IT Governance course: Balanced Scorecard
Balanced Scorecard (BSC)
In the 1990s, Kaplan and Norton developed the Balanced Scorecard. Their idea is that the evaluation of a company should not be restricted to the traditional financial performance measures but should be supplemented with measures concerning customer satisfaction, internal processes, and the ability to innovate. Results achieved within the additional perspectives should assure future financial results.
Kaplan and Norton propose a three layered structure for the four perspectives: mission (to become the customers’ most preferred supplier), objectives (to provide the customers with new products), and measures (percentage of turnover generated by new products). To put the BSC to work, companies should translate each of the perspectives into corresponding metrics and measures that assess the current situation. These assessments have to be repeated periodically and have to be confronted with the goals that have to be set beforehand. At first, the BSC was used as a performance measurement system and a planning and control device. Later on, some companies moved beyond this early vision of the scorecard. They discovered that the measures on a Balanced Scorecard can be used as the cornerstone of a management system that communicates strategy, aligns individuals and teams to the strategy, establishes long-term strategic targets, aligns initiatives, allocates long- and short term resources and finally, provides feedback and learning about the strategy.
Generic IT Balanced Scorecard
Different market situations, product strategies, business units, and competitive environments require different scorecards to fit their mission, strategy, technology, and culture. The general BSC-framework can be translated to the more specific needs of the monitoring and evaluation of the IT function, and recently the IT BSC has emerged in practice. This IT scorecard differs from the company-wide BSC because it is a departmental scorecard for an internal service supplier (IT): the customers are the computer users, the business contribution is to be considered from management’s point of view, the internal processes under consideration are the IT processes (systems development and operations), and the ability to innovate is measuring the use of new technologies and the human IT resources.
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USER ORIENTATION |
BUSINESS CONTRIBUTION |
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How do the users view the IT department? |
How does management view the IT department? |
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Mission |
Mission |
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To be the preferred supplier of information systems and to exploit business opportunities maximally through information technology |
To obtain a reasonable business contribution of investment inIT |
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Objectives
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Objectives
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OPERATIONAL EXCELLENCE |
FUTURE ORIENTATION |
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How effective and efficient are the IT processes? |
Is IT positioned to meet future needs? |
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Mission |
Mission |
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To deliver efficiently IT products and services |
To develop opportunities to answer future challenges |
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Objectives
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Objectives
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