Balanced scorecard
In 1992, Kaplan and Tobin's-q measures the ratio of the value of a company's assets to its market value. The excess value can be thought of as intangible assets. These figures are not measured by normal financial reporting.
The scorecard seeks to measure a business from the following perspectives:
- Financial perspective - this will be familiar to business managers and measures such as financial ratios, debtors or cash flow common.
- Customer perspective - seeks to measure aspects directly impact on customers such as the time taken to deal with calls, customer surveys, complaints or competitive rankings.
- Internal business perspective - looks at the impact of internal processes on the business - how long is spent prospecting? How much rework is required? How successful are we when tendering for new business?
- Innovation and learning perspective - How much revenue comes from new ideas? How many employee suggestions are there? How do we train staff?
The specific measures within each of the perspectives will be chosen to reflect the drivers of that business. The method can facilitate the separation of strategic policymaking from the implementation, so that organizational goals can be broken into task oriented objectives which can be managed by front-line staff. It can also help detect correlation between activities. For example, we might find that the internal business objective of implementing a new telephone system can help the customer objective of reducing response time to telephone calls, leading to increased sales from repeat business.
Kaplan and Strategic management
References
- Kaplan R S and Norton D P (1992) "The balanced scorecard: measures that drive performance", Harvard Business Review Jan ? Feb pp71-80.
- Kurtzman J (1997) "Is your company off course? Now you can find out why", Fortune Feb 17 pp128- 30
