Introduction to Balanced Scorecard

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Introduction to the Balanced Scorecard and Performance Measurement Systems 1 Chapter 1 Introduction to the Balanced Scorecard and Performance Measurement Systems by Christian C. Johnson From the beginning, it is important to understand why measuring an organization’s performance is both necessary and vital. An organization operating without a performance measurement system is like an airplane flying without a compass, a Formula One race car driver guiding his car blindfolded, or a CEO operating without a strategic plan. The purpose of measuring performance is not only to know how a business is performing but also to enable it to perform better. The ultimate aim of implementing a performance measurement system is to improve the…show more content…
Putting the Balanced Scorecard to Work. Harvard Business Review. September-October 1993. Organizations have adapted the BSC to their particular external and internal circumstances. Both commercial and notfor-profit organizations have successfully used the BSC framework. Since 1992, Drs. Kaplan and Norton have studied the success of various applications of the BSC in different types of organizations. Companies have used as few as four measures and as many as several hundred measures when designing a BSC performance measurement system. Based on this research, it has been found that a BSC framework using about 20–25 measures is the usual recommended best practice. Smaller organizations might use fewer measures, but it is generally not advisable to go beyond a total of 25 measures for any single organization, holding company, or conglomerate group of holding companies. 4 Balanced Scorecard for State-Owned Enterprises Financial Figure 2: Example an “Ideal” Balanced Scorecard #of Metrics 5 5 5 9 24 measures 22% Learning and Growth 22% 22% Customer Perspective Weight 22% 22% 22% 34% 100% Financial Customer Learning and Innovation Internal Processes 34% Source: Norton, David. 2000. Beware: The Unbalanced Scorecard. Internal Processes Figure 2 is drawn from an article written by Dr. David Norton. The brief article explained the need for balancing the number
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