Proposal to buy a business

The Balanced Scorecard - Measuring the Path to Success

Description:

In 1992, Robert S. Kaplan and David Norton introduced the balanced scorecard (BSC), a concept for measuring a company's activities in terms of how well it performs against its vision and strategies. It gives managers and staff a comprehensive view of the performance of a business against the goals set for them or by them..

Content:

The Balanced Scorecard is a strategic management system that when used as part of a Strategic Business Plan forces managers to focus on the important performance metrics that drive success. It balances a financial perspective with customer, internal process, and learning & growth perspectives.

The overall system consists of four processes:
1. Translating the vision into operational goals;
2. Communicating the vision and linking it to individual performance;
3. Strategic business planning;
4. Feedback and learning and adjusting the strategy accordingly.

The scorecard seeks to measure a business from the following perspectives:

Financial perspective - measures reflecting financial performance, for example number of debtors, cash flow or return on investment. The financial performance of an organization is fundamental to its success. Even non-profit organizations must make the books balance. Financial figures suffer from one major drawback in that they are historical. Whilst they tell us what has happened to the organization, it may not tell us what is currently happening. Nor is it a good indicator of future performance.

Customer perspective - measures having a direct impact on customers, for example time taken to process a phone call, results of customer surveys, number of complaints or competitive rankings.

Business process perspective - measures reflecting the performance of key business processes, for example the time spent prospecting, number of units that required rework or process cost.

Learning and growth perspective - measures describing the company's learning curve -- for example, number of employee suggestions or total hours spent on staff training.

The specific measures within each of the perspectives will be chosen to reflect the drivers of the particular business. The method can facilitate the separation of strategic policymaking from the implementation, so that organizational goals can be broken into task oriented objectives which can be managed by front-line staff.

It can also help detect correlation between activities. For example, we might find that the internal business objective of implementing a new telephone system can help the customer objective of reducing response time to telephone calls, leading to increased sales from repeat business.
In many senses, the objectives chosen are leading indicators of future performance. Effort we make today is reflected in the future profits of the company. In this way, current expenditure can be viewed as an investment in the future of the company.

Author: Bob Pearce

About Author:

Following a career as a Naval Engineer Officer and many successful years in Senior Management positions, and in Small Business mentoring, Bob has chosen to use the benefit of that experience to help business Owners and Managers create successful businesses. His website http://www.strategic-business-plan-4u.com contains a lot of free advisory information, and his eBook on Strategic Planning is a simple, easy to follow approach to set the pathway for a successful busines

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