Is it a balanced scorecard? Following understanding, function, perspectivity and example

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Is it a balanced scorecard? Following understanding, function, perspectivity and example

Is it a balanced scorecard Following understanding function perspectivity and example

Balanced Scorecard is a management system that aims to translate organizational strategic goals into a series of performance objectives, in turn, measured, monitored, and changed if necessary to ensure that the organizational strategic objectives are met.

The main premise of the Balanced Scorecard approach is that the financial accounting metrics traditionally followed by companies to monitor their strategic goals are not enough to keep the company remain on its path. Financial results explain what has happened in the past, not where business or should.

Want to know the understanding of Balanced Scorecard more in-depth? Read on this article:

Understanding and history of balanced scorecard

Before deceiving more to know everything about Balanced Scorecard, it is important to understand the context and concepts behind the management and monitoring tools made by Professor Robert S. Kaplan and David Norton in their famous article at Harvard Business Review 1992 entitled “The Balanced Scorecard: Measures That Drive Performance. “

At that time there was a perception that the benchmarking method of the organization became obsolete and inadequate. At the end of the Professor study, they needed a more appropriate company performance measurement method, in the end they developed an efficient support system for decision making, to help strategic management.

One key point of the Balanced Scorecard is expanding the evaluation of prospect performance which has always been very focused on financial aspects.

So, companies have expanded measurement and monitoring capabilities, which allow all relevant supply chain points to be measured.

Also, this brings a significant increase in understanding the entire company about their strategies determined by top management, involving each employee in the process. It was done through the development of strategic maps.

In addition, in the management example using the Balanced Scorecard method, there are several strategic maps that are more clear when management summarizes every method of measuring organizational performance and its influence on the achievement of business goals.

A good business management process system will always be reliable in monitoring, management and assistance in decision making in your company.

Balanced Scorecard function

1. Give structures on strategies

Unlike financial management or HR, organizations often talk about organizational performance and strategies in various different and unique ways.

Thus, there are many different approaches to strategic management. Balanced Scorecard is a logical and structured way to help your organizational leaders ensure that all organizational areas are covered in an easy-to-understand way.

It helps keep your goals in the center, using special measurements to track progress, and follow the initiative to track their danstructural actions that use the knowledge and data collected.

2. Facilitate strategy communication in business

Business plans are designed to convey strategic plans clearly. It is a good and simple visual aid that is used to harmonize each department or division with the aim of achieving high-level business goals.

When applied correctly, that means it will be:

  • Give employee clear goals to remember when working on action.
  • Helping employees identify the main purpose.
  • Allow employees to better understand strategic elements that require handling
  • Allows employees to see how the purpose affects each other.

3. This synchronizes the department and division

If applied properly, all divisions and departments must be in harmony with the same strategy, and Balanced Scorecard facilitates this process.

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With a structure made in balanced scorecard, you can connect your critical goal with the company’s overall goal.

In addition, you can see how your measurements can be reviewed and applied to company level measurements, how the project is linked to the company’s level project, and more. Balanced Scorecard also provides the structure needed when large projects are distributed to various divisions.

4. It helps your employees see how their individual goals are related to organizational strategies

Using the organizational framework focusing on strategies, Balanced Scorecard allows individuals to harmonize their goals throughout the organization.

For example, an employee who sets regular performance goals for annual personal reviews and can link their goals with the purpose of their division or department.

So, Balanced Scorecard allows all your employees to connect what they do for the progress of the team and the company as a whole.

5. It makes your strategy continue on the track

Many organizations build a strategic plan and put it on the shelf, it has never been reviewed. The making of a balanced scorecard framework is based on your strategy review regularly and you can only do this if your strategy is set.

A routine strategy review meeting every month or three monthly, combined with an annual strategy update, will ensure you refer your strategy regularly and make it a center for your management reporting process.

Reviewing your strategy will turn it on and make it part of the way you manage the organization. In addition, you will know where you are at any time in achieving your goals.

4 Perspectives in Balanced Scorecard

There are 4 perspectives that you need to think of before designing the correct balanced scorecard. Here are 4 perspectives:

Financial perspective

For most business organizations, profits are the top destination. Therefore, the top perspective is about financial goals and gaining sustainable benefits.

Basically, any major objectives related to health and financial performance companies can be included in this perspective. Income and profit is a clear goal listed by most organizations in this perspective.

Other financial goals may include:

  • Cost savings and efficiency (for example, certain objectives to reduce production costs by 10% by 2020)
  • Profit margin (increase operating profit margins, for example)
  • Source of income (for example, add new income channels)

Customer perspective

This perspective focuses on performance goals related to customers and markets. In other words, if you want to achieve your financial goals, what do you really need for your customers and market?

Examples of things included in this perspective are like:

  • Service and customer satisfaction (enhancing Net Promotion Score, or reducing the lead time call center, for example)
  • Market share (such as, market share that develops in certain segments or countries)
  • Brand awareness (for example, increasing interaction on social media)

Internal Process Perspective

What process you need to do to achieve customer and financial related goals? That is the question you want to answer by this perspective.

Here you will set internal operational goals and objectives, or in other words, what needs to be businessed and what business needs to be done well to encourage performance?

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Examples of internal process objectives may include:

  • Process improvement (for example, shortens the internal approval process)
  • Quality optimization (such as reducing production waste)
  • Utilization of capacity (using technology to improve efficiency, for example)

Learning and Growth Perspective

While the third perspective is about the concrete side of the various things, this last perspective considers a more intangible performance drivers. Because it includes a broad spectrum, this perspective is often broken down into the following components:

  • Human capital – skills, talent and knowledge (for example, skills assessment, performance management scores, training effectiveness)
  • Capital Information – Database, Information Systems, Networks and Technology Infrastructure (such as Safety Systems, Data Protection Systems, Infrastructure Investment)
  • Organizational capital – culture, leadership, employee alignment, teamwork and knowledge management (for example, staff involvement, net promoter scores of employees, corporate cultural audits)

Examples of Balanced Scorecard on Business

The process of developing a balanced scorecard in a company involves several steps, here is the summary:

  • Set a clear future vision
  • Determine strategic goals
  • Determine the determinant of success
  • Choose an indicator to measure and monitor performance
  • Set goals, action plans, and initiatives

All 5 steps for each of 4 perspectives.

These points, are just a few aspects of how to set goals and choose indicators.

Here is an example of a strategic map generated during the development of the Balanced Scorecard project, which summarizes all jobs for the organization, including goals, targets, indicators, and actions and initiatives that must be carried out and implemented.

Conclusion

That is the complete understanding of Balanced Scorecard for the progress of your business. Remember, the financial perspective becomes a major perspective in this plan, then make sure you use the best system in financial planning on your business.

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