Balanced Scorecard for Finance

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In this article you will get knowledge about an importance of Balanced scorecard in the field of finance and also will get the vision of the organization by taking into account various perspectives of performance. Check additional information about Balanced Scorecard for Finance.

Balance Scorecard is a holistic approach for gauging progress towards achievement of the vision of the organization by taking into account various perspectives of performance.

Balanced Scorecard is a planning and management system employed to gauge performance and align activities to an organization's vision and strategic goals. It was developed by David Norton and Dr. Robert Kaplan of Harvard Business School in early 1990s. Since then, the Balanced Scorecard has been used by organizations operating in different industries all over the world to improve performance by planning and setting realistic goals, realigning activities with strategic vision and objectives, prioritizing them, and improving communication. Balanced Scorecard is a performance management system that presents a balanced analysis of organizational performance by combining financial indicators with (soft) strategic indicators. It helps managers attain vision and mission of the organization by employing the designed strategy and focusing on the 4 perspectives which are as follows; Financial, Business Processes, Learning and Growth and Customer. The Financial perspective takes into account traditional financial indicators and emphasizes the importance of accurate and timely data. However, gauging performance solely on the basis of financial indicators inevitably presents a misleading picture. This is where the other three perspectives of the Balanced Scorecard come in; they help managers make better decisions by giving them a balanced performance management system. The Business Processes perspective analyzes internal business processes enabling managers to evaluate their effectiveness and efficiency as well as their contribution towards the achievement of organizational vision and mission. In case business processes are supporting organizational vision and mission, managers can opt for Business Process Reengineering for realigning them. The Learning and Growth perspective underscores the need for improvement (and development) at both individual and corporate levels. It is by no means limited to training and goes a step ahead to include initiatives like mentoring, tutoring, and technological development etc. In the rapidly evolving environment of today, it is all the more important to inculcate continuous improvement in the organizational culture. The Customer perspective is an adaptation of Harry Gordon Selfridge's phrase "the customer is always right." Customer focus and high levels of customer satisfaction are two of the most important indicators of success for any business. For example, rapidly declining levels of customer satisfaction will flag the need for improvement for meeting their varying needs, even if the financial indicators present a rosy picture. Each of these four perspectives is looked at with the following dimensions in mind; Objectives, Measures, Targets and Initiatives. Objectives outline key (organizational and departmental) goals that need to be attained for achieving vision and mission. As the name suggests, measure are parameters against which progress towards objectives will be measured. Targets attribute exact values to these measures/indicators highlighting the appropriate strategy for achieving the above mentioned objectives. Initiatives refer to actionable steps that will assist in achieving the vision and mission of the organization. Thus, Balanced Scorecard is an ideal performance management system for organizations including purely financial setups such as investment banks etc.

If you are interested in Balanced Scorecard for Finance, check this link to find out more about Balanced Scorecard for sales. Also, you can check other articles in Balanced Scorecard for Finance category.

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