MeasureProductivity

Imagine that you are a top manager who was a sign of the task of measuring productivity of certain company.  What is measurement of productivity, and what does it have in common with measurement of performance?  What should you start with?  What is the right way to select indicators which will signal about success of failures of the business?  Moreover, evaluation of business productivity should be communicated with strategic goals.  Making profits is not enough to call business productive.

Advantages of BSC

Of course, there are no universal answers to these questions.  Every company is individual and thus requires individual approaches to evaluation of performance and productivity.  However, use of effective and well reputed performance management system is a must.  If you should communicate strategy with operational management and Balanced Scorecard is exactly what you need.

On the one hand, you can use balanced scorecard as a performance management tool.  Balanced scorecard evaluates key performance indicators in four categories: financial, customer, internal processes, learning and growth.  Each category has a number of indicators which characterize key success factors in a certain business area or direction.  As a result, you will have performance management evaluation index expressed in figures or percents.  But what is more important you will have figures measuring all key success factors.  Thus, it will be possible to locate week points in the work of the company.

4 perspectives of Balanced Scorecard

But if your task is to communicate operational in strategic management, or in other words, puts strategy into action, and at the same time evaluate current performance of the company, balanced scorecard it just an ideal solution.  Strategy maps will show cause and effect ties between different categories and indicators of balanced scorecard.  Thus, implementation of financial goals is impossible without improvements and implementation of strategic goals in customer or learning and growth categories.  This makes balanced scorecard a unique performance management tool.  At the same time, balanced scorecard is a great tool for strategic planning.

It is important to remember that balanced scorecard is not just and magic management system which all of a sudden solves any business problems.  Balanced scorecard will not substitute strategy either.  But it will surely help top managers and strategic planners to clearly see what should be done to drive company to its strategic goals.

Measurement of business product in a tea will give answers to many questions, including two once concern in implementation of the company strategy.

Very often implementation of balanced scorecard system fails because of different reasons.  At the same time mistakes made in development of strategy and selection of key performance indicators are rather typical.  As they can be systemized they can surely be avoided.  Balanced scorecard is used as a strategic management tool that communicates operational in strategic management that puts strategy into action.  It doesn’t matter in what business area the company operates.  Balanced scorecard can perfectly do its job in case a number of certain requirements and norms is observed.

Critical success factors for competitive advantage

Some business owners use balanced scorecard to implement strategic goals while others use it as a measurement tool.  Very often, strategic goals concern improved financial results, like increase of market share, company value, net income and cash flow.  At the same time, balanced scorecard is very effective performance management tool that can evaluate business productivity.

It happens that business owners and top managers never know that their business can earn more than it currently does.  The company gets profits, employees get competitive salary, shareholders have sufficient return on their investments.  But all of a sudden, having used balanced scorecard for a while it turns out that the business can do more, and that company potential is not used by 100%.

What is an effective KPI?

Balanced scorecard is a great tool to locate strengths and weaknesses.  In such a way, both company top management and ordinary employees can understand what needs to be improved to implement strategic goals.

Balanced scorecard will create strategy maps which a very easy to read.  Just imagine that every employee in the company can understand peculiarity is of the company strategy.  Moreover, ordinary personnel can be aware of own contribution to implementation of strategic goals.  This is very important for an effective work of balanced scorecard.

In measurement of business productivity it is important to find the right indicators, also called key performance indicators.  If you measure secondary things you will operate secondary information which is nothing to do with critical success factors for your business.  That’s why, the right choice of KPIs is a precondition for success.  At least, top management will operate the right data and thus it will be able to make the right decisions.

It is important to remember that balanced scorecard is not a magic tool.  It will not substitute strategy, and it will not make decisions.  It is just a tool in humans hands.