Balanced Scored Card

Implementing Balance Scorecard for Performance Measurement
Ashu Sharma*
The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizationperformance against strategic goals. A major consideration in performance improvement involves the creation and use of performance measures or indicators. Through the analysis of data from the tracking processes, these measures or indicators themselves may be evaluated and changed to better support such goals. The success of the balanced scorecard or a similar device will depend on the clearidentification of non-financial and financial variables and their accurate and objective measurement and linking the performance to rewards and penalties. The proponents of the balanced scorecard claim that it aligns with strategy leading to better communication and motivation which causes better performance.

Introduction
The success of any organization is reflected upon by its performance which is in turnhighly dependent upon its strategies. In this era of cut-throat competition, what an organization requires is not just framing the right strategies, but also managing the same. The impact of the right strategies will automatically be reflected in the results. Moreover, any organization has to understand that it needs to give impetus not only towards the financial results, but also towardssatisfaction of the customers, development of state-ofthe-art technologies and creation of an environment of learning and growth. The balanced scorecard can be thought of as the ‘strategic chart of accounts’ for an organization. The long-term success of any organization is determined by the capabilities and the competencies it has developed. One of the tools for organizational appraisal that is gainingimmense popularity is the Balance Scorecard, developed by Robert S Kaplan and David P Norton in 1992. This tool brings a link between strategy and action. Due to this, the framework is gaining increasing importance among different business houses. This innovative tool is unique in two ways compared to the traditional performance measurement tools. They are: • It considers the financial indices aswell as the non-financial ones in determining the corporate performance level; and • It is not just a performance measurement tool, but also a performance management system.
* Faculty, The Icfai Business School, Jaipur, India. E-mail: ashu@ibsindia.org Implementing Balance Scorecard for Performance Measurement © 2009 The Icfai University Press. All Rights Reserved. 7

The aim of the balancedscorecard is to direct, help manage and change in support of the long-term strategy in order to manage performance. It acts as a catalyst for bringing in the ‘change’ element within the organization. It allows, for the first time, an organization to look ahead—using leading indicators—instead of only looking back using lagging indicators. The balanced scorecard puts strategy—the key driver ofresults today at the center of the management process. The basic premise behind the balanced scorecard is quite simple: measurement motivates. Most of us have heard some version of the standard performance measurement cliches: “what gets measured gets done”, “if you don’t measure results, you can’t tell success from failure and thus you can’t claim or reward success or avoid unintentionally rewardingfailure”, “if you can’t recognize success, you can’t learn from it; if you can’t recognize failure, you can’t correct it”, “if you can’t measure it, you can neither manage nor improve it”. However, what eludes many is the easy path to identifying truly strategic measurements without falling back on things that are easier to measure such as input, project or operational process measurements....