Balanced scorecard: connecting the performance measures

Abstract

Performance indicators help companies/organizations to assess and make improvements to increase the feasibility of success and overall continuation of satisfactory operations. Tangible assets can be easily measured through financial accounting, such as profit margins, and therefore it’s easy to differentiate between if the company is successful or unsuccessful. However, With the constant change in the market, intangible assets have become as important as tangible ones, such as customer satisfaction, the efficiency of services, reputation, etc. To increase accessibility for top managers and provide important information relevant to the company through indicators, Robert S. Kaplan and David P. Norton researched different companies. They came up with the “Balanced scorecard”, which is a systematic approach to align goals to strategy. This approach also gives managers an overview of these indicators and how each one of them connects to each other from 4 different perspectives: Financial, Customer, Internal and Innovation, and Learning ref>. By visualizing these perspectives in the form of a balanced scorecard, a connection can be made between them, and increasing/decreasing one indicator will in turn affect other indicators. Having an overview of these indicators, companies can adjust their operations to align with their current goals or create new goals with the help of the indicators. Despite this, limitations are still in place, such as managers resistance to change, time and cost-heavy data acquisition, and misinterpretation of indicators that are presented.

References

Caplan, R. S. (1992). The balanced scorecard : measures that drive performance. Harvard Business Review, 71–80.