The strategic management and planning system used by organization is known as balanced scorecard (BSC). The balance scorecard is often used for purpose such as-

1. To communicate well about what the organization wants to accomplish
2. To align the daily work of employees with organizational strategy
3. To prioritize on product, project and services level
4. To monitor and measure the progress of organization towards the strategic goals

In order to identify the downfall in the internal function and to improve the performance balance scorecard is used as a performance metrics. It is very useful to provide feedback to the employees about their performance and outcomes. The crucial step of balance scorecard is data collection, the realistic information gathered is further interpreted by executives and managers in the company to provide a guideline for decision making in the future.

Explain Kaplan and Norton balanced scorecard

In early 1990, Kaplan and Norton developed balance scorecard model to help firms in measuring their performance using data (both financial and non-financial). The aim of balance scorecard is ‘to align the work activities of organization to its vision and strategy, to improve communication and to monitor business performance with respect to strategic goals to be achieved’. According to the definition of balanced scorecard, it consists of relevant aspects of financial and non-financial information which supports the efficient business management.

Background to the Balanced Scorecard:

1. Balanced scorecard states and define that a broad picture of status of organization can be predicted using several relevant measures. 
2. Instead of single measure organization should used composite scorecard which consists of different relevant measures linked with the goals and performance of the organization.
3. Four perspectives are important and should be considered during analysis- customer, finance, internal, learning and growth.
4. Critical measures should be selected by organization of each of these perspectives. 

What are the 4 perspectives of balance scorecard?

The perspective of balance scorecard means to cover almost all the business aspects of the organization. It consist of the financial front, the customer point of view, the process which is internally follow, the learning as well as growth the organization is expecting and ongoing. The four perspectives of balance scorecard are explained in detail as given below:

1. The Financial perspective

The obvious objectives of any organization include profit and revenue. The financial perspective of balance scorecard deals with the financial performance and health of organization. The financial objective popularly includes- cost saving and improved work efficiency, more profit margins and addition in revenue sources.

2. The Customer perspective

The customer focused organization always work on needs and wants of customer. If an organization wants to achieve the set financial goal then it has to know what need to be delivered to the customer. From customer perspective the company can set objects such as- improvement in customer service and satisfaction, increase market share and hike in brand awareness.

3. The Internal Process perspective

Now as the financial objective is set and company is aware about the wants of customer, then comes the processes which need to put properly to reach the set financial and customer related goal. Here the organization has to set the internal operational objectives. The company has to decide the actions which must be executed in order to dive the performance. The internal process objective might cover- work process improvement, quality optimization and improvement in capacity utilization.

4. The Learning and Growth perspective

This perspective is related to intangible drivers of organizational performance. The spectrum of this perspective is very broad and thus segregated into parts such as human capital, information capital and organizational capital. The objectives of learning and growth perspective are- assessment of skills, talent and knowledge, information about safety system, infrastructure investment and data protection system, updates linked to staff engagement, employee alignment, knowledge management and teamwork.

Balanced Scorecard Model and Approach

The balance scorecard model has four parts, which are the perspectives such as, financial perspective, customer perspective, learning and growth perspective and internal business processes perspective.

Each perspective further has their set objectives, the measures used to monitor the objective, the set target based on small time period and the initiatives taken by the organization.

The balance scorecard approach is quite critical and organization should follow the eight steps given below:

1. Preparation: The preparation is the first step organization should take before using balance scorecard model. Here, the organization should identify the business unit for which the balance scorecard is appropriate. It has to define the business unit which has its own financial measures, customers, production and distribution facilities.

1. First round of interviews: In the 1st round of interview, the facilitator takes interviews of managers for around 90 minutes each. The purpose of these interviews is to obtain information about performance measures and strategic goal of the business unit.

1. First executive workshop: A top management team and balance scorecard facilitator conduct workshop together to link measures with mission and strategy of organization. Video interviews of customers and shareholder can be conducted to take necessary inputs. 

1. Second round of interviews: A tentative balance scorecard is formed based on the executive workshop and interviews of each senior executive working in the business unit.

1. Second executive workshop: This is a brainstorming session conducted with middle management, senior management and their subordinates. The debate results into development of a implementation plan to reflect strategy in the operational stage.  

1. Third executive workshop: Stretch targets are developed for each measures. After the development of all the measures the team discusses to agree and finalize them. Once this is done, an implementation plan is ready for execution.
2. Implementation: A team implements the plan and links the performance measures with the database to communicate the balance scorecard in the organization. It encourage that at decentralized units a second-level metrics is developed.

1. Periodic reviews: Managers view and monitor the balance scorecard quarterly or monthly. It is also re-visited annually to discuss on the future strategic planning process.

Balanced Scorecard advantages and disadvantages

Balanced scorecard is a popular approach which has its own set of advantages and disadvantages. It helps organization in certain aspects but it gets criticized by experts for the difficult changes organization has to put up to implement balance scorecard. 

Advantages of Balanced Scorecard

1. It builds up the necessary focus required for the company to create a extraordinary performance.
2. It integrates variety of business programs.
3. It makes the organizational strategy operational by reflecting it in performance targets and measure.
4. It connects the corporate level with the local managers to see what actions have to be taken to improve organizational efficiency.
5. It improves the communication within the organization and provide a feeling of togetherness among employees.

Disadvantages of Balanced Scorecard

1. It increases number of performance indicators which can be confusing for the employees.
2. It is very difficult to manage all the four perspective and create a required balance.
3. Although the employees put hard work to make internal process effective, the senior management will still look for results in terms of instant financial performance.
4. The balance scorecard system has to be updated regularly to make it relevant to the given point of action.

What is the purpose and objectives of balanced scorecard?

It is common concern about why organization should use balance scorecard? There are some purpose and objectives due to which balance scorecard is generally used in the organization.

Purpose- The main purpose of balance scorecard is to integrate the organization on one platform. It also empowers the employees who can now contribute in the organizational system through their thoughts and actions. The balance scorecard has a purpose of measuring both tangible and non-tangible aspects of performance. The balance scorecard serves a purpose of overall improvement of organization by taking care of four important perspective of organization.