Fundamentals: Balanced Scorecard

With the methods of the Balanced Scorecard (BSC) management is supposed to turn its attention away from a traditional business view that considers primarily financial aspects and instead consider all relevant parts to achieve a more balanced picture. The more inclusive vision will then enable to a greater degree the successful application of specific measures to realize the company's goals. Based on a particular strategy critical success factors will be determined and a scorecard designed that contains key performance indicators. The indicators illustrate how far the strategic goals have been realized. In a continuing process goals and the fulfillment of goals will be checked and controlled through correcting measures.

The strengths of the BSC however lies in the fact that environmental factors or life-cycle assessments may be considered as much as, e.g., stakeholder views of sector specific factors. For each of the perspective scores will be chosen which will measure to which degree the strategic goals have been realized. This permits evaluation of how far the business strategy, measured in financial terms, depends on mainly three other company-internal conditions. A BSC is based on a cause-and-effect diagram which demonstrates how different measures support the strategy as a whole. The diagram will be used to develop a business vision. The scores in the BSC make it possible to track the development of the business vision. In this way the BSC enables the management not only to review the financial aspects of the company but also to use structural early indicators to enhance success.

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