Definition:

A balanced scorecard is a strategic performance management tool that uses a set of performance metrics to evaluate a company’s overall performance. It goes beyond traditional financial measures to include non-financial measures that are critical to a company’s long-term success.

Key components of a balanced scorecard:

  • Financial perspective: Measures the financial performance of the company, such as profitability, revenue growth, and return on investment.
  • Customer perspective: Measures the company’s performance from the customer’s point of view, such as customer satisfaction, market share, and customer acquisition.
  • Internal business process perspective: Measures the efficiency and effectiveness of the company’s internal processes, such as quality, productivity, and innovation.
  • Learning and growth perspective: Measures the company’s ability to innovate, learn, and grow, such as employee satisfaction, training and development, and technology adoption.

Why is a balanced scorecard important?

  • Holistic view: A balanced scorecard provides a holistic view of a company’s performance, considering both financial and non-financial factors.
  • Strategic alignment: It helps to align the company’s goals and strategies with its performance measurement system.
  • Performance management: A balanced scorecard can be used to track progress towards goals and identify areas for improvement.
  • Communication: It can be used to communicate the company’s strategy and performance to employees, investors, and other stakeholders.

In essence, a balanced scorecard is a powerful tool for strategic performance management that helps companies to achieve their long-term goals by measuring performance across multiple dimensions.