Database Reference
In-Depth Information
All line functions need to reevaluate their old metrics to ensure that they are current with
the customer-centric and customer-responsive stances of the twenty-first-century enterprises. We
discuss these issues next.
15.5 Balance Scorecard (BSC)
The BSC is a VBM system based on four distinct perspectives for evaluating the performance
of a company: financial, customer, internal, and learning. The BSC aims to provide a balance
between the external and internal measures of performance, between short- and long-term objec-
tives, between financial and nonfinancial measures, and between lagging and leading indicators.
It is not limited to being merely a measurement and control system but has actually developed
over the course of time into a full-featured management system for the successful implementa-
tion of a company's strategy.
As discussed in Chapter 1's “Knowledge as the New Capital,” in this postindustrial and post-
modern era of information, the focus of capital and investments has changed dramatically. In the
industrial era, all measures and managerial assessments were geared toward the efficiency with
which financial capital could be allocated for capturing as quickly as possible the economies of
scale for maximizing the return on capital employed (ROCE). In this postmodern computerized
era, however, a company's competitiveness resides primarily in the collaborative systems, pro-
cesses, and people that enable it to be flexible and reconfigure rapidly in response to the changes
in the marketplace.
It should be noted that a company's emphasis is not on the capability to ingest the latest tech-
nology per se, because that would continue to change in future too. The emphasis is related more
to the capability to confront any changes in the market with a strategy that will not only make
the customers continue to value the company's products and services but also differentiate them
effectively from those provided by the competitors. This is the subtle reason why a few years back
General Motor's much known foray into highly automated manufacturing facilities to beat the
Japanese on productivity and quality was not very successful.
Thus, a company needs a management system to assess and evaluate its strategy in terms of
competitiveness and performance in the future. There is also the important need for the company
to be able to dynamically monitor the progress and performance of the execution of these strate-
gies, which will then enable the company to administer any corrections or adjustments based on
the real-time operational feedback received from such a system. The BSC is precisely such a stra-
tegic management system that enables an enterprise to monitor and manage the execution of its
value-adding and value-creating strategies effectively. Enterprises also need an information system
that would empower them to implement the BSC.
BSC provides companies with a framework for translating the company's vision and strategy
into a coherent set of performance measures. BSC derives the objectives and measures of the value
determinants or the corresponding performance drivers based on the vision and strategy of the com-
pany. As shown in Figure 15.3, the BSC framework is constituted of the following four perspectives:
◾
Financial
◾
Customer
◾
Internal business processes
◾
Learning and growth
