Performance Management – A System for Strategy Execution
The "Balanced Scorecard" represents a powerful tool for measuring results and provides managers with a comprehensive framework for translating the strategic objectives of their company into a coherent set of performance indicators. This instrument is widely used today by the best performing organizations in the world.
“You cannot manage what you cannot measure” said Peter Druker, the father of modern management, highlighting the importance of obtaining relevant information about the way the processes and activities of an organization are undertaken and about the results they produce.
Traditionally, organizations have used in the past various financial data in order to understand and communicate their performance. Nowadays, it is widely acknowledged the fact that this type of information is not enough in order to generate a correct image about the past results and the future results of an organization in all it aspects.
Based on these realities Robert Kaplan and David Norton proposed in 1992 the concept of “Balanced Scorecard” which represents a new system for measuring results that provides managers with a comprehensive framework for translating the strategic objectives of an organization into a coherent set of performance indicators.
Being more than a measurement system “The Balanced Scorecard” represents a management system that allows radical improvements in very important business areas like product development, market development, internal processes and customer service. It offers managers the opportunity to focus on four perspectives. It complements the traditional financial perspective with the customers’ perspective, the internal processes perspective and the learning and development perspective. In this way managers get a much better image about the company’s results, about the possible future results and about the degree of achieving the operational and strategic objectives.