Balanced Scorecard

What it does:
Helps an organization pinpoint ways to increase earnings.

Its other names:
Balanced Scorecard Method; Kaplan and Norton's Scorecard

Where it comes from:
The article "The Balanced Scorecard - Measures that Drive Performance" by Robert Kaplan and David Norton, Harvard Business Review, 1992.

Summary:
Instead of relying only on past financials as an indicator of future performance, it is possible to build profits by reviewing four operational perspectives:

1. Financial -- Operating income, profits and the other financial touchstones, plus an organization's ability to raise funds.
2. Customer -- Market share, customer satisfaction and retention.
3. Business process -- Quality, cost, productivity and other efficiency measures.
4. Learning and growth -- Worker skill set, employee satisfaction and retention.

Seeking connections between these perspectives can uncover new ways to increase earnings. Example: If customer retention is low but product quality is high, what does that imply? Perhaps it is time to provide better training for "front line" personnel in sales and service.

What else you need to know:
The data gathered to create a Balanced Scorecard must be drawn from all four perspectives. An organization that spends more time researching customers than investigating the other perspectives will overlook ways to build profits through improving production and other means.