CDC Insight Article

Balanced Scorecard

May 8, 2013

A Balanced Scorecard defines what management means by "performance" and measures whether management is achieving desired results. The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised. These measures typically include the following categories of performance:    

  • Financial performance (revenues, earnings, return on capital, cash flow)
  • Customer value performance (market share, customer satisfaction measures, customer loyalty)
  • Internal business process performance (productivity rates, quality measures, timeliness)
  • Innovation performance (percent of revenue from new products, employee suggestions, rate of improvement index)
  • Employee performance (morale, knowledge, turnover, use of best demonstrated practices)

 

What Balanced Scorecards do:

  • Articulate the business's vision and strategy
  • Identify the performance categories that best link the business's vision and strategy to its results (e.g., financial performance, operations, innovation, employee performance)
  • Establish objectives that support the business's vision and strategy
  • Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets
  • Ensure companywide acceptance of the measures
  • Create appropriate budgeting, tracking, communication, and reward systems
  • Collect and analyze performance data and compare actual results with desired performance
  • Take action to close unfavorable gaps
Bain & Company guide
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