BALANCED SCORECARD developed by Drs. Robert Kaplan (Harvard Business School) and David Norton is a management system (not only a measurement system) that enables organisations to clarify their vision and strategy and translate them into action.
It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.
The Balanced Scorecard and Measurement-Based Management
The balanced scorecard methodology builds on some key concepts of previous management ideas such as Total Quality Management (TQM), including customer-defined quality, continuous improvement, employee empowerment, and primarily, measurement-based management and feedback
The BALANCED SCORECARD suggests that we view the organisation from four perspectives, and to develop metrics, collect data and analyze it relative to
each of these perspectives:
1. The Learning & Growth Perspective
2. The Business Process Perspective
3. The Customer Perspective
4. The Financial Perspective
Double-Loop Feedback
In traditional industrial activity, "quality control" and "zero defects" were the watchwords. In order to shield the customer from receiving poor quality products, aggressive efforts were focused on inspection and testing at the end of the production line. The problem with this approach -- as pointed out by Deming -- is that the true causes of defects could never be identified, and there would always be inefficiencies due to the rejection of defects. What Deming saw was that variation is created at every step in a production process, and the causes of variation need to be identified and fixed. If this can be done, then there is a way to reduce the defects and improve product quality indefinitely. To establish such a process, Deming emphasised that all business processes should be part of a system with feedback loops. The feed-back data should be examined by managers to determine the causes of variation, what are the processes with significant problems, and then they can focus attention on fixing that subset of processes. The balanced scorecard incorporates feedback around internal business process outputs, as in TQM, but also adds a feedback loop around the outcomes of business strategies. This creates a "double-loop feedback" process in the balanced scorecard.
