The positive aspect of the Balanced Scorecard approach is that it looks past simple financial results to the overall big picture of what is going on in the organization overall. This is especially important in businesses that are publically traded since there is a perverse incentive to take actions that “improve performance” on financial statements in the short run but in the long run jeopardize the competitive advantage and growth of the company. An example of this would be a government contracting services firm that dumps employees to reduce their immediate short term cash obligation to pay salaries, but later finds itself unable to bid competitively on new service contracts because they lack the people with skill sets to fulfill the contracts. Under the balanced scorecard, leadership should consider the customers perspective, the financial perspective, the internal business perspective, and the innovation and learning perspective.
The customer’s perspective has to do with how the external public (customer) views the company. An example would be how people view their iPad in comparison to how people view their Dell Streak. If you are Apple, your relationship with iPad users is going well; if you are Dell, your relationship with Streak owners is pretty dispassionate. The status of the relationship with the customer is essential when considering the future of a business. Just as the current status of a marriage relationship can tell us about the future of that marriage relationship, the current status of the company’s relationship with their customer base can be useful in predicting the probable future status.
However, current reality is not 100% predictive of future reality. This is why it is important for companies to consider innovation and learning perspective. Just as people grow and change over time, products and services demanded by the market grow and change over time. To know if the relationship with the customer will last over time, companies must proactively seek out new knowledge and trends. In terms of competitive advantage, companies should strive to be a market leader instead of a market follower in order to achieve maximum financial results. An example of this is Apple. People didn’t know they needed the iPhone until after Apple shared this information with them. All the other companies that produced similar products after Apple could only compete on price, since their product was not considered innovative by the market.
Financial reality is still important, however. Only through adequate cash flow and profitability can the business continue to exist and respond to its internal and external publics. The internal business perspective is critical in evaluating overall business performance. A company such as Starbucks is selling a product, but it could also be argued that they are also selling an experience. Part of that experience is the customer’s interaction with the staff. If companies are not adequately investing in their employees through wages, benefits, training, and the creation of a positive work environment, it is probable that employees will become resentful over time and seek out alternant employment options. For a services or knowledge based company, it is ESSENTIAL that the internal perspective of employee relationship management is prioritized. If the company is more a manufacturing type of firm, the internal business perspective may emphasize productivity or manufacturing excellence.
Since the creation of the managed score card requires data, and data must be generated and organized, it would be good if healthcare entities had a way to integrate external quality measures (from Medicare and the Joint Commission National Patient Safety Goals) in their internal management and processes. I looked at Poudre Valley Health Systems, AlantiCare, and Mercy Health System’s performance measure on their Baldridge applications. One thing I found across the board was that they all commented on how they assure data integrity, security, and HIPPA compliance. The timeliness of the data collection and review are necessary in order for the information to be actionable. By reviewing performance on a frequent basis, health entities can take corrective action to address areas where they are not performing at an adequate level.
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