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Balanced Scorecard

Published in: Blog / November, 27 2014

As previously mentioned in the Key Performance Indicator (KPI) publication, a way to graphically visualize these KPIs is using Balanced Scorecard. This tool assists by integrating indicators related to results and performance. Every indicator is assigned to one of the following perspectives:

  • Financial
  • Customer; focused in providing value to their customers
  • Internal processes; focused in an increase of efficiency and effectiveness in the processes
  • Learn and growth; focused in sustaining innovation through continuous improvement and preparation for future challenges

Recently, some companies have considered other perspectives, such as personal (focused on the welfare and development of staff) and social (focused on environmental protection, waste reduction and sustainable development).

The following figure shows a representation a Balanced Scorecard. Each circle is an indicator and the arrows represent a causal relationship between them. This relationship can be obtained using regression or other statistical methods. As can be seen in the figure, employee training improves revenues by their dependence with other objectives.  This kind of indirect relationship is easily visualized using this framework and can be used to identify indirect reasons of underperformance.

The balanced scorecard framework shows at first glance the individual object’s performance, tendency and dependencies. Besides, it provides a comprehensive analysis of the company and it facilitates the permeability of the indicators throughout the organization.

Cho, Yong-Ju, Kwang-Yeol Ryu, Dong-Yoon Lee, Young-Jae Choi, and Hon-Zong Choi. 2008. “A Study on BSC-Based Evaluation System for Collaborative Information System in Manufacturing Industry.” In International Conference on Smart Manufacturing Application, 2008. ICSMA 2008, 74–77. doi:10.1109/ICSMA.2008.4505616.

Guanying, Liu, Yu Kaichao, Wang Congcong, and Yu Pengqian. 2010. “A Study of Enterprise Performance Management System Based on KPI +BSC.” In 2010 International Conference on Information Management, Innovation Management and Industrial Engineering (ICIII), 2:468–72. doi:10.1109/ICIII.2010.277.

Kaplan, R., and D. Norton. 1996. The Balanced Scorecard. Harvard Business Review Press.

Peng, Yan, Suozhu Wang, and Like Zhuang. 2008. “Balanced Scorecard-Based Management System for Performance Evaluation of Organizations.” In Third International Conference on Pervasive Computing and Applications, 2008. ICPCA 2008, 1:236–41. doi:10.1109/ICPCA.2008.4783584.

Winkelhoferova, M., V. Marikova, and J. Tupa. 2012. “Measuring and Improvement of Diagnostic Processes by Using KPI’s and Statistical Method.” In 2012 35th International Spring Seminar on Electronics Technology (ISSE), 465–70. doi:10.1109/ISSE.2012.6273147.

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