Dear Wowow, I would like to add some FUNDAMENTALS of BALANCE SCORECARD (BSC).
The BALANCED SCORECARD method of KAPLAN and NORTON is a STRATEGIC APPROACH, and PERFORMANCE MANAGEMENT SYSTEM, that enables organizations to translate a company's VISION and STRATEGY into implementation. It usually works from 4 perspectives:
1. FINANCIAL PERSPECTIVE.
2. CUSTOMER PERSPECTIVE.
3. BUSINESS PROCESS PERSPECTIVE.
4. LEARNING AND GROWTH PERSPECTIVE.
This allows the MONITORING of present PERFORMANCE, but the method also tries to capture information about how well the organization is POSITIONED to PERFORM in the FUTURE.
For each PERSPECTIVE of the BALANCED SCORECARD 4 things are MONITORED (scored):
1. OBJECTIVES: major objectives to be achieved, for example, profitable growth.
2. MEASURES: the OBSERVABLE parameters that will be used to measure PROGRESS toward reaching the objective. For example, the objective of profitable growth might be measured by growth in net margin.
3. TARGETS: the specific target VALUES for the measures, for example, 7% annual decline in manufacturing disruptions.
4. INITIATIVES: PROJECTS or PROGRAMS to be initiated in order to meet the objective.
CAUTIONARY NOTE on using the BALANCED SCORECARD (BSC):
You tend to get what you MEASURE. People will work to ACHIEVE the EXPLICIT targets which are set. For example, emphasizing traditional financial measures may encourage short-term thinking. The CORE GROUP THEORY by Kleiner provides further CLUES on the mechanisms behind this. Kaplan and Norton recognize this, and urge for a more balanced set of measurements. But still, people will work to achieve their scorecard goals, and may IGNORE important things which have no place on their scorecard.
EVOLUTION of the BALANCED SCORECARD (BSC):
In 2002, COBBOLD and LAWRIE developed a classification of BALANCED SCORECARD designs based upon the INTENDED method of use within an organization. They describe how the BALANCED SCORECARD can be used to support 3 DISTINCT management activities, the first 2 being MANAGEMENT CONTROL and STRATEGIC CONTROL. They assert that due to DIFFERENCES in the PERFORMANCE data requirements of these applications, PLANNED use should influence the type of BSC design adopted. Later that year the same authors reviewed the EVOLUTION of the BALANCED SCORECARD as shown through the use of STRATEGY MAPS as a STRATEGIC MANAGEMENT tool, recognizing 3 DISTINCT generations of BALANCED SCORECARD design.
[SOURCE: Book: Robert S. Kaplan, David P. Norton - The BSC: Translating Strategy into Action]
Regards,
Asif