What is a balanced scorecard?

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Traditionally, corporations have measured their success using financial indicators, which worked effectively when the majority of the company’s assets were physical and could be recorded in a balance sheet, such as machines, buildings, and cash. However, a company’s success is now more dependent on variables such as customer loyalty, the effectiveness of its work process, and the employees’ skills than on its physical assets.

A strategic planning framework that businesses use to prioritize their commodities, initiatives, and services, communicate about their direction and objectives, and organize their daily operations is known as the balanced scorecard(BSC). Companies can use the scorecard to track and evaluate the success of their strategy to see how well they’ve done. The balanced scorecard is a systematic report that evaluates the management performance of a corporation.

The balanced scorecard can be used by other employees of the organizational hierarchy to demonstrate their contribution to the company’s progress, as well as their eligibility for job promotion opportunities and compensation reviews. A balanced scorecard’s primary qualities provide an emphasis on a strategic topic essential to the company and the utilization of both financial and non-financial data to develop strategies.

BSCs were originally designed for for-profit businesses, but they have since been adapted for nonprofits and government institutions. Its purpose is to assess a firm’s intellectual capital, which includes training, skills, expertise, and any other private information that gives it a competitive edge in the market. By isolating four distinct areas that need to be reviewed, the balanced scorecard model rewards excellent behavior in an organization.

Four perspectives of a balanced scorecard:

  • Business processes
  • Customers
  • Finance
  • Learning and growth

About the author

Pieter Borremans

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