Balanced Scorecards (BSC) Are Designed to Provide Essay

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Balanced Scorecards (BSC) are designed to provide insights into which customer-centric strategies are the most profitable and scalable over the long-term (Glykas, Valiris, 2011). Often customer-centric measures of satisfaction, sales and repurchase rates hide the real issues of customer profitability, lifetime customer value and cost to serve the most loyal customers (Kaplan, 2005). A balanced scorecard must take into account the entire value chain of a business if it is going to be successful and capture those most profitability activities first, not just seek to gain customers' satisfaction levels alone (Jayashree, Hussain, 2011).

The measurements as defined by Niven are not customer-centric, they are centered on how companies connect with their prospects and customers. There is a major difference in truly customer-centric measures of performance and those that seek to measure the value of the messaging produced. Niven is speaking of unique value propositions (UVP) that are unquantifiable by nature, and they are not customer-centric. Organizations strive to make their UVPs very customer-focused, yet often they only convey part of the message.

A more effective series of metrics is defined by Kaplan, specifically evaluating the metrics that capture lifetime customer value and the costs to serve them, are more complete and thorough in their approach (Kaplan, 2005).

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Kaplan contends that using metrics to evaluate how product line extensions including build-to-order and mass customization strategies can more effectively meet needs is critically important as well. There is also the dimension of cycle times for customers and their expectations relative to what a company can deliver. Merely choosing metrics for a balanced scorecard that measure customer satisfaction by the pure efficiency of a business is very misleading and can over time lead to unprofitable decisions (Jayashree, Hussain, 2011).

What is needed are more effective metrics that capture how cycle times can be created that allow for more flexibility in creating customer satisfaction (Glykas, Valiris, 2011). Balanced scorecards that provide for an element of agility and focus on the customer as they change, not just how they are today, is essential for any business to keep moving forward. The Niven examples are one-dimensional in this regard; they only capture customer satisfaction, not the expense of serving them or the long-term view of how they will change. The Kaplan analysis of metrics and key performance indicators (KPIs) are in the right framework of how to evaluate strategies based on the costs to….....

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