A Brief Insight Into the History of Balanced Scorecards and Current Software Available for Implementation
Jonathan A. Garrell
11.28.2008
The concept of a Balanced Scorecard was first introduced in 1992 by Robert S. Kaplan and David P. Norton. In 1996, after years of compilation, the two men published the book The Balanced Scorecard.
The “1st Generation” of Balanced Scorecards consisted of simple tables broken down into four sections, and then selecting five or six ways to better measure the efficiency of each section. The four sections included Financial, Customer, Internal Business Processes, and Learning & Growth.
During the mid 1990’s, the Balanced Scorecard evolved from its original form. These “2nd Generation” Scorecards used a “strategic linkage model”. This means that the five or six ways to better measure the efficiency of each section, as mentioned with the “1st Generation”, were inter-linked to better show their relationship with one another.
By the late 1990’s, the current state of the Balanced Scorecard had taken form. The “3rd Generation” or “Destination Statement Driven” Scorecards used a “work-backwards” approach. In other words, the “Destination Statement” was derived before the creation of the Balanced Scorecard in order to more accurately select the proper measures for the Scorecard and desired outcome for these measures. To date, some form of a Balanced Scorecard is used by nearly 60% of Fortune 500 companies. Due to the widespread popularity, there is a website devoted to everything you could ever want to know about Balanced Scorecards, including where to attend Balanced Scorecard seminars.
So once a company decides to implement a Balanced Scorecard, the question then arises, what is the best way to go about this implementation? There are many options to choose from, considering the growth in popularity of the Scorecard over the past two decades. These options range from the most complex forms of application software to the most basic, with prices ranging accordingly. Let’s examine three possible solutions for applying a Balanced Scorecard into a business.
If your company is looking for software specifically designed for the development of a Balanced Scorecard, ActiveStrategy, Inc, offers an ActiveStrategy Enterprise software application. Version 7.0 of this software was released in October 2008. The Personal Goal Management (PGM) area of the software allows the company to easily track employee goals with the overall goals of the corporation. This provides a concrete way to show employees the effect that their individual performance will have on the overall performance of the company. Also, PGM allows an unlimited number of personal scorecards to be created which can greatly assist in the evaluation of an employee’s individual long-term performance. Another valuable part of the software is the ability to create Stoplight Charts. Stoplight Charts provided executives and managers the ability to easily evaluate the performance measures across multiple divisions, units, or geographical areas. As the name implies, the concept of a stoplight, using green, yellow, and red indicators, is used in order to determine the effectiveness in which a specific division is meeting certain criteria.
Next, KPIfix is another version of application software designed specially with the concept of a Balanced Scorecard in mind. KPIfix is composed of Objectives, KPI Performance, and Sub-KPI. The Objectives, for example, may be the four basics sections (Financials, Customer, Internal Business Processes, and Learning & Growth) or any variations depending on the needs of your organization. KPI Performance is the goal of the organization. For example, if your organization is looking to increase profits or maximize shareholder’s return on investment; those would be the organization’s KPI Performance headings. Finally, the Sub-KPI section entails ways in which the KPI Performance can be achieved. Using the example of increasing profits, the Sub-KPI could be decrease cost and/or increase sales to new markets. This software allows full access for the organization to customize each section to match its specific needs. While not as in depth as the ActiveStrategy Enterprise software application, KPIfix provides a solid basic foundation for a smaller company to implement a Balanced Scorecard.
Finally, there is the cheapest and most basic option. This option includes using basic software such as Microsoft Word, Microsoft Excel, Microsoft Access, etc. to establish the parts of a Balanced Scorecard. Although this option is more time consuming to first establish due to the need to manually create charts, graphs, tables, etc., it can be a valuable asset to an organization that does not wish to purchase a high cost commercial Balanced Scorecard software package or service.
No matter what form an organization’s Balanced Scorecard takes, one thing is for sure: implementing a Balanced Scorecard into an organization can prove to be extremely valuable when trying to evaluate the performance of individuals or the organization as a whole. A Balanced Scorecard can track the smallest or largest areas of a business which allows all aspects of the organization to be accounted for in the overall evaluation of the organizations performance.
Works Cited
"ActiveStrategy Launches ActiveStrategy Enterprise v7.0." IPNews. Oct. 2008. 25 Nov. 2008. .
"Balanced Scorecard." Wikipedia. 25 Nov. 2008. .
"Features & Screenshots." KPIfix. 24 Nov. 2008. .
About the Author:
Jonathan is currently a junior accounting/finance student at West Chester University of Pennsylvania .
Article Source: ArticlesBase.com - A Brief Insight Into the History of Balanced Scorecards and Current Software Available for Implementation