The Business Balanced Score Card (BSC) is becoming increasingly popular for companies in balancing their short and longer term objectives. This essentially means that companies adopting the BSC realise that the longer term objectives are not automatically reached by hunting the financial short term objectives. It means that certain investments (that reduce short term profits) are encouraged, because they serve the longer term objectives (healthy, profitable growth).
The BSC consists of four (global) aspects (perspectives):
1. Financial Results
2. Customer Satisfaction
3. Process Performance
4. Competence level.
The Financial Chapter is considered to be a "lagging" indicator: it is the result of what has been achieved in the past.
Customer Satisfaction is also a result from the past, but at the same time is an indication for the future: sales potential, potential price premiums, new opportunities etcetera depend on the perception of the customers. There is a cause and effect relationship that can be quantified. Therefore, Customer data provide indications of future financial results (or: potential).
Customer Perceptions are caused by Process Performance. "Process" includes all types of processes: advertisement, production, logistics, sales, quality etcetera.
Competences impact on Process Performance, by: knowledge, leadership, employee motivation etc.
From this point of view, Competence are leading towards Process Performance, which is leading towards Customer Perception and satisfaction. The financial results are lagging, with a certain time shift. In some cases this time shift can be significant (years), which makes it more difficult to manage ("check and adjust"). This is one of the benefits of the BSC: shorter feedback loops provide a basis for better controlled processes.
In the Design and Deployment of the BSC, 5 key stages can be distinguished:
1. Select Critical Success Factors (CSF) in the 4 BSC perspectives and explore interrelationships
2. Identify Performance Indicators
3. Set Targets
4. Deploy whole scorecards to sites
5. Deploy goals within sites.
The BSC provides a "measurement tool" to evaluate sites/businesses in a balanced way, and should help to assess improvement opportunities. As such, it is very useful, and the most advanced way to monitor (measure) business performance.
The BSC is not an improvement implementation program. It is the measurement part of the Demming (Plan, Do, Check and Adjust) Circle. In order to achieve Performance Improvement, structured improvement implementation programs are needed