THE BALANCED SCORECARD: CONCEPT AND PHASES
The balanced scorecard was released in the number of January – February 1992 issue of Harvard Business Review by authors Robert Kaplan and David Norton. It is a system of supervision and corporate control, whose main task is to monitor compliance with the objectives through performance indicators and help improve the performance of the company. It is also a tool that facilitates the implementation of the strategy adopted by the organization.
The balanced scorecard is business management through four perspectives: financial, customer, internal processes, innovation and learning.
Addressing the financial needs is basic for the company. It is vital to have cash flow to sustain the company or cover the interest on their debts or seek a benefit for owners and investors.
Customers are the protagonists of the film, without them there would be no business. You need to know your needs and understand why they choose our company and not the other competitors.
Internal processes :
You have to be excellent in the production of products or services. The internal processes of the company directly affect both meeting the needs of our customers and achieving financial goals.
Innovation and learning:
Learning innovation and enable growth and improving the company’s long term. We know that markets change and with them our competitors and customers. Therefore we must develop capabilities and processes that need in the future.
The previous four prospects should not be viewed in isolation but as a whole to form the basic pillars of the balanced scorecard. The financial results can only be achieved if customers are satisfied, satisfied customers are achieved only if internal processes generate them and add value and only improvements in internal processes will be achieved through innovation and learning.
PHASES TO DEVELOP THE BALANCED SCORECARD FOR COMPANY:
Definition mission and vision:
Before drawing up the scorecard we define the mission and vision of the company. You need to know who we are and who we want to be in the future. To define the mission we can answer questions like: what do we do ?, What is our business ?, what do we do? to define the vision respond to questions like: what I want to accomplish? or where I want to be in the future?
external and internal analysis:
This phase is to conduct a comprehensive study on the current internal and external situation of the company. The tool SWOT analysis (weaknesses, threats, strengths and opportunities) is perfect for this.
Setting strategic objectives:
After performing the analysis in the previous stage we are able to establish the strategic objectives of the four perspectives of the balanced scorecard (financial, customer, internal processes, innovation and learning). Establish goals correctly is key to the scorecard that focused on the implementation of the strategy in the company. Examples of objectives of the four perspectives are:
* Finance: ensuring liquidity, increased cash flow, reduce external financing, etc.
* Customers: improve customer service, increase customer satisfaction, increase market share, improve return policy, etc.
* Internal processes: improve cooperation with suppliers, reduce storage costs, reduce process times, reduce manufacturing cycles, etc.
* Innovation and learning: improving recruitment processes, promote innovation, increase employee satisfaction, increase training, etc.
Determination of indicators:
To implement the strategy is necessary to transform the objectives in several indicators. Management indicators used to measure compliance with the strategic objectives. A balanced scorecard should not exceed 2-3 indicators for each objective, as an excessive number of indicators for each target can actually damage the strategy and that efforts are useless.
* Financial indicators: economic profitability, net income, short-term debt, long term debt, total debt, working capital, profit per employee, dividend per share, etc.
* Customer indicators: number of complaints, number of visits to customers, market share, sales per customer, loyalty share, share satisfaction, lost customers, benefit customers, etc.
* Indicators internal processes: compliance audits, evaluation waste, downtime, maintenance rates, transport costs, net production, number of suppliers, process cycle time, etc.
* Indicators innovation-Learning training quality indices, cost of training, employee satisfaction, index incentives, dropout rates, rates of communication, etc.
As we have seen the balanced scorecard is a source of strategic information and not just a few indicators.
I therefore recommend that the balanced scorecard is implemented as a result of the strategic planning of the company. The scorecard will analyze the evolution of the company in case of deviations can be established adaptations or new strategies to take the organization to the fulfillment of the objectives set.
“What can not be measured can not be controlled; which can not be controlled can not handle; what can not be managed can not be improved. “