What is a Balanced Scorecard?

The balanced scorecard has helped to streamline the process, increase the revenue generation as well as help in providing means to evaluate the performance of the company for a time duration. Earlier before the balanced scorecard was used reports helped to evaluate the revenue, expenditure in the company as well as the overall profit, along with that balance sheets maintained by the finance department of companies help to keep in check the overall expenditure on a quarterly, monthly or for a fixed duration and time range in a company and statements incurred during that time period provided a better understanding about the expenses and payments made for liabilities in the company. These ways of understanding and evaluating performance had few drawbacks as they provided past data but were not ideal for everyday planning and for future progression. With the help of Balanced Scorecard, it provided the company a better approach that helped to predict future operations and events so that the opportunities are utilized completely.

“Balanced Scorecard was not for effective strategy execution, but for more tactical reasons, such as to change the compensation system, to reinforce a quality management system, or to change the reporting system to give managers more access to information about their operations. All of these goals are laudable but none, by itself, can transform and align an organization for effective strategy execution, the principal deliverable, as it turned out, for Balanced Scorecard implementations.”

The four metrics of the balanced scorecard for measuring performance are –

1. Financial — These include cash flow, revenue, earnings, and assets.

2. Customer — These include the company’s reputation and image, loyalty, the relationship between the value of good and money, and market value.

3. Business processes — Process cost, rate of productivity, production output, rate of product defects as well as complete production cycle.

4. Innovation, Learning, and growth — Research, development, willingness for change, motivation for employees.

BSC can be used to translate strategic plans and mission statements into a set of objectives and performance metrics that can be quantified and measured. BSC is used to clarify and update the strategy, align the IT strategy with the business strategy, and link strategic objectives to long-term goals and annual budgets. The astute student may realize that the balanced scorecard can be applied to link KPIs of IT to business goals to determine the impact on the business. The focus for the assessment could be, for example, the project portfolio or the application portfolio. The balanced scorecard can be used to assess the IT project portfolio by listing projects along the vertical dimension, and specific measures, critical to what the organization needs to track, horizontally.

“Each of these perspectives provides relevant feedback as how well the strategic plan is executing, so that adjustments can be made as necessary. Kaplan and Norton (1996) believed that, the four perspectives of the BSC can make balance between many important things, such as, between outcomes desired and the performance drivers of those outcomes, and between hard objectives and more subjective measures.”

Balance Scorecard helps to improve the IT strategy as it provides an approach for business performance. The four metrics of balanced scorecard financial, customer, internal process, and innovation learning & growth, each of these metrics helps to help to ensure that the approach being followed is effective or certain changes need to be made to enhance the performance by altering the methodology being followed. This approach also helps to make better long-term goals for the organization by maintaining strategic objectives as well as keeping a check on the budget of the company annually. “The Balanced Scorecard deliberately did not label its fourth perspective the “employees” or “people” perspective, choosing a more generic name, “learning and growth,” to signal that we were not taking a pure stakeholder approach. Under the BSC approach, employee objectives always appear (in the learning and growth perspective) but they get there because they are necessary for the strategy, not because someone has labeled them as a “stakeholder.” ”

Conclusion

We can apply the balanced scorecard approach to connect KPIs of Information Technology to the objectives of the business, to decide the effect on the business, revenue, profit, and loss. The concentration for the evaluation could be, for instance, the project portfolio or the application portfolio. The balanced scorecard can be utilized to survey the IT anticipate portfolio by posting ventures along with the vertical measurement, and explicit measures, basic to what the association needs to follow, evenly. To begin with, the scorecard unites, in a solitary administration report, a considerable lot of the apparently different components of an organization’s aggressive motivation: getting to be client arranged, shortening reaction time, improving quality, underlining cooperation, lessening new item dispatch times, and overseeing if possible. “Strategy mapping is a powerful business tool. Strategy maps show graphically how organizations create value for customers and stakeholders. Good strategy maps communicate strategic intent internally and externally and are one of the most effective communication tools an organization can use to build alignment, accountably, and a focus on results.”