Wednesday, May 1, 2013

Is Balance Scorecard relevant today ?

Dr Robert Kaplan & Mr David Norton introduced powerful model of Balance Scorecard during the last decade of 20th Century. It clearly makes the organisational focus broader merely from financial focus.  Model has become successful and used by many organisations across the globe. Main tenet of the models are as under: 

1) Financial Perspective : To succeed financially how should we appear to our shareholders. What are our financial goals? 

2) Customer Perspective : To achieve financial goals what should be our customer strategy? 

3) Internal Perspective : To achieve our financial and customer goals what kind of business processes we must have? 

4) Growth and Learning Perspective : To remain competitive what kind of people competency we should have or develop?

It is working well for many organisations. However in changing times this balancing also should under go change. 

What are we aiming to balance through Balance Scorecard ? As can be seen from the tenet it is only and only about WHAT part of strategy. Again on top of the strategy it is  Financial Perspective and all other perspectives are serving the financial perspective. 

It has to change. Financial Perspective and WHAT part of the strategy is important However unless its HOW is defined with keeping in mind environmental effect of doing business , social & ethical behaviors and making all stake holders happier by rightful conduct , it fails to balance the society in which the business operates. 

We first need to think to balance the negative impact the business generates before we decides about balancing business strategy for self use. New tenet of balance scorecard should be as under: 

1) Happy Customers : How to make our customer happier when they are dealing with us ?

2) Happy Employees : How to make our employees who are working for us happier ?

3) Happy Community : How to conduct business with social commitment, ethical conduct with every stakeholder incl Govt.  ?

4) Happy Shareholders : Here financial, internal processes and learning & growth perspectives of existing Balance Scorecard can fit in.

Balance Scorecard in its existing form is missing some of the important balancing requirements.  

Do you think differently ? Please share your views. 

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