The Balanced Scorecard Method of Goal Setting

In order to ensure that your goals focus on all important aspects of the business, the Balanced Scorecard provides a good framework. It was developed as a conscious move from traditional focus on only financial measures. Kaplan and Norton, the developers of the Balanced scorecard, advocated that one should not only focus on financial aspects when setting goals for your company, but also on business processes, learning and growth and customer requirements.

The Balanced Scorecard

Financial Perspective

Aspects which this perspective includes for analysis are:

• Sales
• Costs
• Cashflow
• Profit
• Cost/benefit analysis. This type of analysis assesses the following types of calculations:
  • Projected direct and indirect costs of the products and services offered by the organisation.
  • Expected sales.
  • Cost of purchasing similar products and services from competitors.
  • Intangible benefits gained by the organisation or the client.
  • Any other assumptions, risks and foreseeable changes to be taken into account.

The Business Process Perspective

Analysis questions we could ask include:

• How well we do what we do (as reported in our management information and financial systems)?
• What is the impact of our in-house software systems?
• What is the impact of our office equipment and facilities?
• What is the impact of our relationships and interpersonal skills?
• What is the impact of our job and behavioural competencies?

The Customer Perspective

Businesses today have an increasing realisation of the importance of customer focus and customer satisfaction. If customers are not satisfied, they will eventually find other suppliers who will meet their needs. Poor performance in this area is a good indicator of a decline in the future, even though the financial picture at the moment may look good.

When doing strategic planning the focus is on external stakeholders such as customers, suppliers, advertising agencies and the recipients of Corporate Social Responsibility programmes. When doing operational planning, the focus is on internal stakeholders, such as internal suppliers, customers, and departments to be consulted with.

Analysis questions we could ask include:

• What key stakeholders have been surveyed?
• What do key clients think of your customer service and product quality?
• How is your reputation?

Learning and Growth (People Perspective)

The appraisal should cover:

• Levels of skill and expertise currently available.
• Future availability of the quantity and quality of people required.
• Morale.
• Climate of industrial relations.

Other Considerations

Manufacturing: The areas to be considered are:

• Productivity
• Overall plant capacity
• Degree to which plant is up to date and efficient
• Use of new technology
• Quality
• Ability to meet deadlines
• Effectiveness of planning and scheduling procedures

Distribution: Appraisals cover:

• Capacity and coverage of distribution channels
• Level of service to customers
• Distribution costs

Administration: The appraisal headings are:

• Use of information technology to process and disseminate data.
• Efficiency in processing data and providing information.
• Administration