Balanced Scorecard Approach to Performance Evaluations

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  • 0:04 A Balanced Scorecard
  • 0:33 Foundation Definitions
  • 1:11 Balanced Scorecard…
  • 2:18 Example
  • 3:33 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
Companies set goals and visions for their future. In order to meet those goals and visions they must rely on business methods and tools. In this lesson, we'll learn about one of these tools, called a balanced scorecard.

A Balanced Scorecard

Meet Tess. Tess owns a large company where they make cosmetics. After five years in the business, Tess now employees over 100 people. While her staff do a great job, Tess has been struggling to find a way to make sure the performance of her workers matches the goals and the objectives for her company.

What Tess is actually looking for is a balanced scorecard. What's that? How can it help a company better align actual performance with what they envision?

Foundation Definitions

Before we dive much further into this topic, let's define some key terms. First, a balanced scorecard is a system that helps a company match performance and activity to the objectives and goals of the organization. It also helps enhance communication and meet visions and strategies of the company.

Key performance indicators also known as KPIs, are metrics for a company to understand and manage their growth. It is basically a way for a company to look at certain factors (which differ depending on the company) to see if they are making progress.

Balanced Scorecard Perspectives

When using a balanced scorecard, there are four perspectives that help guide the measurement of progress. They are as follows:

  1. Financial perspective: Management tracks and keeps record of the company's financial well-being. Metrics for this perspective include making sure companies stay on budget, and are doing well as far as profit is concerned.
  2. Internal business process perspective: The next perspective involves tracking the actual business activities. Are we meeting customer demand? Are we being productive?
  3. Customer perspective: Every company knows that if a customer is not happy, they will go elsewhere. Metrics include recognizing the target market and what products or services they are looking for.
  4. Learning and growth perspective: This is the perspective that focuses on training and ideas on how to improve. Training employees is crucial in ensuring a company is efficient and meeting objectives. Metrics help to fund training and can even include mentors and tutors.

Example

Let's take a look at an example of the perspectives applied to our company from earlier.

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