The Purpose of the Balanced Scorecard

The purpose of the Balanced Scorecard is to gain a feel for how the company is progressing towards its stated objectives and visions. Some research material refers to the Balanced Scorecard a management system and not a measurement system. The feeling is that through continual refinement and practice, the Balanced Scorecard will become ingrained in the organizational structure and have a lasting positive effect. (Arveson)

There are four parts to the basic Balanced Scorecard:

1. "Customer" or "Customer Satisfaction"

This "perspective" looks at factors such as quality of goods and/or services, delivery and overall customer satisfaction. (Office of Procurement and Assistance Management) Of course, without the customer most businesses would cease to exist. It makes sense to value their satisfaction.

2. Internal Business Processes

This perspective is concerned mainly with the internal functions of the organization, how well they interlink with the other perspectives and the measurements of their effectiveness. (Office of Procurement and Assistance Management) To make an analogy, if the engine doesn't run smoothly (i.e., Internal Business Processes) then the car as a whole (i.e., the organization) will not be terribly valuable.

3. Learning and Growth

This measurement assesses the ability of an organization and its employees to move and adapt to the changing environment of business. Retaining skilled employees, ongoing education/training and ready access to inter-organizational communications are all part of Learning and Growth. (Office of Procurement and Assistance Management)

4. Financial

Finally, we touch on the Financial Perspective. This perspective is fairly intuitive. One would expect that a company would be concerned with their financial health as well as the previous three measurements. In many instances, there is too much internal financial information produced within many organizations. (Balanced Scorecard Institute)

Organizational Strategy

Ideally, a Balanced Scorecard plan should be implemented from the top down. It takes commitment from upper management to implement and use the balanced scorecard. At the bottom levels, employees should be working on their own balanced scorecards that correspond to the goals and objectives of the organization. (Berkman) This gives everyone a sense of participating in the direction of the organization.

Strengths and Weaknesses

One of the main weaknesses of using a Balanced Scorecard approach would have to be participation. It takes time and effort to define the key areas of business and, as in more modern applications, their causal links. As with any organizational initiative,