Revolutionizing with Balanced Scorecard
Balanced scorecard is a tool for linking the strategies of the different business areas within a corporation to the overall corporate vision. The term was coined by David Norton and Harvard Business School professor Robert Kaplan back in 1992. They opined that the typical financial reports most companies were churning out did not provide management with enough information to run companies effectively. Instead of just a mechanical reporting of financial activities, Norton and Kaplan suggested that management focus must be on the key performance indicators which really indicate the business processes. Both financial and statistical figures were reported.
It used to be simpler to keep track of the performance of a business and to create future plans. However, as key business conditions are changing, performance measurement, reporting, and analysis also need to change. The idea of the balanced scorecard is to focus in on the financial and statistical measurement that really drives the company and not waste time and money on planning and reporting for every possible line item in every corner of the business. The balanced scorecard approach also encourages management to include general industry comparisons as well as competitive comparisons in the planning and reporting.
Balanced scorecard methodology has become a well accepted school of thought in 21st century of management education. A number of well-known management consulting companies offer implementation services, and software vendors are improving their applications to handle balanced scorecard reporting. By developing a set of key performance indicators and a continuous follow-up process organizations can improve their processes. Some examples of such indicators are average revenue per employee, customer satisfaction, employee retention rate etc. Most modern BI systems now have the capability to allow for loading or entering all the data needed to create a balanced scorecard and they have the report-writing features as well as the required analytical functions. As balanced scorecards are being offered by BI software vendors, large organizations with applications from multiple vendors in use around the world have found it necessary to integrate their scorecards. Vendors are now solving this by implementing XML and a set of standards for integration.