Balanced Scorecard
1.
Description
The balanced scorecard (BSC) is a strategic planning and management instrument that is
used to reconcile existing activities with the visions and strategic goals of an organization,
improve information exchange as well as monitor the performance of the organization. The
BSC is thus a performance measurement and evaluation tool aligned to the corporate
strategy, which, besides financial key figures (e.g. profitability), also takes “soft” factors
(social and environmental variables, image, knowledge, etc) into account that can, in future,
influence the financial key figures.
This type of performance measurement usually happens in private companies (!) – from the
following four perspectives:
1.
The financial perspective in which profitability, sales and sales growth, capital ratios etc
are considered.
2.
The customer perspective, which includes key figures that describe the competitive
situation such as customer satisfaction, market share, etc.
3.
The internal process perspective that identifies the processes relevant to success (for
reaching customer and financial targets) and should secure the efficiency of the
organization. Key figures such as labor efficiency, process costs or even throughput
times can be relevant here.
4.
The employee or development perspective in which the required capabilities and core
competencies are reviewed in order to reach the goals (which are defined by the other
perspectives). Important key figures here include employee satisfaction and absences.
The typical goal of private companies is to maximize profits. The financial perspective is
often driven into the background in public administrations and non-profit organizations and
represents “only” one of several target dimensions. The fulfillment of the specific, statutory
or political mandate (or the target dimension of “task completion”) is focused on instead. In
addition, the orientation to citizens or addressees (or the target dimension “customer
satisfaction”), employee orientation (or the target dimension “employee satisfaction”), as well
as the efficient and economic use of resources (or the target dimension “economy”), are
particularly relevant for public administrations and non-profit organizations.
A successful BSC is based on meaningful key figures, which are continuously recorded and
updated. For this reason we have the early indicators, which can indicate in advance how an
organization will develop in the future and the late indicators, which represent the past
situation and thus provide information as to whether the organization has reached the goals it
has set.
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2.
Goals

Present, communicate and implement strategies

Allocate responsibilities for task completion

Include non-monetary goals in the management process (in addition to monetary or
financial targets)

Link strategies to important key figures

Identify interdependencies of different goals

Quickly determine changes in framework conditions through continuous data analysis
and adjust accordingly

Enable farsighted planning and management (on the basis of early and late indicators)

Promote the learning process
3.
Procedure
1.
Define the strategic goal / task
The organization’s mission statement as well as all its perspectives and stipulations can be
found at the beginning of the balanced scorecard. This means that a common, strategic goal
must be determined. The mission or the assignment must be mentioned here for public
administrations.
2.
Determine a strategy for goal attainment
The organization must then determine a strategy in order to be able to break it down into
strategic subgoals. All the central success factors and causal relationships must be taken
into account here.
3.
Define measurement categories for the strategic goal with the aid of the perspectives
Once these strategic goals have been defined, both operational and strategic (missioncritical) key figures and target values must be determined for each perspective (see above).
4.
Explain the steps to be taken for goal attainment
Furthermore, measures that are to ensure that target values are reached must be agreed
and combined in cause-and-effect chains (e.g. with the use of areas of responsibility). This
step promotes a transparent process which makes it clear to employees when they are
personally responsible for implementation and can contribute to success. It is important that
all key figures can be adequately measured and that a relevant target value is stipulated in
advance.
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5.
Record the key figures/measurement categories of the individual steps
The subdivided target system serves as a basis for a meaningful reporting structure which
can be analyzed, serves as a tool for monitoring the implementation process and can also
promote sustainable learning.
6.
Communicate strategic measures; motivate and include all participants
In order to implement the BSC successfully, all members of the organization must be
informed of the BSC. The common, strategic corporate goal, critical key figures as well as
the necessary measures must be communicated so that a successful joint strategy
implementation can be guaranteed.
7.
Use the balanced scorecard as a management tool
And, last but not least, the balanced scorecard must be regularly maintained and updated in
order to enable response to a changed environment and ensure that the targets and tasks
set can be reached.
4.
Application

Phase 4 – Implementation:

5.
-
Competence: Identify criteria relevant to success; determine strategic measures
-
Communication: Establish an expedient strategy; create transparent processes
-
Capability to implement: Informed and motivated strategy implementers; allocate
responsibilities
Phase 5 – Ongoing impact evaluation:
-
Competence: Evaluate the indicators determined
-
Communication: Promote reporting; communicate target attainment
-
Capability to implement: Take changed environments into account and act
flexibly
Other sources
Friedag, Herwig, und Walter Schmidt. Balanced Scorecard. 4th edition. Planegg, 2011.
Gleißner, Werner. Aufbau einer Balanced Scorecard in der Unternehmenspraxis.
Bilanzbuchhalter und Controller (6) 2000. 128-134.
Hahn, Tobias, und Marcus Wagner: Sustainability Balanced Scorecard – Von der Theorie zur
Umsetzung. Lüneburg 2001.
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Martello, Michael, und John Watson, und Michael Fischer. Implementing A Balanced
Scorecard in A Not-For-Profit Organization. Journal of Business & Economics Research
Volume 6 (9) 2008. 67-80.
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