DEFINITION of 'Balanced Score Card (BSC)'

A balanced score card (BSC) is a strategic planning and management system used extensively in business and by organizations worldwide. The benefits of the system include increasing focus on results, aligning business activities with organization strategy and improving performance and communications.

A balanced score card proposes that the organization should be viewed from four perspectives, with metrics developed, data collected and analyzed for each of them. These four perspectives are as follows: 

  1. Financial
  2. Customer
  3. Internal Business Processes
  4. Learning and Growth

BREAKING DOWN 'Balanced Score Card (BSC)'

The first balanced scorecard was created by independent consultant Art Schneiderman at Analog Devices in 1987. The concept was popularized by Dr. Robert Kaplan and David Norton in the early 1990s.

How the Balanced Score Card Helps Companies

BSC is used by organizations is a means to better communicate the goals the team needs to achieve. This management system allows workers to better align their daily tasks and efforts to support the organization’s strategy. It can be used to assess how a team or operation is advancing to meet company goals. This is also means of clearly seeing which projects, services, or products should be prioritized for development and work.

The BSC system is seen as a kind of roadmap that lays out the direction and purpose of the organization’s strategy and where different components fit. That includes what the company’s mission is, the vision of what the organization hopes to achieve, what the underlying core values are, the ways that performance will be measured, and the company's focus for objectives and forward action.

Using the BSC system is a way for an organization to plan its future beyond short-term, immediate gains and goals such as driving up immediate revenue. Instead of only thinking of ways to turn a quick dollar, the BSC is a type of guidance that speaks to how the organization can evolve, scale up, and achieve greater ambitions.

The organization’s progress can be measured against what the BSC has outlined, or key performance indicators monitored to show that progress. This can be done with business management software and apps that gather data and performance information and sends it to the most appropriate parties to take action. A key difference between using past financial information and the BSC system is financial records provide a look at the past and to some extent assumptions on future progress. BSC, on the other hand, is about forming a proactive, and reactive framework for growth or many quarters and year to come.

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