The Balanced Scorecard methodology for business management was developed by Dr Robert Kaplan and Dr David Norton. This management approach seeks to provide a balanced view of the business by recognising that financial measures are not the only criterion by which to measure successful strategy implementation.
A Balanced ScoreCard (BSC is the preferred acronym, for some reason this is preferred to BS) provides a management system, not just a measurement system. Corporate vision and strategies are clearly mapped and a scorecard is built to show what actions the business is doing to implement its strategies, and how well the business is implementing those actions.
Kaplan and Norton suggest that a business is viewed from four perspectives;
- Financial
- Customer
- Business Process
- Learning and growth
"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."
Fact Based Measures
The measures used to build a score for each strategy need to be based on real, observable events. They must be able to be reproduced by different people to give essentially the same score. The reason for measurement in a Balanced Scorecard is to allow managers to make decisions that will change the business. These decisions need to be based on an objective, fact based view of the business. A well constructed Balanced Scorecard allows a view of the business from several perspectives.
A well designed system of measures influences the behaviour of people within the business. Often, the mission and goals stated by the organization include a balanced set of strategically-determined objectives, and yet the commonly tracked and published KPIs are limited to revenue, expenses and margins.
The Balanced Scorecard was born of a desire to broaden the scope of Performance Measurement to include areas like customer satisfaction, efficiency, effectiveness and desired outcomes.
The fc Balanced Scorecard System
Excel based system. Common interface easily understood by most users.
- Fast to set up.
- Builds on existing company reporting systems.
- Very cost-effective compared to existing solutions.
This is a balanced scorecard system developed in Microsoft Excel and VBA. It can easily be linked to company data systems, and has all the functionality required to start using balanced scorecards to manage an organisation.
The scorecard application contains:
- Strategy Map - with traffic lights
- Scorecard
- multiple measures for each strategy, with traffic lights
- easy period selection (usually years/months)
- predefined (and user selectable) score formulas for measures
- individual measure weights (user defined)
- individual traffic light trigger levels (user defined)
- Chart - monthly and year-to-date chart linked to each measure
- Report - easy to configure report sheets on any combination of measures
- Data - standardised data area that can be linked to company systems
At present, data is entered in the scorecard by typing or pasting into an Excel sheet. Or, if you are confident with Microsoft Query, by building a query to link directly to an ODBC database. We also have a set of functions to link to both Essbase and Cognos data sources. These are available as a separate add-in.
The scorecard is licensed for unlimited use by one company. (You can use as many copies as you like, and can build multiple scorecards for the one company). The fee includes the scorecard application and user manual. The scorecard report and data are kept in Excel spreadsheets that can be easily customised by the user.
The code is protected and remains the property of Ferrero Consulting.
The Balanced Scorecard application is available for $US250.00. This provides the full version with instructions on how to set up the Scorecard with your own Strategy Map and KPIs.
You can also get Ferrrero Consulting to set up the Strategy Map and KPIs to your own specifications. This may be cost-effective if you wish to concentrate on running a Scorecard as opposed to learning Excel. It usually takes us one day to set up a new Socrecard, and we charge $500 for this. Contact ed@edferrero.com to request this service.
If you wish to obtain a demo version of the Balanced Scorecard application, please contact ed@edferrero.com.