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Strategic Management – The Balanced Scorecard Concept

the balanced scorecardThe balanced scorecard concept is often associated with strategic management. The association between the two is not hard to see because this concept is often used as part of developing strategic business plans that requires managers to focus on important performance metrics that are drivers for success. This concept aims to balance the financial perspective with other important perspectives: customers, internal processes, and learning and growth. When used in strategic planning and management, it calls for four processes: translating the organization vision into operational goals, communicating the shared vision and relating it to individual performance, strategic business planning, and feedback and learning to adjust the strategy accordingly.

As mentioned, the balanced scorecard concept seeks to measure the performance and value of the business through four perspectives. The financial perspective assesses the fiscal performance of the business. For example, it takes into account the number of debtors, cash flow, and returns on investment. The fiscal performance of the organization is essential to its success that even non-profit organizations must make the books balance. However, financial figures are historical in nature. While they can very well tell us what has happened to the organization, they cannot really tell us what is currently happening nor can they be good predictors of future performance.

To balance this out, the balanced scorecard concept takes into account the performance of the organization through other perspectives. The customer perspective measures the direct impact of the organization on its customers. It measures customer satisfaction based on a number of factors, including the time taken for customer service representatives to process a phone call, results of customer satisfaction surveys, number of complaints received, and competitive rankings.

The business process perspective aims to measure the performance of the organization based on key business processes and indicators. For example, it measures the performance of the organization based on the time spent for prospecting, the number of resources required in doing rework, and the process cost.

There is also the learning and growth perspective. This balanced scorecard perspective aims to measure the learning curve of the organization. This perspective is able to describe that learning curve in terms of the number of suggestions received from employees, total number of hours spent on staff training, and other related factors. And having determined the specific measures within each of these perspectives, an organization is able to reflect on the drivers for its success. And with the help of strategic management, these measures can be used to develop better and more effective plans for the future.

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