The Balanced Scorecard (BSC / Balanced Scorecard) is a tool that allows linking strategies and key objectives with performance and results through four critical areas in any company: financial performance, knowledge of the client, internal business processes and learning and growth.
Below Robert Kaplan, one of its creators, shows us what the Balanced Scorecard is and what it is for:
Kaplan and Norton (pp. 38 and 39) explain that it is a structure created to integrate indicators derived from the strategy. Although it continues to retain the financial indicators of past performance, the Balanced Scorecard introduces the drivers of future financial performance. Drivers, which include customers, processes, and learning and growth perspectives, derive from an explicit and rigorous translation of the organization's strategy into intangible goals and indicators.
However, it is more than just a new measurement system. Innovative companies use the Balanced Scorecard as the central and organizational framework and structure for their processes. Companies can develop a Balanced Scorecard, with quite limited objectives: to clarify, obtain consensus and focus on their strategy, and then communicate that strategy to the entire organization. However, the true power of the Balanced Scorecard appears when it is transformed from a system of indicators into a management system. As more and more companies work with the Balanced Scorecard, they realize that it can be used to:
- Clarify the strategy and build consensus on it Communicate the strategy to the entire organization Align personal and departmental goals with the strategy Link strategic goals with long-term goals and annual budgets Identify and align strategic initiatives Conduct regular and systematic strategic reviews Obtain feedback to learn about the strategy and improve it.
The balanced scorecard fills the gap that exists in most management systems: the lack of a systematic process to implement the strategy and obtain feedback on it. The management processes around the Scorecard allow the organization to align and focus on the implementation of the long-term strategy. Used in this way, the Balanced Scorecard becomes the foundation for managing organizations in the information age.
The following figure presents the four perspectives of the Balanced Scorecard, it can be seen that it is a system that considers all the strategic processes of the organization:
Guerrero (p.179) interprets it as a tool to mobilize people towards the full fulfillment of the mission, channeling the energies, skills and specific knowledge of the people in the organization towards the achievement of long-term strategic goals. It allows both guiding current performance and targeting future performance. It uses measures in four categories - financial performance, customer insight, internal business processes, and learning and growth - to align individual, organizational, and cross-departmental initiatives and identifies entirely new processes to meet customer and stakeholder objectives. It is a robust learning system to test, get feedback, and update the organization's strategy.It provides the management system for companies to invest in the long term - in customers, employees, development of new products and systems - rather than in managing the bottom line to pump short-term profits. It changes the way a business is measured and managed.
Correa, Van Hoof and Núñez (p.30) see it as a facilitating element of the implementation of business strategies and allows to make evident the causal relationships between financial and non-financial activities, and identify the impact of soft activities (those that do not have direct relationship with financial results) in the achievement of strategic objectives. For this reason, it is a useful tool to integrate social and environmental issues in the company and show the causal relationships between social, environmental and financial performance.
Bibliography
- Correa, Maria Emilia; Van Hoof, Bernhardus and Núñez, Georgina. Change and Opportunity: Corporate Social Responsibility as a Source of Competitiveness in Small and Medium Enterprises in Latin America and the Caribbean. United Nations Publications, 2010 Guerrero Cuadrado, Manuel. Total quality management in Spanish city councils: models and experiences, INAP, 2011. Kaplan, Robert S. and Norton, David P. The Balanced Scorecard, Gestión 2000, 2009.
