Balanced Scorecard

The balanced scorecard has become an incredibly powerful way of communicating targets within an organisation. It was developed in reaction to the over-reliance that many organisations were placing on purely financial measures such as PBIT and ROCE. The Balanced Scorecard, as its name suggests, encourages organisations to take a balanced view.

This balance is achieved by taking four different perspectives on a business, and ensuring that there are targets and measures set within each perspective. The perspectives are:

- Financial, measuring things like PBIT, revenues, revenue per employee etc

- Customer, measuring what the customer sees, feels and does, principally customer satisfaction, referrals, repeat business etc

- Process, which measures how good the internal processes of the business are, for instance productivity, quality, sales pipeline etc

- Growth, which typically picks up many of the ?soft? issues to do with HR, training and learning, as well as new products and IPR.

For each perspective it is usual to have between 2 and 4 measures. These may be a mix of lead or lag measure, but between them they should give a complete and balanced view of your business, and a balanced set of objectives for your staff.

Once the corporate scorecard has been developed, companies can then look to cascade it down through the organisation, creating departmental and even individual scorecards.