Companies and Tax

Balanced scorecard, what is it and what is it for?

The balanced scorecard is a tool used as part of the company’s strategic management, which makes it possible to move from the company’s mission and vision to a series of performance indicators, which make it possible to quantitatively measure the expected results of the company process.

The strategy was introduced by Kaplan and Norton in the 1990s. The goal was to improve measurement methods with a balanced management of short and long-term objectives.

Advantages and features

The balanced scorecard is a method that translates business performance into automated or semi-automated methods for evaluating a company’s performance.

The factors that are taken into account are:

1)Financial performance : customers, earnings, turnover

2) customer satisfaction: complaints, loyalty

3)innovation: new products, research and development department, marketing focused on novelty

3) staff satisfaction: turnover, awards given to employees.

What the balanced scorecard method does

The main purpose is to establish measurable and achievable objectives, define procedures for measuring objectives, ensure that the entire company accepts them, collect and analyze performance data and prepare reports that can give an idea of how the company works and design solutions that can contain errors.

A company administered according to this method is able to plan an organized and homogeneous management of processes and company figures, useful especially in cases of complex and articulated productions. A project of indicators and performance detectors is the first step to formulate a correct balanced scorecard strategy.

The method applied to the administrative sector

Assuming to act within a medium-sized production environment, the method described above may prove useful, especially in the administrative sector. The amount of work between offers, quotations, monitoring of customers and suppliers in an administrative office can be considerable. Establishing strategies to measure performance, customer satisfaction and control the work of employees can therefore bear considerable fruit, especially in the long term. The public sector lacks the corporate profit point of view, so we focus only on the mission part. Healthcare companies have successfully used the model with an eye to the end users of performance, i.e. patients.  In other companies, effectiveness has been successful in 70% of cases.

The project

The project of a balanced scorecard has five fundamental phases:

1) identification of the strengths and weaknesses of the company context (SWOT matrix), in particular of the administrative department

2) management translates strengths and weaknesses into a well-defined strategy, which is measured with Kpi performance indicators (customer satisfaction, number of offers made/number of offers accepted, billing punctuality).

3)development of a work strategy that takes into account the factors previously analysed (e.g. improving the management software or the management of supply requests)

4. data collection, analysis and design of possible strategies to compensate for errors made

5. data analysis, compilation of statistics and final judgement on the company.

Conclusions

The balanced scorecard can be analysed from different perspectives: customer perspective, financial perspective, internal process perspective and learning perspective. For each of these aspects it is necessary to consider objectives, measures on the basis of which to act, targets, i.e. target values of the measures and initiatives to be taken to achieve the objectives. The balanced scorecard represents a very effective method, in different business contexts, and enables the development of an effective operational strategy.

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