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Performance Measurement: Understanding the Balanced Scorecard

  Arthur F. Rothberg, Managing Director, CFO Edge, LLC  
  Chase Morrison, Managing Director, Resource Planning Solutions Corporation  
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  Article Summary  
To complete this four-part series on best practices for strategic planning and accurate performance measurement, we will discuss the balanced scorecard and its uses.

A balanced scorecard is a strategic performance management tool that translates a company’s abstract vision and objectives into tangible performance measures and target values, most commonly in four perspectives: a) financial, b) internal, c) customer and d) learning and growth. This allows for analysis and subsequent determination as to whether desired results are being achieved and, if not, where to focus management’s attention.

This balanced scorecard review looks at why they are necessary, what the performance management benefits are, and how they’re created. In general, a balanced scorecard is generated by first identifying perspectives for closer examination, then designing a strategy map that shows cause-and-effect links between objectives. Perspectives are then assessed to look for possible areas of concern. The article also extends previously-introduced examples to show – with illustrations – how balanced scorecards are applied to support performance management.

Balanced scorecards make it possible to connect high-level strategic planning objectives with day-to-day activities. Balanced scorecards are a crucial means of optimizing productivity and improving performance across all levels. They are an ideal method for connecting the other performance management tools we have discussed to create a cohesive, coherent picture of success.

Los Angeles executives who do not have internal expertise or capacity can benefit from consulting with an outsourced CFO services firm to provide comprehensive assessment, development and deployment of the four performance management strategies including balanced scorecards.

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