Balanced Score Card – A Better Approach For Maximizing Performance And Maintaining Results.
If you are a part of an accounting or check department of any major or even minor company, you would probably have heard of a balanced score card. What is a balanced score card you ask? Well, if you aren’t aware of the term itself, you would surely be aware of the principle behind it. Remember your SAT scores Rather than being absolute values like say 95 out of a hundred, they were typically presented in percentiles. This is one instance of a balanced score card. Another instance could be the percentile rank of your status in a class as compared to a percentage rank.
Well, it is not exactly an easy concept to explain, but allow me to try. When anything needs to rated, there is usually a principle for the rating. In the older days, when things were more linear, this happened as a linear calculation. But, as the business environment and businesses themselves got more and more complex, other variables started influencing business operations. In order to arrive at the true picture, these too needed to be taken into consideration before a proper study could be made. This was the idea behind a balanced score card.
To take a real life example let us assume that the sales figures of a particular product are being evaluated across the world. Now the sales would surely not be consistent across the world. But the sales managers would surely have tried. There could be external business environmental factors influencing the sales in one or more regions.
For instance, the business climate in Brazil could have been worse than the climate in the US. At the same time, the resources available in the US could have been greater than in Latin America. Similarly, the market in China could have been impacted by the presence of low cost me too operators. While the technology incompatibility could have made the product dearer in markets such as Japan.
Now no rational manager would expect the sales figures from all over the globe to be consistent. Which is why a tool such as a balanced score card comes into the picture. A balanced score card weighs the factors influencing an action (in the above case sales) against the availability of factors that help or obstruct it.
Which is why, when a balanced score card analysis is done, the sales figures for Latin America could prove to be better than those for America due to the weightage awarded to the factors influencing sales. A balanced score card is just one way to do so. There are others as well. But their objectives are consistent. Think of a balanced score card as some sort of a handicap for resource and opportunity poorer markets.