Balanced scorecard banking is quite different from the other scorecards that companies use to measure how they are performing in terms of CTQs or Critical to Quality standards. Any business needs to have a standard of reference of what is right and what is wrong. These standards are always based on the specifications of the end users or customers, as well as the financial impact a process will bring.
There are many ways to measure performance. In many manufacturing industries, performance is measured in terms of productivity and quality of the output. In some, like the Business Process Outsourcing industry, performance is measured in terms of average handle time. In almost all industries, though, the ultimate measurement of a process or business output is customer satisfaction.
The results of these numbers are then translated into percentages and are computed against the other metrics called KPIs or Key Performance Indicators. To achieve a balanced scorecard, one must ensure that the average of all the metrics combined is acceptable. Usually, these metric numbers are converted into weighted averages. Some are converted into scale—the most popular of which is the 5 point scale—and are then averaged to see if the results are lagging in terms of basic standards held against the target.
In the financial world, balanced scorecard banking is a determinant of how well a business has placed a strategy in terms of finances. This means that the strategy should be driven across all areas of operations, and the implementation of these strategies or action plans should translate into results. In many cases, if the scorecard is not balanced, statistical analysis then becomes an imperative.
This happens if the variation of the result from what is being achieved is random. There are two causes that can trigger failure—the common cause and the special cause—which will help people identify what solution is appropriate. If a common cause is treated as a special cause, what will most likely happen is likened to adding insult to injury, since the process in question only needs to be changed gradually. A common cause is an occurrence that happens randomly. A special cause is something that happens out of the blue that is unpredictable yet severely impacts performance.
If the issue that impacts the performance of a company—or the pan, as it is called—is a special cause, there is no need to conduct an analysis to bring balance to the performance scorecard. A special cause can be likened to a natural disaster. If there were an earthquake or a typhoon and the production is severely impacted, it is illogical to conduct an analysis because it is obvious that the cause of the problem is natural.
However, if the company is failing in the delivery of adequate service for many reasons—employee behavior, external factors, management decisions, etc.—then there has to be an analysis to determine the real cause of the problem. Only then will one company find the right solution and implement action plans to balance the scores in the Key Performance Indicators. That is the only time one can achieve a balanced scorecard banking situation.
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