With the current situation of the economy, more and more entrepreneurs are starting to focus on how they can strengthen their companies and successfully manage their business funding. In recent years, business owners started use various gauges such as return on investment, operating income, and economic value to evaluate and appraise the status of the company. Despite these, however, the question on whether or not these gauges will really provide an objective assessment of the company remains.
The use of these financial measures is important in every business. However, it should be noted that in order to get a better picture of the business, one must also use metrics that are not focused on the financial aspects of the organization.
One of the ways to put together a better picture of the company is by using a Balanced Scorecard which utilizes the right combination of financial and non-financial gauges.
In a nutshell, the Balanced Scorecard refers to a system that attempts to provide the company owners with an accurate status of the organization. It uses a variety of financial and non-financial metrics that gauges the performance of the company. These include:
1. The financial component which measures the cost reduction, revenue growth, and investment returns of the company;
2. The customer component which looks into the market share, loyalty of customers as well as their satisfaction and profitability;
3. The Internal Business Process which tries to find effective methods for the company that will lead to an efficient way to meet its goals; and
4. The learning and growth component that focuses on skills and training of employees, knowledge on information technology and the efficiency of processes concerning administration.
Initially, looking at these components may appear overwhelming. But since the Balanced Scorecard is only meant to cover those gauges that show the company's strategy, the reality is that it is far simpler. Instead of using every measure that is available, those who are tasked to develop a particular scorecard should limit their list with those that look into the fulfillment of the company's vision, goals and objectives. Thus, one is expected to first create or find a specific strategy that he or she wants to measure.
Using a Balanced Scorecard system will maximize a company's efficiency not only in managing business funding but also in strengthening the entire organization. Because it seeks to measure the progress of the company towards its objectives, the Balanced Scorecard will give entrepreneurs an opportunity to align the business into its targets. This solves one of the most common problems in the field - the tendency for some companies to develop a strategy and then forget about it for years.
The use of these financial measures is important in every business. However, it should be noted that in order to get a better picture of the business, one must also use metrics that are not focused on the financial aspects of the organization.
One of the ways to put together a better picture of the company is by using a Balanced Scorecard which utilizes the right combination of financial and non-financial gauges.
In a nutshell, the Balanced Scorecard refers to a system that attempts to provide the company owners with an accurate status of the organization. It uses a variety of financial and non-financial metrics that gauges the performance of the company. These include:
1. The financial component which measures the cost reduction, revenue growth, and investment returns of the company;
2. The customer component which looks into the market share, loyalty of customers as well as their satisfaction and profitability;
3. The Internal Business Process which tries to find effective methods for the company that will lead to an efficient way to meet its goals; and
4. The learning and growth component that focuses on skills and training of employees, knowledge on information technology and the efficiency of processes concerning administration.
Initially, looking at these components may appear overwhelming. But since the Balanced Scorecard is only meant to cover those gauges that show the company's strategy, the reality is that it is far simpler. Instead of using every measure that is available, those who are tasked to develop a particular scorecard should limit their list with those that look into the fulfillment of the company's vision, goals and objectives. Thus, one is expected to first create or find a specific strategy that he or she wants to measure.
Using a Balanced Scorecard system will maximize a company's efficiency not only in managing business funding but also in strengthening the entire organization. Because it seeks to measure the progress of the company towards its objectives, the Balanced Scorecard will give entrepreneurs an opportunity to align the business into its targets. This solves one of the most common problems in the field - the tendency for some companies to develop a strategy and then forget about it for years.
In case you are still wondering how you can start with the formulation of your own Balanced Scorecard, here are five steps that you'd want to try:
1. Experiment first on a single business unit before adopting it to the entire organization;
2. Hire a professional who can help you and your officials in the creation of a Balanced Scorecard;
3. Keep in mind the company's strategy, objectives, and goals that you want to measure;
4. Get feedback from other departments as regards your measures and its corresponding objectives; and
5. Assign a group of individuals who will focus on the creation of the process that will measure the health of your organization.
More detailed information and useful advice can be found at http://www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.
Article Source: http://EzineArticles.com/?expert=Mark_Favre
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