The Balanced Scorecard Strategy

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  • 0:02 What Is a Balanced Scorecard?
  • 0:41 Who Uses It and Why?
  • 2:03 Example 1: Financial…
  • 3:03 Example 2: Bank
  • 3:42 Example 3: Charity
  • 4:10 Lesson Summary
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Lesson Transcript
Instructor: Rana Abourizk

Rana has a Masters Degree in Business Administration and is pursuing a Doctorial Degree. She has been teaching online for over a year. She has a strong business background.

Many businesses use a balanced scorecard in everyday operations. In this lesson, we'll see what a balanced scorecard is and how and why it is used by businesses. We will also review a few examples.

What Is a Balanced Scorecard?

A balanced scorecard is an aid for measuring business performance for the purpose of meeting goals and making changes to behaviors to meet these goals. The scorecard helps track all areas the business finds important to measure.

For instance, a business may want to know how many customer transactions there were for each day, and it may want to see trends and make sure enough transactions are being done. In addition, the business may want to track and measure sales performance for each transaction. It may also want to know what the customers think. Overall, the balanced scorecard serves as a simple, clear, and precise way of measuring goal accomplishment.

Who Uses It and Why?

Many businesses, non-profit organizations, and even government organizations (such as hospitals, banks, universities, and towns) use a balanced scorecard. Each business or organization has a purpose that can be used to understand what aspects need to be measured, and there are many different points of view that can be measured. Therefore, the specific business or organization determines the most important things to measure to reach its aims.

For example, a non-profit entity can use a balanced scorecard to keep track of peoples' opinions. Non-profit organizations have many supporters that keep their organizations alive, so the scorecard can be a good tool to both manage all their supporters and determine the best ones.

Many businesses use the balanced scorecard to measure their operations, customer/client service, finances, goals, employee development, and internal strategies. If used properly, the balanced scorecard can be used as a way to run daily operations, monitor progress, and manage and save information.

For instance, a sales company has a mission to provide customers with the best products and solutions. This company may use the balanced scorecard to understand customer behavior, track employee performance and behaviors, track what products customers bought and why, keep count of the number of products sold, track the company's progress towards goals, analyze the way the company is run in every department, and measure profit growth.

Example 1: Financial Institution

Let's take a look at an example of a balanced scorecard being used in a financial institution.

Sam is a director of a financial institution, and one of his jobs is to check branch performance on a monthly basis. Additionally, he has to check year-to-year performance and see how branches are doing, what needs to be changed, and what areas need more focus. Luckily, Sam's management team thoroughly uses the balanced scorecard to track performance. One of Sam's employees checks the scorecard daily and weekly to ensure he is on track to meet his personal goals, and the manager checks the branch's performance in sales, operations, volume, and customer service.

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