and objectives.
The BSC is a semi-standard structured report, supported by proven design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.
The Balanced Scorecard is a Strategic Planning and Performance Management system that is used extensively in business, government, and nonprofit organizations to align business activities to the vision and strategy of the organization.
The Balanced Scorecard is based on the idea that organizations should measure their performance not just in terms of financial indicators (thus lagging indicators), but also in terms of a broader range of metrics that reflect the organization's strategic priorities. This includes metrics related to Customer Satisfaction, internal processes, learning & growth, and innovation & improvement. By measuring and managing this more comprehensive, more "balanced" set of metrics, organizations can better understand their progress towards achieving their strategic goals and make any necessary adjustments to their activities.
With the scorecard and metrics in place, a organization should adopt a continuous, iterative approach to managing its Strategy and BSC. Though this process of utilizing BSC as part of the Strategy Development and Strategy Deployment process, organizations can achieve such benefits as:
For effective implementation, take a look at these Balanced Scorecard best practices:
In the era of rapid technological advancement, Digital Transformation has become a cornerstone for competitive advantage. As organizations strive to integrate digital technologies into all areas of their business, the Balanced Scorecard (BSC) framework is evolving to accommodate these changes. This integration aims to ensure that digital initiatives are closely aligned with strategic objectives, thereby enhancing performance and value creation.
The challenge for many executives is how to effectively incorporate digital metrics into the BSC without compromising the simplicity and clarity that the framework provides. Traditional financial and customer satisfaction metrics are no longer sufficient to capture the full spectrum of digital performance. Instead, metrics related to digital customer engagement, digital product innovation, and cybersecurity resilience are becoming increasingly important. These metrics help organizations to measure their digital transformation progress and make informed strategic decisions.
To address these challenges, organizations should consider the following actionable recommendations:
Explore related management topics: Digital Transformation Operational Excellence Competitive Advantage Value Creation Cybersecurity
The Agile methodology, originally developed for software development, has been widely adopted across various functions within organizations seeking flexibility, speed, and customer centricity. This shift towards Agile has necessitated a reevaluation of traditional performance management tools, including the Balanced Scorecard (BSC). The static nature of traditional BSC frameworks can conflict with the dynamic and iterative approach of Agile organizations, where priorities and goals may shift rapidly in response to market changes or customer feedback.
To reconcile the BSC with Agile methodologies, executives must focus on flexibility and adaptability in their performance management practices. This means setting up BSC metrics that are not only aligned with strategic goals but are also responsive to the fast-paced changes characteristic of Agile environments. For instance, incorporating sprint-based performance metrics, customer feedback loops, and innovation rates can provide a more accurate reflection of performance in Agile settings.
Actionable recommendations for executives looking to adapt the BSC for Agile organizations include:
Explore related management topics: Continuous Improvement Agile KPI Feedback
As global awareness and concern for sustainability and Corporate Social Responsibility (CSR) grow, organizations are increasingly expected to demonstrate their commitment to social and environmental responsibility. This shift in stakeholder expectations has prompted a reevaluation of traditional performance management frameworks, including the Balanced Scorecard (BSC), to better reflect an organization's impact on its community and the environment.
Incorporating sustainability and CSR metrics into the BSC enables organizations to track and manage their performance in these critical areas. However, the challenge lies in identifying appropriate metrics that are both meaningful and measurable. Metrics such as carbon footprint reduction, sustainable supply chain practices, and community engagement initiatives are becoming increasingly relevant. These metrics not only help organizations to monitor their progress towards sustainability and CSR goals but also contribute to long-term value creation by building trust with stakeholders and mitigating risks associated with environmental and social issues.
To effectively enhance sustainability and CSR in the BSC, organizations should consider the following recommendations:
Explore related management topics: Supply Chain Corporate Social Responsibility Sustainability
Here are our top-ranked questions that relate to Balanced Scorecard.
Balanced Scorecard Implementation for Professional Services Firm
Scenario: A professional services firm specializing in financial advisory has noted misalignment between its strategic objectives and performance management systems.
Strategic Implementation of Balanced Scorecard for a Global Pharmaceutical Company
Scenario: A multinational pharmaceutical firm is grappling with aligning its various operational and strategic initiatives from diverse internal units and geographical locations.
Strategic Balanced Scorecard Reform in Automotive Sector
Scenario: A firm in the automotive industry is struggling to align its performance management systems with its strategic objectives.
Implementation of a Balanced Scorecard for a Technology Startup
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Balanced Scorecard Redesign for Aerospace Leader in North America
Scenario: The organization, a prominent player in the North American aerospace sector, is grappling with the complexities of aligning its strategic objectives with operational outcomes.
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Scenario: A leading firm in the maritime sector is struggling to align its operational activities with its strategic objectives.
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