Balanced
Scorecard Methodology
Balanced
Scorecard Methodology is an analysis technique designed to translate
an organization's mission statement and overall business strategy
into specific, quantifiable goals and to monitor the organization's
performance in terms of achieving these
goals.
The Balanced
Scorecard Methodology examines performance in four areas: financial
analysis, the most traditionally used performance indicator,
includes assessments of measures such as operating costs and
return-on-investment; customer analysis looks at customer
satisfaction and retention; internal analysis looks at production
and innovation, measuring performance in terms of maximizing profit
from current products and following indicators for future
productivity; and finally, learning and growth analysis explores the
effectiveness of management in terms of measures of employee
satisfaction and retention and information system performance. So
this is crux for Balanced Scorecard
Methodology.
As a structure,
Balanced Scorecard Methodology breaks broad goals down successively
into vision, strategies, tactical activities, and metrics. As an
example of how the methodology might work, an organization might
include in its mission statement a goal of maintaining employee
satisfaction. This would be the organization's vision. Strategies
for achieving that vision might include approaches such as
increasing employee-management
communication.
Let’s see some
more information about Balanced Scorecard Methodology. Organizations
incorporate management methodologies to link vision and strategy
with performance. In many organizations multiple methodologies are
incorporated to meet their objectives. Activity Based Planning is
used to manage overhead costs and more accurately align overhead
costs with the revenue it supports to properly execute profitable
pricing strategies.
Six Sigma
advocates quality management as a component of improving performance
through reduced overheads and increased competitiveness. Economic
Value Added methodology links employee compensation with increasing
the economic value of the organization with the objective of making
employees act like owners. Then, there is the Balanced Scorecard and
Strategy Maps which is an overriding umbrella methodology which asks
the organization to create 4-categories of key performance
measurements to tie everyday decision making to the overall
execution of strategy.
Organizations
who embrace the Balanced Scorecard buy into a philosophy where 75%
of their organization's value is locked in metrics that are not
financial, namely, their customers, their internal business
processes and their learning and growth initiatives. Balanced
Scorecards involve communicating strategy to every level within the
organization so that corporate strategy is integrated with everyday
decision making. The best Balanced Scorecards are not a static set
of measurements, but instead remain a work in progress and involve a
multi-year progress of testing and tweaking performance measures to
reflect better information and changes in business
climate.
The CPM
Balanced Scorecard solution is completely customizable to your
organization's needs. CPM (Current Performance Management)
effectively integrates its database architecture and end user
interface to provide a solution that satisfies the requirements of
the Balanced Scorecard Methodology. Start by defining your Scorecard
perspectives, then each of your perspectives insert your measures
and finally link your measures to the relevant determinants in your
CPM financial database and supporting source systems. Complete your
scorecard by designing your end-user data view and integrate your
data views with CPM's collaboration and security tools to
communicate your scorecard to all levels of performance management
participation and link accountability to
strategy.
For nearly a
decade, the private sector has used the Balanced Scorecard – a
methodology for measuring organizational performance towards
receiving sustainable results – as a leading tool for management.
Performance management consultant and author Paul R. Niven’s new
book, Balanced Scorecard:
Step by Step for Government and Nonprofit Agencies, offers a
practical approach to adapting this methodology to the public
sector. Some federal government departments – notably Canada Customs
and Revenue Agency and Human Resources Development Canada – already
use it to some effect.
