The Concept of the Balanced Scorecard Process

The common mistake that some companies do in the balanced scorecard process is to copy or adapt the scorecard of another one who is in the same industry. It should be understood that each company—even if they are in the same industry—should have different scorecards because each corporation has different priorities. What may seem as an important attribute or metric for one company may be of lesser essence to the other one, precisely because there are varying factors that each company should consider in doing business. These factors may be location, target market, logistics, and so on. What is important is that the people who manage the company should be able to grasp the basic framework of how the business should be done and then translate the metrics into a KPI sheet or balanced scorecard.One must realize that a process requires strategy and not only whimsical decisions. Actions should be validated and supported by numbers. Specifying errors and suggesting improvement plans without supporting data is like a trial-and-error methodology in approaching problems and generating solutions. This is going to waste a considerable amount of time, manpower, and money, if one will really think about it.Generally, a balanced scorecard is a management tool or approach used commonly in business, non-profit organizations, and even government offices to ensure that the activities of the employees—no matter how small—are aligned with the company’s or organization’s vision and direction. In essence, this is a means of measuring performance of employees and the business itself. These are quantified in numbers that will help people identify why they are not performing well. The reason for its need is to guarantee that the data are intact and available. In addition, these data will be used to manage processes carefully and objectively. It has always been said in management process that one person cannot manage things if these things cannot be measured.In the past, this process used to be very so simple. During its early stages, it was only used to measure effectiveness of employee performance. This was, then, translated to coaching and improved employees. Now, the balanced scorecard is a widely known concept, which a lot of corporate directors and managers’ use in planning which directions the organizations need to take. It has gone from a simple score sheet to a full blown management tool. What it does is to help managers formulate action plans that are simple yet gives high impact on business performance. As a result, these plans are executed very well and the strategies are proven effective.In effect, there are other sub-attributes in the balanced scorecard process, such as the double-loop feedback, management by fact principle, outcome metrics, and others. A double-loop feedback is the effect of providing feedback on each process step where it identifies the cause of variation for these processes in order to reduce the errors. This is especially done in the manufacturing industry. Outcome metrics are about developing priorities in the strategy and management. In fact, it is a concept that pushes driving performance through validated data, not assumptions.