Introduction to Balanced Scorecard
Introduction to the Balanced Scorecard and Performance Measurement Systems
1
Chapter 1
Introduction to the Balanced Scorecard and Performance Measurement Systems by Christian C. Johnson
From the beginning, it is important to understand why measuring an organization’s performance is both necessary and vital. An organization operating without a performance measurement system is like an airplane flying without a compass, a Formula One race car driver guiding his car blindfolded, or a CEO operating without a strategic plan. The purpose of measuring performance is not only to know how a business is performing but also to enable it to perform better. The ultimate aim of implementing a performance measurement system is to improve the performance of an organization so that it may better serve its customers, employees, owners, and stakeholders. If one “gets” performance measurement right, the data generated will tell the user where the business is, how it is doing, and where it is going. In short, it is a report card for a business that provides users with information on what is working well and what is not. With this in mind, Chapter 1 provides an overview of the various performance measurement systems used today by enterprises to drive improvements in overall organizational performance. A performance measurement system enables an enterprise to plan, measure, and control its performance according to a pre-
A performance measurement system enables an enterprise to plan, measure, and control its performance according to a pre-defined strategy
2
Balanced Scorecard for State-Owned Enterprises
defined strategy. In short, it enables a business to achieve desired results and to create shareholder value. The major performance measurement systems in use today are profiled below (in order of global adoption) and include • • • • • The Balanced Scorecard Activity-based Costing and Management Economic Value Added (EVA) Quality Management Customer Value
1
Chapter 1
Introduction to the Balanced Scorecard and Performance Measurement Systems by Christian C. Johnson
From the beginning, it is important to understand why measuring an organization’s performance is both necessary and vital. An organization operating without a performance measurement system is like an airplane flying without a compass, a Formula One race car driver guiding his car blindfolded, or a CEO operating without a strategic plan. The purpose of measuring performance is not only to know how a business is performing but also to enable it to perform better. The ultimate aim of implementing a performance measurement system is to improve the performance of an organization so that it may better serve its customers, employees, owners, and stakeholders. If one “gets” performance measurement right, the data generated will tell the user where the business is, how it is doing, and where it is going. In short, it is a report card for a business that provides users with information on what is working well and what is not. With this in mind, Chapter 1 provides an overview of the various performance measurement systems used today by enterprises to drive improvements in overall organizational performance. A performance measurement system enables an enterprise to plan, measure, and control its performance according to a pre-
A performance measurement system enables an enterprise to plan, measure, and control its performance according to a pre-defined strategy
2
Balanced Scorecard for State-Owned Enterprises
defined strategy. In short, it enables a business to achieve desired results and to create shareholder value. The major performance measurement systems in use today are profiled below (in order of global adoption) and include • • • • • The Balanced Scorecard Activity-based Costing and Management Economic Value Added (EVA) Quality Management Customer Value