A Balanced Scorecard is a system of the organization's goals, metrics, objectives, and initiatives and the relationships between them, which together describe the organization's strategy and how to implement it.
The Balanced Scorecard can also be described as a collection of key performance indicators (KPIs) organized hierarchically and is related to the operational, tactical, and strategic aspects of the organization's business and decisions.
Financial Perspective
The economic results reflect the economic results that arose from past decisions and activities. However, they do not reflect the current state of the organization.
Performance metrics examples:
Cash flows
Project profitability
Sales forecasts
Return on investment
Internal Process Perspective
Reflects the business processes that support the organization's strategy and in which the organization must excel to succeed. These processes include production safety control, research and development, and more.
Performance metrics examples:
Customer service times
Success in tenders
Safety accident rate
Customer Perspective
This perspective refers to customers' perceptions of the organization. Customer perceptions are influenced by product quality, delivery reliability, customer compensation, and the level of customer service representatives or support.
Performance metrics examples:
Customer surveys
Customer complaints
Market share
Delivery times
Learning and Growth Perspective
Reflects the level of employees, systems, and organizational procedures. Success in this area is influenced by the skills and abilities of employees and managers, their job satisfaction, and working according to organizational procedures.
Performance metrics examples:
Profits from new services or products
Satisfaction surveys
Number of improvement proposals submitted by employees
Employee turnover
When defining a balanced scorecard, one should consider the appropriate threshold for each metric and indicate the weight of each one against the set goal (roll-up).
For example, in human resources, employee satisfaction surveys will carry more weight than the number of improvement proposals submitted by employees. We also need to define how to present the metrics through a graphical, textual, or numerical display or traffic light colors.
In summary, to monitor the organization's performance and measure its progress by the defined strategy, we must determine financial, economic metrics, and qualitative metrics and combine them in the organizational scorecard.
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