The Balanced Scorecard is an excellent tool to communicate the company's vision to the entire organization
The Balanced Scorecard (BSC) was originally developed, by Professor Robert Kaplan from Harvard and consultant David Norton from the firm Nolan & Norton, as a business performance evaluation system that has become a fundamental part of the strategic management system of firms around the world.
Business executives have welcomed the BSC very well as it allows them to fulfill the vision of their firms and, in the same way, to achieve the objectives and goals outlined in their strategic plans. Although strategic planning is a widely used tool in companies, commonly the vision presented in business strategic plans is not translated into operational terms that make it known within the entire organization, some studies show that the vision is very little Known among middle management (40% know it) and employees (10%).
What is the BSC looking for?
The BSC fundamentally seeks to complement the indicators traditionally used to evaluate the performance of companies, combining financial and non-financial indicators, thus achieving a balance between the organization's day-to-day performance and the construction of a promising future, thus fulfilling the organizational mission.
Strategy Vs. Action. A good strategy is not enough: even the best formulated strategy fails if the organization cannot implement it
BSC is not just another fad, it is a tool that without putting the normal operations of the company in trouble, complements very well with what has already been built in the organization.
The four perspectives of the BSC
BSC combines financial and non-financial indicators in four different perspectives through which it is possible to observe the company as a whole. These perspectives are:
Most current measurement systems in companies are characterized by being almost or totally focused on financial indicators. When a company focuses primarily on financial indicators, in most cases, its corporate performance is reflected in the Financial Reports, which are based on past events, placing the emphasis on results and on the short term.
We could compare the financial reports in a company with the score of a soccer or baseball game, they simply give us a result, if we won or lost. We could also compare financial reports with operating an airplane with a single instrument (for example, altitude). No one is going to win a match just by looking at the scoreboard and neither will they successfully reach their destination with a single instrument from their control panel.
Integration, balancing and strategy
BSC is an integrated model because it uses the 4 essential perspectives to see a company or area of the company as a whole, after two 1-year investigations: one in the United States in 1990 and the other in Europe in 1996. He has been able to establish that these are the 4 basic perspectives with which it is possible to achieve the vision of a company and do it successfully.
It is balanced because it seeks the balance between financial and non-financial indicators, the short and long term, the results and process indicators and a balance between the environment and the interior of the firm, that is the key and novel concept of which is based on the name «Balanced Scorecard»: System of balanced indicators. The important thing here is that the management indicators of a company are balanced, that is to say, there are both financial and non-financial indicators, indicators of result and process, and so on.
It is a strategic tool because it is about having indicators that are related to each other and that count the company's strategy through a cause-effect link map (result indicators and driving indicators). Most companies have isolated indicators, defined independently by each area of the company, which always seek to strengthen their power, increasingly strengthening the islands or functional compartments (silos).
What companies require today are related (crossed) indicators built between all areas in consensus, always seeking to negotiate trade-offs, not allowing one area to stand out at the expense of another or other areas of the company.
