Tool vendor ratings, not typically found on the Balanced Scorecard, can really help organizations save time selecting business partners and be able to work with them more consistently. The balanced scorecard is a strategic management method that emphasizes understanding the overall, complete situation in order to better make important decisions. By using this framework, organizations can effectively define their goals while understanding many aspects of overall performance. This concept is not a new one and has been applied to many parts of organizational work, from performance management to planning and maintenance.
Basically, the Balanced Scorecard consists of four integrated perspectives: Finance, Marketing, Development, and Operations. In proponents Kaplan and Norton’s original terminology, these were financial, customer, learning and growth, and internal business process perspectives. As can be seen, these cover all the activities of an organization and therefore one can rightly claim to be able to measure and integrate all these activities.
In an ideal implementation, the scorecard should be developed from the top down. That is, everything will start with a mission or vision for the entire organization, which is a long-term goal. Then, based on this vision, smaller and smaller goals and objectives can be developed as needed. Each department, group, team, and employee is ultimately assigned tasks to achieve specific goals so that they work together to achieve the vision. This really ensures unity within the organization as everyone is working towards the same goal. Consistency will also be greatly improved because, ideally, everyone will know why they need to do what they are assigned to do.
Even in less than ideal implementations, which require the use of a bottom-up approach to some extent, the balanced scorecard is a powerful tool. On the one hand, it can bring clarity to an organization by forcing management to clearly decide on a set of goals and then ensuring that everyone in the organization understands this.
Another reason why the Balanced Scorecard is useful is that it provides an effective way to monitor these goals from all angles. Performance can then be measured against ideal or desired outcomes using relevant metrics. Progress towards these goals can be determined and will be tied to performance, whether or not there is significant progress. This is in stark contrast to some of the vague, vague management and performance tracking policies that have plagued many organizations since the dawn of mankind.
Using a balanced scorecard, tool supplier selection and relationships can be greatly improved. Again, scorecards can be used to determine a complete picture of the past performance of these suppliers. Smooth working relationships can then be maintained by managing the performance of the appropriate departments (again using the scorecard approach or concept). This flexible, powerful tool should be in the arsenal of any smart strategic manager, as it can both clean up problems and make them easier to track and improve.