Also known as “Balanced Scorecard”, it is a tool for planning and executing organizational strategies based on a set of interrelated goals and indicators, which allows us to understand the current state of the organization and verify the development of the organization in a specific period.
One of the most outstanding characteristics is that the areas that make up the company’s balanced scorecard will cover 4 basic points of view: finance, customers, internal processes, and learning and growth. Only in a few cases, and due to the characteristics of the industry, can we find companies that need another perspective.
In addition, the order of perspectives will be arranged in the order listed above, so those goals at the bottom of the company’s balanced scorecard act as higher goal drivers. In this way, the most important financial goals and their indicators usually measure past performance, and it is impossible to take immediate action, these financial goals come from the client’s point of view, internal processes, and the contributions of the plans and goals of learning. In addition to adequate management of the related objectives.
In the company’s balanced scorecard, the state of the organization must also be considered in terms of its “business cycle”. For example, in the initial stage of growth of the company, your objective will be to lay the foundation for the use of the potential of the company (revenue growth, customer growth, investment level, development of potential products/services).
In the maintenance phase, the goals and indicators focus on maximizing the return on invested capital and optimizing the value chain. In the maturity or collection phase, the objectives will be those that focus on collecting the results of the previous phases (reduce outstanding capital, increase cash flow, make small investments to maintain production capacity, etc.).
The management process surrounding the balanced scorecard allows the organization to focus on implementing the long-term strategy. In this way, the balanced scorecard becomes the basis of management organizations in the information age.
Therefore, it is a useful tool to integrate social issues in a company and show the causal relationship between social performance and financial performance.