The Balanced Score Card Methodology (BSC)
The Balanced Score Card Method is a strategic approach of Kaplan and Norton. It is a `performance` based system which enables organization to translate a company’s Vision and strategy for implementation working from four perspectives. It is a tool for Performance Management; helps in measuring operational activities of the company vis-à-vis its objectives. BSC method helps the organization function at its best capability with regard to long term benefits. The four perspectives are:-
Financial Perspective: This integrates tangible outputs into financial terms. In a way this analyses the execution of the company strategy to see that it is benefitting the bottom line improvement of the company. Financial perspective includes profit margins, revenue growth, net operating income, etc.
Customers Perspective: This means the value perception vis-à-vis the customers` expectations. The result is more sales for the most profitable consumers. The value revolves around operational excellence, customer intimacy, or product leadership.
Internal Process Perspective: This process relates to the procedures that generate and provide customers value preposition. Essential key activities are the focus for the company to excel effectively, collectively, and productively in fulfilling the expectations of the consumers.
Innovation and Learning Perspective: The focus here is non-material or intangible assets of a company. It refers to the internal capabilities and skills needed for internal value creation. The starting point in this perspective is ideally the Human Resources Department.
The BSC method is primarily used in converting the `Vision` into operational goals, planning of the business with individual performance to the vision and getting the feedback and adopting the business strategy in line with the feedback.
At least five or six goals for each perspective need to be identified by the Manager. Then these goals must be inter-connected. The BSC method is found to be more useful and successful, and many companies use this method for `performance enhancement` and of the management.