Balanced scorecard: strategic performance measurement framework

Balanced scorecard approach is a method of evaluating a business that encompasses a wider range of metrics than just the financial (QuickMBA, 2010). The approach as originally outlined by Norton and Kaplan includes the customer, business processes and learning & growth as well as financial these four are developed with objectives, measures, targets and initiatives in mind, so that they can be evaluated as the 'scorecard' part of the balanced scorecard approach.

The most conventional element is the financial element, which consists of many common financial objectives. These include sales, profits and expenses. Sales can be measured in both revenue for the time period, and revenue period-over-period. The same can be done with profit, and there are three different types of profit that can be measured (gross, operating and net). The same approach can be taken with expenses, and there can be different categories of expenses including managerial. Other financial objectives can include those relating to capital structure, or if the firm goes public perhaps share price could be used as well. Heavy Henry's can set objectives for all of these. The initial objectives for the launch of the business will be based on very loose estimates and therefore not especially important, but after the first period all objectives can be developed with past achievements in mind, giving meaningful and accurate objectives. Once the objectives are set, the initiatives to deliver these targets will be formed.

One of the most important elements of the balanced scorecard as a strategy tool is that it integrates all four of its categories so that the strategy for each will be dependent on the strategy for the others as well (Ronchetti, 2006). A number of customer-focused objectives exist, in terms of delivering a very high level of customer satisfaction. Indeed, customer satisfaction is going to be one of the measures, based on customer surveys that will be available at the restaurant. Other customer metrics will include repeat visitors, and because Heavy Henry's is going to be a destination restaurant the number of out-of-town guests as well. These will be measured in part by surveys and through random sampling of guests as well. The survey will also investigate the contribution that Heavy Henry's is making to another objective -- changing the way Americans think about food.

Process are critical, especially for Heavy Henry's as having the best barbeque on the planet is a key objective. This can be broken down into two types of objectives -- service objectives and product objectives. The former can be approach in terms of metrics such as average wait time for a table, average service time, wait time before food, and meal preparation time. Product measures will reflect quality as rated by customers, and by the number of awards the food wins in competitions. Other process measures will include the amount of food waste generated, and it is hoped that this will be minimal.

Learning and growth objectives are important, since Heavy Henry's wants to have a staff that is among the best-trained in the business. The company's code of values is an important element of the training process. Measures will include the knowledge level of the staff with respect to preparation techniques, ingredients, and the code of ethics. Service staff will also be tested on their beverage pairing knowledge as well. Management will be measured on their knowledge not only of the restaurant but also of the competition -- they must always know what the competition is doing to ensure that they are consistently outcompeting.

Using the balanced scorecard approach, we can see how excellence in one area supports excellence in all the others. A well-trained staff that is knowledgeable is going to deliver superior customer service levels. Satisfied customers will become repeat customers, and this will improve the company's revenues. Combine increased revenues with process improvements and profits will increase. More profits means more money to train, to buy better equipment, and to otherwise invest in improving the business. The interconnectedness of all of these different facets is essential to understanding why the balanced scorecard is such a valuable strategic option. The all-round approach to excellent at Heavy Henry's is going to reflect in the organization meeting all of its goals, because the goals are going to be mutually supportive of one another. The sample balanced scorecard looks as follows: