Why is the balanced scorecard a management system? How does the system observe and evaluate company performance?

The balanced scorecard is a new performance management system that implements the organization's strategy into operational measurement indicators and target values ??from the four perspectives of finance, customers, internal operations, and learning and growth. The purpose of designing the balanced scorecard is to establish a performance management system that "realizes strategic guidance" to ensure that corporate strategies are effectively implemented. Therefore, people often call the balanced scorecard the most effective strategic management tool to strengthen corporate strategy execution.

Implementation of the Balanced Scorecard

Implementation Principles

A well-structured balanced scorecard should contain a series of linked goals and measures. The goals are not only coherent but also mutually reinforcing. Just like a flight simulator, it contains a complex set of variables and causal relationships, including leading, lagging and feedback loops, and can depict strategic orbits and flight plans.

Establishing a balanced scorecard that turns strategy into an evaluation criterion must adhere to three principles:

1. Causal relationship;

2. Outcome measurement and performance Driving factors;

3. Linked to finance.

These three principles connect the balanced scorecard to corporate strategy. Their causal chain represents the positive impact of current processes and decisions on future core results. The purpose of these metrics is to represent new work process specifications to the organization and establish a logical process of strategic priorities, strategic outcomes, and performance drivers to transform enterprise processes.

Design and implementation steps

The design of the balanced scorecard must first start with clarifying and transforming the organization's vision and strategy, listing the reasons for implementing the balanced scorecard plan, and guiding management process, with the ultimate goal of mobilizing the organization toward new strategic directions. The procedures include clarifying strategy and establishing first-class knowledge, focusing on focus, developing leadership capabilities, strategic communication and coordination, educational organization, setting strategic goals, calibrating plans and investments, establishing a feedback system, etc.

Kaplan & Norton (1993) summarized the design steps of the balanced scorecard. After clarifying the enterprise's vision and strategy, he displayed the four major aspects of the balanced scorecard: finance, customer, From aspects such as internal procedures and learning and growth, the next layer is to evaluate the key success factors of the enterprise, and the last layer is the key evaluation indicators that connect design and strategy.

Kaplan & Norton (1993) believe that in the implementation steps of the balanced scorecard, at the beginning of establishing the balanced scorecard, a "balanced scorecard implementation team" must first be established to summarize the company's complete Information and the company's short-term goals and long-term strategies, and then implement the balanced scorecard according to the following implementation steps: 1. Preparatory stage, 2. First interview, 3. First supervisor discussion meeting, 4. Second interview, 5 .Second supervisor discussion meeting, 6. Third supervisor discussion meeting, 7. Implementation stage, 8. Regular review.

In the actual application process, enterprises need to comprehensively consider the industry environment, their own advantages and disadvantages, their development stage, their own scale and strength, etc. Summarizing the successful implementation of balanced scorecard enterprise experience generally includes the following steps:

(1) Establishment and advocacy of the company's vision and strategy. The company must first establish a vision and strategy so that each department can use some performance measurement indicators to complete the company's vision and strategy; in addition, it can also consider establishing a department-level strategy. At the same time, a balanced scorecard group or committee is established to explain the company's vision and strategy, and establish specific goals in four areas: finance, customers, internal processes, and learning and growth.

(2) Design and establishment of performance indicator system. The main task at this stage is to find the most meaningful performance measurement indicators for the four specific types of indicators based on the company's strategic goals and the company's long- and short-term development needs. The designed indicators should be communicated from top to bottom, from internal to external, solicit opinions from all aspects, and absorb suggestions from all aspects and levels. After this communication and coordination is completed, the designed indicator system will be balanced so that it can fully reflect and represent the strategic goals of the enterprise.

(3) Strengthen internal communication and education within the enterprise. Use various communication channels such as regular or irregular publications, letters, bulletin boards, slogans, meetings, etc. to let managers at all levels know the company's vision, strategy, goals and performance measurement indicators.

(4) Determine specific figures for annual, quarterly, and monthly performance measurement indicators, and combine them with the company's plan and budget. Pay attention to the causal relationship, driving relationship and connection relationship between various indicators.

(5) Improvement and improvement of the performance indicator system. First of all, at this stage of the balanced scorecard, we should focus on whether the design of the indicator system is scientific and whether it can truly reflect the actual situation of the enterprise. The second thing to pay attention to is the incompleteness of the performance evaluation after adopting the balanced scorecard, so as to supplement new evaluation indicators so that the balanced scorecard can be continuously improved. The last thing to pay attention to is the unreasonable aspects of the designed indicators, which must be resolutely canceled or improved. Only through repeated and serious improvement can the balanced scorecard better serve the strategic goals of the enterprise.