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Balanced Score Card (BSC)
The four key components of Strategy Analysis are principles, practices, techniques, and skills. They play an essential role in identifying and validating the organization’s strategic needs, defining suitable solution approach(es) and solution(s), and planning, monitoring, and engaging stakeholders to achieve the organization’s strategic objectives. Techniques describe a step-by-step approach to conducting Strategic Analysis activities.
Want to keep track of the execution of all business activities by the staff and monitor the consequences arising from these actions? Here is a Strategy Analysis technique to achieve that. This blog will look at a technique called Balanced Score card with examples.
The Balanced Scorecard (BSC) is a strategic performance management tool developed by Drs. David Norton and Robert Kaplan in the early 1990s. It is a framework for measuring and managing organizational performance that focuses on four key areas: financial performance, customer satisfaction, internal processes, and learning and growth. The BSC is designed to help organizations align their strategies, objectives, and activities with their overall mission and vision.
The BSC was initially developed as a tool for measuring and managing financial performance, but it has since evolved to include other performance metrics such as customer satisfaction, internal processes, and learning and growth. The BSC is based on the idea that organizations should measure and manage performance in all areas of the business, not just financial performance. This holistic approach to performance management allows organizations to identify areas of strength and weakness to develop performance enhancing strategies for all areas.
The BSC is used by organizations of all sizes and in all industries. It is a popular strategic planning, budgeting, and performance management tool. The BSC is also used to measure and manage the performance of individual employees and teams.
The BSC has been widely adopted by organizations around the world and is considered one of the most successful performance management tools. It has been credited with helping organizations improve their performance and achieve their strategic goals.
Balanced Scorecard is a strategic planning and management tool to measure organizational performance beyond traditional financial measures aligned to the organization’s vision and strategy. A Balanced Scorecard takes a holistic view of an organization and coordinates MDIs so that all departments experience efficiencies in a joined-up fashion.
To embark on the Balanced Score Card, path an organization first must know (and understand) the following:
Meaningful measures are quantitative, linked to strategy, and easily understandable.
Two types of indicators used in BSC are:
Lagging – Provide results of actions already taken.
Leading – Provide information about future performance.
To construct and implement a BSC, managers should:
Figure 7: Balanced Scorecard to Implement and Manage Strategy
Advantages of Balanced Score Card
Weakness of Balanced Score Card
Relationship of Balanced Score Card with other Strategy analysis techniques
The BSC is closely related to other strategy analysis techniques such as the SWOT analysis, Porter’s Five Forces, and the Value Chain Analysis. The BSC is used to measure and monitor the performance of an organization in terms of its strategic objectives, while the other techniques are used to analyze the external environment and the internal capabilities of the organization. The BSC is also used to identify improvement areas and develop strategies to achieve the desired goals.
The BSC provides a framework for organizations to measure and monitor performance against strategic goals and identify improvement areas. Additionally, the BSC can be used to identify and prioritize initiatives that will help the organization achieve its goals. As organizations continue to become more complex and global, the need for a comprehensive and integrated approach to strategy analysis will only increase, making the Balanced Scorecard an invaluable tool for organizations.
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