The Balanced Scorecard
If you are watching this video then you’ve probably realized your role as an HR professional, formulated, implemented and evaluated your strategy and developed some knowledge of key financial terms. Now it’s time to really gauge the health of your organization. Historically, companies would use only financial metrics to gauge their performance. You know, those terms that we talked about earlier in Unit 1 like the balance sheet, income statement and cash flow statement. While all very important, we’ve quickly learned that using finances is not enough to gauge an organization's health.. The primary reason is that financial metrics only describe what has happened in the past. They don’t give us a full picture of how an organization is really performing.
Consider your favorite fast food restaurant (or in this case… maybe your least favorite). They may be making tons of profit. However, their business practices are outdated, their customers are unhappy and you don’t see any progressive changes anytime soon. But their making money so they must be doing something right. Right? Maybe not so right. The finances give us an unbalanced view of how an organization is really doing.
This is where the Balanced Scorecard comes in. It helps organizations to stand the test of time. In addition to the finances, the Balanced Scorecard looks at 3 other very important metrics.
The first is the customer: The customer perspective focuses on the people who actually patronize your business. These are the folks that buy your products. Customer satisfaction is key, especially in world where your business can quickly be tainted by a bad review. Some of the questions you may ask yourself to gauge satisfaction is: Are you getting new business? Are you keeping your current customers happy and how is your company viewed in comparison to others in your industry. Consider the talk about Popeyes vs. the Chick fil A chicken sandwich. Think about the way customers viewed each of these chains during this fiasco.
The second perspective to consider is internal business process. This looks at how smoothly and efficiently your business is running. How do you ensure that you are eliminating time wasters and maximizing time to increase efficiency. Taking a quality look at your internal business processes also ensure that you are considering what your customers really want. Think about how fast food restaurants have implemented mobile ordering. Maybe they’ve identified through looking at their processes that their customers don’t like waiting in line. Mobile ordering to make fast food…. WELL FASTER is a direct reflection of considering internal business processes. Again, one can assume that there were some opportunities for improvement for Popeyes as it relates to their business processes during the chicken rush.
The last perspective to consider is the learning and growth perspective. We’ve all worked for those companies before where you’ve learned a new task and when you question the why behind the task, you’ve likely gotten the response, we’ve always done it that way. This is the challenge that the learning and growth perspective hopes to overcome. It looks at your overall corporate culture and questions things like if employees are aware of the latest trends or if it’s easy for employees to collaborate and work together in an efficient and effective way. As an HR professional, whether or not employees have access to the same training and developmental opportunities may be top of mind.
In a nutshell, the balanced scorecard is a strategic performance tool that assesses how well an organization is doing in its financial and non financial performance indicators