Performance measures
Every year supervisors have to fill off the evaluation form for employees. It always reminds me what happened in the last 365 days. Am I improved or stay the same level? People want to pass the evaluation, not only for the bonus or other benefits. They want to contribute to the organization. It works the same way in commercial environment.
How can performance measured? Financial statements? Customer satisfaction? Or others?
Balance scorecard gives us a good solution.
Balance scorecard is a multidimensional measurement tool aimed to capture performance measures related to accounting and finance, human resources, internal processes, and customers. It is developed by Robert Kaplan and David Norton as a means to reduce the limitations of the traditional financial –based performance measures in business. There were four major sessions: customer, internal process, learning and growth, and financial performance. The balance scoreboard approach involves taking measurements in four different areas rather than focusing solely on financial performance measures.
Why does most company favor balance scorecard? Let us go back to see the traditional measures. Most company uses financial measures such as ROI .A weakness is that it omits non-financial measures such as customer service, operational quality an innovation. Calculation ROI is simple; however, deciding what number to qualify can be difficult. These intangible measures are much harder to measure, but firms such as GE Capital IT Solution are working on ways to factor intangible factors into the analysis to create a more effective and accurate measure of payback. For example, conducting customer satisfaction surveys either directly or over the Internet to learn how customers are interacting with their system.
Now we know balance scoreboard is the best known prescription of internal scorecard creation. How about external scorecards? There are numerous organizations providing scorecard services on the internet.
Watchfire GómezPro Scorecards is one of examples. It is released bi-annually and measures the quality of the online financial services offerings, with a predominant focus on ease of use, customer confidence, onsite resources, relationship services and overall cost.
Reference:
1. http://www.balancedscorecard.org/basics/bsc1.html
2. http://www.cms.daimlerchrysler.com/dccom/0,,0-5-7197-1-69285-1-0-0-69293-0-0-135-7177-0-0-0-0-0-0-0,00.html
3. http://www.watchfire.com/news/releases/6-8-04.aspx
2 comments:
It’s a very good post about balance scorecard. You make it easy for me to understand its general idea. So, basically, balance scorecard for businesses is a more all-sided measurement than traditional measurement. It evaluates performance not only by counting financial figures quantitatively but also by surveying, observing, and analyzing specific cases qualitatively. I think, for a performance measure, the more comprehensive it is, the more accurate its result will be. Do I understand you right?
The Balance Scorecard has it’s advantages, but for a short, fast and regular analysis of immaterial values it is far to complex and much to slow. I've tried some practical ways and even try to implement Balanced Scorecard with MS Excel and only find in the end that Balance Scorecard just didn't go far enough to make it a really useful management tool. A scorecard may also lead to counterproductive actions if management decides to 'play the numbers' instead of improving performance. It can tell you the present status of different measures, but it cannot tell you how to achieve better performance.
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