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Thursday, May 22, 2008

Bettering Performance Using A Balanced Scorecard

The balanced scorecard is a new management concept which helps managers at all levels to monitor results in key areas. As an entrepreneur, you can make use of this tool to drive performance of employees as well as that of the business. The concept was devised by Robert Kaplan and David Norton in the early 1990's to provide a framework of four different perspectives to analyze businesses.

The balanced scorecard enables you to clearly define your vision and strategy for the business and translate that into action. By providing feedback around internal business processes and external outcomes, it becomes a vital tool in the hands of strategic planners who can direct the focus of the organization on key success factors. Strategy transforms into actionable points when broken into small bits at employee level, enabling them to perform better. Improved performance and better results are but an expected outcome.

Essentially, Kaplan and Norton suggest that an organization should be viewed from the following four perspectives:

Learning and Growth: How does an organization sustain change and improvement? It starts by training employees and helping them imbibe the culture of the organization. Your employees are your most important resource and hence their continued development should form your first focus. With the ever changing business environment, it is all the more mandatory to make sure that the learning curve of your employees is always on the up. Inability to hire technical workers or abnormal attrition is a potential threat to your business. Include mentoring and tutoring programs within the organization; break the ice between the management and the workers so that they can share problems and seek solutions.

Internal Business Processes: The efficiency and effectiveness of business processes determine business performance. Continuously monitoring and improving current processes will help your business position itself to perform better in future.

Customer Focus: At a time when the customer is king, can you afford to fall short of his expectations? An organization that leaves much to be desired by way of customer orientation is surely on the path of future decline.

Financial Focus: The financial perspective involves analyzing a business from the point of view of its shareholders. Financial performance of an organization is fundamental to its success; however most financial data is historical in nature and is therefore inaqeduate when it comes to generating insight for new age businesses. This is precisely why the preceding three perspectives have to be employed in conjunction with this one .

Source: The Balanced Scorecard Institute (

A word of caution - all performance measures are vulnerable to manipulation in order to meet targets. An example is to meddle with schedules to make the monthly sales look good.

To overcome such tendencies, Kaplan and Norton suggest the creation of a balanced set of measurements. It is also important that the scorecard is reviewed often, in order to ensure that the parameters are still as relevant now as they were when originally laid down.

Look at - this website helps beginners get familiar with the balanced scorecard. provides solutions and consulting on implementing performance measures. For further reading, books like "The Balanced Scorecard: Translating Strategy into Action" and "Balanced Scorecard Diagnostics: Maintaining Maximum Performance" available on may be useful.

Hi, I'm Akhil Shahani, a serial entrepreneur who wants to help you succeed. If you like to work smart, check out It's full of articles and resources to help you start and grow your business successfully. Please visit us & download our special "Freebie of The Month" at


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