Kaplan and Norton 1992, a structured method of selecting indicators, granting versatility within the organization's management.
This tool integrates both the strategic management aspect and performance evaluation, based on four basic perspectives (multiple dimensions that are proposed to analyze the performance of the Organization).
balanced-scorecard-presentationThese perspectives are:
Financial: growth strategy, profitability and risk seen from the authority's perspective.
Customer: the strategy to create value and differentiation.
Internal Processes: the strategic priorities of different processes that create satisfaction for customers and shareholders.
Learning and Growth: the priorities to create a climate of support for change, innovation and growth of the organization.
Ensures compliance with the vision of the organization.
It becomes a powerful simulation tool for modeling the strategy.
It is possible to define the hypotheses on which the strategy is based and to verify them by means of a map of cause-effect links between the strategic objectives and the relationship between the results indicators and the guides or drivers of the result.
The Balanced Scorecard makes strategic learning possible; Once the hypotheses of the strategies are tested, it is easy to know how to lead the organization to achieve its vision, it becomes a dynamic process of permanent feedback and if, for example, any external factor changes, it will allow it to be proactive and quickly act to adapt to new circumstances.
FEATURES
INTEGRAL EXPLANATION
Part of a holistic approach. Use multiple perspectives to view the organization or processes as a whole
BALANCED
It guarantees the balance of the strategy, as well as its financial and non-financial management indicators
STRATEGIC
It relates the strategic objectives to each other and expresses them in a map of cause-effect links.
SIMPLE EXPLANATION
The complexity of the organization and its strategy is simplified by presenting it in a single model. It has support tools that allow it to develop management indicators that facilitate translating the organization's vision and strategy
CONCRETE
It reflects in specific and related indicators the strategic objectives and the inducers of action, which clarifies the strategy.
CAUSAL
The strategic map establishes the cause-effect relationship, the inducers of action and the indicators of results.
The Balanced Scorecard states that the unified achievement of all these objectives logically goes through continuous TRAINING-LEARNING and GROWTH, being one of the basic pillars of this tool.
There is talk of a Strategic Management System, even more so of "Strategic Implementation" useful for managing the strategy itself when the measurement approach of the Balanced Scorecard is used to develop important management processes such as:
- Translation and / or transformation of vision and strategy. Communication and linkage with strategic objectives and indicators. Planning, setting of objectives and alignment of strategic initiatives. Increased feedback and strategic training.
Elements that would ensure success in the application of the WCC. The common elements are:
- The review of the strategic plan The study of processes The design of the strategic map The determination and design of indicators The formulation of strategic projects, among others
The strategic map is the most important contribution of the Balanced Scorecard because it helps to assess the importance of each strategic objective, since it is linked to the perspectives of the Balanced Scorecard.
These are ordered following the cause-effect criteria (Ishikawa diagram) and represent the key success factors for the entity.
The power of the Scorecard appears when it is transformed from a system of indicators into a strategic management system:
- It is possible to unite in a single management report many apparently different elements that make up an organization: how to focus on the customer, how to reduce response time, how to improve quality, emphasize teamwork, reduce the launch time of new products and manage the long term. The system is a protection against under-optimization, by forcing managers to consider all important operational measures as a whole, it allows to know if an improvement can be achieved in one area, risking another. The measures of customer satisfaction, business performance, innovation and improvement derive from the particular world view of the organization and its perspective of the key success factors.
A good Strategic Management System must incorporate the following elements:
- Mission, vision and values Perspectives, strategic maps and objectives Indicators and their goals Strategic initiatives Resources Responsible Subjective evaluation
Conditions influencing management control
- The environment: this can be stable or dynamic, cyclically variable or completely atypical. The Entity's objectives: whether they are profitability, growth, social and environmental. The structure of the organization: depending on whether it is functional or divisional, implies establishing variables different, and therefore also different control objectives and systems.
Conditions influencing management control
- The size of the organization: this condition is related to centralization, the larger the company it is necessary to decentralize it, because it affects decision-making due to the large amount of information that is handled. Administrative culture: human relations are very important, and staff working in the company should be encouraged and motivated.
In a very generic way, the Dashboard must be made up of at least four distinct parts:
- The most outstanding variables to control in each situation and level of responsibility The indicators with which we can quantify each of the variables The deviations produced, whatever the reason that causes them The solutions to be taken in each case, as far as possible
It is important to keep in mind that the content of any Dashboard is not limited to numbers or numbers, it must be a very specific content for each department or for each person in charge.
Likewise, it must be borne in mind that the information that is handled in a certain Dashboard may be valid for another.
The Dashboard uses simple and bulky information.
The usual accounting disciplines and tools require a greater dedication of time for analysis and realization, and when it comes to making decisions, they will always need other aspects that in principle were not part of their framework of action.
