What Is a Balanced Scorecard? - Metrics & Examples

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  • 0:03 The Balanced Scorecard
  • 1:28 Focus Areas
  • 2:26 Metrics
  • 4:11 Lesson Summary
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Lesson Transcript
Instructor: Katryn Stewart

Katryn has a Masters degree in Management, has been PHR certified, and has taught college business and human resource management courses.

One of the most effective ways to determine the success of one's business, product, strategy, or employees is to measure results via performance appraisals. This lesson discusses one form of performance appraisal, the balanced scorecard.

The Balanced Scorecard

You've probably received a work evaluation at your job. Often, performance is evaluated by measuring an employee's specific traits or general behaviors. Do you come to work on time? Do you make errors? Do you complete your work efficiently? Do you satisfy your clients? You might even work on a team and receive a group evaluation. Does the team handle work-related stress well? Does it know how to foresee potential problems? Can the team collaborate to find the solution?

Corporations utilize performance appraisals to evaluate how a person or team acts, and what skills and knowledge they have, in order to give a broader view of the performance and productivity of individual employees, teams, business units, or entire corporations. There are many performance appraisal methods. The balanced scorecard method provides a big picture of the organization and how each part fits into and influences the whole organization.

The balanced scorecard (BSC) provides a clear description of the goals and objectives for each segment of an organization, but takes it one step further by tying in individual goals with organizational goals. The BSC demonstrates how the objectives of an individual employee have an influence on his role as a member of a team and how that team then contributes to the success of a business unit and how that business unit's productivity affects the overall goals of the organization.

Focus Areas

The BSC is often divided into four process areas:

  • Financial goals: What are the financial responsibilities and goals of each individual, department, and/or organizational group?
  • Customer satisfaction: What can each segment of the organization do to increase customer satisfaction?
  • Departmental and organizational processes: How do we save time, money, or effort, or increase satisfaction or revenue, by changing our processes?
  • Training and Learning Goals: What do we need to train on or learn as an individual, department, or organization in order to improve in the other areas?

You can imagine how much easier it is to work toward your goals when you know how your actions affect the overall goals of the organization for which you work. Conversely, it is also much easier for management to determine the success of different units when they, too, can see how all the pieces fit into place and what must be done in order to be more successful and productive as an organization.

Metrics

The balanced scorecard has the capability to measure many different areas within an organization. Metrics used by different organizations often include:

  • Profitability
  • Market share
  • Productivity
  • Leadership
  • Public responsibility
  • Legal and ethical behaviors
  • Stakeholder responsibility
  • Environmental responsibility
  • Training and development
  • Employee attitudes

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