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The Balanced Scorecard Theory
I wanted to share some information that I consider important for business management, below are a few concepts that support strategic management for companies called “The Balanced Scorecard Theory” developed by Drs. Robert Kaplan (Harvard Business School) and David Norton.
This theory which has been adopted in actuality by large companies can also be incorporated into your small to medium sized business as part of your administrative process; the Balanced Scorecard allows for the synchronization of the vision and the strategy of your company with business activities by monitoring organizational performance. The added value of this theory is the inclusion of non-financial performance measures or metrics that provide a more balanced view that you can have from a simple performance measurement indicators to sophisticated strategic management system.
Typically in most businesses the attention is focused in the financial aspect. Monitoring financial measures is not sufficient to determine what the organization should do in order to create future value; it is necessary to monitor aspects such as technology and innovation investment, customers, suppliers, employees and processes.
With this said, we have three additional perspectives to the normal financial aspect that is usually considered: the Learning and Growth Perspective, the Business Process Perspective and the Customer Perspective.
Below I will describe the aspects handled by each of these three perspectives:
The Learning & Growth Perspective
Here we could include aspects such as training, organizational culture, knowledge, among others. The metrics are therefore aimed at assessing and stimulating results of the progress in knowledge; the development of trainers or coaches within the organization, and the overall improvement of internal communication. As a reseller, and within your organization knowledge has a very high impact on the outcome of your business; having metrics for example indicating whether you are stimulating the incorporation of knowledge of new technologies, services and/or solutions can be essential.
The Business Process Perspective
In this second measurement, we can include the metrics to monitor business processes; establish whether products and services comply with the minimal requirements our customer are expecting or surpass their expectations; this measurement has a strong relationship with the mission of our company; generally these metrics are the result of your internal knowledge of the company. As a reseller, it is important to address the processes of your organization and aim to meet customer requirements and satisfaction; for example in terms of other opportunities linked to deliveries, quality of solutions, consulting level to your customers, and others.
The Customer Perspective
Customers are the reason that companies exist, so their satisfaction is the fundamental basis of any business; with this measurement you can develop indicators to determine whether customers will remain as customers in the future, and to understand how they change their needs. If we only focus on the financial perspective, this can be measured very well today, but in the future customers may no longer exist. In our technology oriented industry customers’ needs are constantly evolving; the follow-up to new initiatives and their satisfaction can be measured. As a resellers of the specialized technology industry having metrics that can tell us how we are serving customers is basic to continue having a bright future.
The idea behind Strategy Mapping is to manage all four perspectives in a balanced manner; to achieve this it is helpful to use a tool like strategy mapping which shows connections between the strategic objectives in a cause-effect chain and a logical sequence. Improving results in the Learning and Growth Perspective, will allow your company to improve the objectives in the Business Process Perspective, which in turn will lead to better results in The Customer Perspective that finally will impact the financial perspective.