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El Balanced Scorecard De Sentra Software Developer

What is the balanced scorecard?

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The balanced scorecard is a strategic planning and performance management framework used by business, government, and non-profits to align day-to-day activities with enterprise vision, mission, and values. The balanced scorecard tracks financial and non-financial measures to determine the degree to which the enterprise is performing as desired and when corrective action is necessary.

The balanced scorecard is a widely used management tool, particularly in the U.S., the UK, Northern Europe, and Japan. Enterprises that are comfortable with the rigor required derive significant benefits from it. However, the balanced scorecard requires a great deal of effort to implement and use effectively. Enterprises must have the necessary resources and discipline to make the balanced scorecard successful.

Balanced scorecard perspectives

The balanced scorecard relies on four perspectives to monitor enterprise health. Specifically:

  • Financial:The financial health of any enterprise is critical to long-term survival. Typical measures used by for-profit companies include revenue growth, operating income, return on equity, and other measures of interest to owners.
  • Customer: The customer perspective compares the enterprise’s service to the competition’s service. Specific metrics vary by industry but most focus on time, quality, and service levels. Metrics common to most industries include customer satisfaction and enterprise responsiveness. Other metrics are more industry-specific. Cellular telephone companies track customer growth and churn. Manufacturing companies track on-time delivery, and percent of orders delivered as ordered (i.e. without back order or substitution). Consumer products companies monitor percent of repeat customers and percent of sales from products introduced in the past five years.
  • Internal process: This perspective helps the enterprise understand the efficiency and effectiveness of internal business processes and supporting technologies. Many companies focus on the time to take an order, on-board a new hire, or complete other internal processes. Manufacturing companies often track setup time, cycle time, first pass yield, and the time to introduce a new product. Companies attempting to streamline internal processes track the percent of paperless processes and the number of self-service processes.
  • Organization capacity: This perspective was initially called “Learning and Growth” and is sometimes called “People” by enterprises that believe that humans are the most important part of an enterprise’s capacity to improve. This perspective considers the degree to which the enterprise can evolve and improve the way it supports its goals. Organization capacity monitors people, culture, organization, and the infrastructure to support them. Typical measures include employee satisfaction/engagement, time to hire, first-year turnover, regretted (sometimes unwanted) turnover, and training/education received.

The original balanced scorecard was designed to help for-profit companies. As the balanced scorecard became more widely accepted, it was adapted for government and non-profits. Since neither have profit, the financial perspective is usually retitled “Stewardship” to reflect the need to manage funding and staff judiciously. The customer perspective is frequently renamed “Beneficiaries” or “Recipients” by non-profits that provide their services for no or very low cost. “Stakeholder” is viewed as more descriptive than customer by some government agencies.

The initial balanced scorecard described the four perspectives but gave little guidance regarding how to identify meaningful measures or how to link measures to strategy. Kaplan and Norton’s The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, published in 2001, introduced the strategy map to show the specific activities required to achieve enterprise goals. The strategy map is a visual, one-page representation of the interrelationships among the activities across the four balanced scorecard perspectives. Associated with each activity in the strategy map are supporting metrics.

Origins of the balanced scorecard

At the beginning of the 20th century, French enterprises began using the “Tableau de Bord,” or “Dashboard” in English. The Tableau de Bord was created in recognition that financial measures alone do not provide enough information for executives to monitor enterprise health. In 1987, Art Schneiderman of Analog Devices, created the Analog Devices Balanced Scorecard. In 1989, Ray Stata, Analog Devices’ CEO, described the company’s five-year scorecard in the Sloan Management Review.

In 1990, Mr. Schneiderman was involved in an unrelated research study headed by Robert Kaplan who worked with Nolan, Norton, & Co., a management consulting firm. During the effort, Mr. Schneiderman described Analog Devices’ work on performance measurement to other participants. In the early 1990s, several papers were published on the design of a balanced scorecard with the Kaplan and Norton paper garnering the most success. As a result of additional articles and their 1996 book, The Balanced Scorecard: Translating Strategy Into Action, Kaplan and Norton are widely seen as the concept’s creators.

Benefits of the balanced scorecard

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The balanced scorecard helps enterprises in several ways. It reminds executives that in addition to tracking financial metrics, it is also important to track quality and service. Too many companies focus exclusively on sales and expenses to the exclusion of other metrics. Second, the strategy map provides a clear, concise way to communicate priorities and goals to employees, customers, suppliers, and other stakeholders. The balanced scorecard also creates an explicit linkage from enterprise strategy to day-to-day activities. Enterprise goals and metrics can be decomposed into business unit or departmental goals and metrics, enabling all stakeholders to understand how their projects and activities contribute to overall enterprise success. Fourth, the balanced scorecard facilitates business planning by providing clear metrics that help the enterprise rank projects into priority sequence and enterprise products by importance. Finally, the framework helps the enterprise monitor and measure progress towards strategic objectives.

Success with the balanced scorecard

Implementing the balanced scorecard is a great deal of work with some implementations being abandoned before completion. Enterprises enjoying the best results share the following characteristics. They all have:

Robust operational systems

The balanced scorecard needs a great deal of high-quality data from the ERP and other foundational systems. When these systems are error-prone or produce incomplete data, additional manual effort is required to collect the necessary data. Typically, the people affected waste time so much time arguing about whose data is correct, they lack the time to analyze the data and take corrective action.

Culture of measurement

Enterprises that are grounded in one of the STEM disciplines normally make decisions based on data and analysis. They are comfortable analyzing a comprehensive set of metrics that considers the same product or process from multiple perspectives. By contrast, enterprises that downplay the importance of data and rely on executive passion and energy, often find the executive team is uncomfortable discussing more than a handful of metrics. Enterprises operating on instinct are better off either not using the balanced scorecard or waiting until a new CEO or the board of directors demands data-based decision making. Even with CEO or board support, the balanced scorecard still represents a major cultural change. Implementation requires a long time and needs to be accompanied by significant organizational change management.

Executive support

In the absence of strong executive support, the necessary resources to collect and monitor the required information are unlikely to be available. Even if by some miracle all of the information could be collected, the executive team must use the balanced scorecard data or the rest of the enterprise will also ignore any corrective actions suggested by it. When this happens, the program will be neglected and eventually cancelled.

Appropriate metrics

Appropriate metrics vary by industry and enterprise. While the balanced scorecard does not provide rigid rules regarding appropriate metrics, it is critical to select metrics that accurately support enterprise goals. Good metrics should be easy to understand and quantitative, that is, expressed as a number. In addition, a good metric should show the trade-offs between cost and service. The call center of a large enterprise that prided itself on excellent customer service, measured call length without a corresponding quality measure. Not surprisingly talk time decreased. Unfortunately, so did customer service, much to their chagrin. As we know, what you measure is what you get.

Limited numbers of metrics

It can be difficult to select the right number of metrics. Enterprises that are just starting the balanced scorecard journey sometimes make the mistake of trying to measure everything. Although enough metrics are needed to provide a complete picture of enterprise health, too much data is overwhelming and can make it difficult to understand what conclusions to reach and what actions to take.

Continuous improvement

It usually takes multiple years to get a large enterprise to fully embrace the balanced scorecard. Even with a well-designed initial implementation, updates will be required as lessons are learned, competition changes, and new challenges emerge. Regular feedback is critical for the enterprise to learn, adapt, and improve. This is particularly important in the public sector where performance targets are often a matter of public record.

Balanced scorecard software

A number of consulting firms offer tools to promote and support the balanced scorecard. Most tool can be evaluated for a few months at no cost. A number of ERP vendors, recognizing the balanced scorecard popularity, created their own balanced scorecard tools. These firms want their customers to use the ERP directly without another piece of software between the customer and the ERP. Although, there are some free tools, most are simply PowerPoint or Excel templates that allow data collected elsewhere to be displayed as a balanced scorecard or a strategy map. Unfortunately, the free tools rarely do much else.

Most of the tools requiring payment share the following characteristics. They:

  • Emphasize visual data presentation. Typically, they are designed for an executive audience and provide easy to understand charts, graphs, and exception reporting. Most tools support root cause analysis through a variety of drill-down capabilities.
  • Support all organizational levels. Reporting is structured to present relevant information to each individual in accordance with the permissions the individual enjoys. In addition, the data rolls up to or down through the organization.
  • Integrate enterprise-wide data. Most balanced scorecard tools were designed as reporting tools and, excluding small enterprises, were not designed as operational systems. Instead balanced scorecard tools gather data from a variety of operational systems (including Excel spreadsheets in some enterprises).
  • Facilitate collaboration. The tools are designed to alert individuals of potential problems within their area of responsibility. The best tools include a workflow engine to support information sharing, solution development, and progress tracking.

Tools by themselves don’t improve the enterprise. However, they provide the individuals accountable with the necessary information to make informed decisions and take appropriate actions.

El Balanced Scorecard De Sentra Software Developer 2017

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The Balanced Scorecard was developed in the early 1990s by two guys at the Harvard Business School: Robert Kaplan and David Norton. The key problem that Kaplan and Norton identified in the business of the day was that many companies tended to manage their businesses based solely on financial measures. While that may have worked well in the past, the pace of business in today’s world requires more comprehensive measures. Though financial measures are necessary, they can only report what has happened in the past — where a business has been, but not where it is headed. It’s like driving a car by looking in the rearview mirror.

To provide a management system that was better at dealing with today’s business pace and to provide business managers with the information they need to make better decisions, Kaplan and Norton developed the Balanced Scorecard.

Note that the Balanced Scorecard is a management system — not a measurement system. Yes, measurement is a key aspect of the Balanced Scorecard, but it is much more than just measurement; it is a means to setting and achieving the strategic goals and objectives for your organization.

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So, what is the Balanced Scorecard? In short, it’s a management system that enables your organization to set, track, and achieve its key business strategies and objectives. After the business strategies are developed, they are deployed and tracked through the Four Legs of the Balanced Scorecard. These four legs comprise four distinct business perspectives: The Customer Leg, the Financial Leg, the Internal Business Process Leg, and the Knowledge, Education, and Growth Leg. These four legs of the Balanced Scorecard are necessary for today’s business executives and managers to be able to plan, implement, and achieve their business strategies:

  • Customer Leg: Measures your customers’ satisfaction and their performance requirements — for your organization and what it delivers, whether it’s products or services.
  • Financial Leg: Tracks your financial requirements and performance.
  • Internal Business Process Leg: Measures your critical-to-customer process requirements and measures.
  • Knowledge, Education, and Growth Leg: Focuses on how you educate your employees, how you gain and capture your knowledge, and how you use it to maintain a competitive edge within your markets.

These four legs have to be measured, analyzed, and improved together — continuously — in order for your business to thrive. If you ignore any one of these four legs, it’ll be like sitting on a four-legged stool with a broken leg. You’ll eventually lose your balance and fall flat on your face. And lying flat on your face is no way to run a business!

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You not only have to measure these critical four legs, but also set strategies, goals, objectives, and tactics to make them happen. And while you’re at it, you have to make sure that your strategies and tactics are congruent. They have to work together and create a single thread, tying together in ways that make sense. This isn’t an optional exercise; it’s essential. The future of your business depends on it.