The Balanced Scorecard methodology takes a company's overall strategy and renders it into specific goals and activities that are then quantified. By translating these activities into numbers and then an overall score, the company's success or failure at attaining its goals can be determined. A company can analyze its performance and uncover useful information by investigating its scorecard.

The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.

The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:

• The Learning & Growth Perspective
  
• The Business Process Perspective
  
• The Customer Perspective
  
• The Financial Perspective
  

You can't improve what you can't measure. So metrics must be developed based on the priorities of the strategic plan, which provides the key business drivers and criteria for metrics that managers most desire to watch. Processes are then designed to collect information relevant to these metrics and reduce it to numerical form for storage, display, and analysis. Decision makers examine the outcomes of various measured processes and strategies and track the results to guide the company and provide feedback.

So the value of metrics is in their ability to provide a factual basis for defining:

• Strategic feedback to show the present status of the organization from many perspectives for decision makers
• Diagnostic feedback into various processes to guide improvements on a continuous basis
• Trends in performance over time as the metrics are tracked
• Feedback around the measurement methods themselves, and which metrics should be tracked
• Quantitative inputs to forecasting methods and models for decision support systems

A major consideration in performance improvement involves the creation and use of performance measures or indicators. Performance measures or indicators are measurable characteristics of products, services, processes, and operations the company uses to track and improve performance. The measures or indicators should be selected to best represent the factors that lead to improved customer, operational, and financial performance. A comprehensive set of measures or indicators tied to customer and/or company performance requirements represents a clear basis for aligning all activities with the company's goals. Through the analysis of data from the tracking processes, the measures or indicators themselves may be evaluated and changed to better support such goals.

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