To make informed business decisions, a couple of my favorite tools available to management are segmented reporting and the balanced scorecard. A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. This can be represented by a location or business unit at the division or department level. The balanced scorecard concept is a performance management tool tracking the financial measures of an organization and key non-financial measures relating to customers or clients, internal processes, and organizational learning and growth. The â€œscorecardâ€ can be used to monitor performance. Successful organizations review the balanced score on a recurring (i.e., quarterly) basis.
Business segment reporting breaks out an organizationâ€™s financial data whether divisions,Â subsidiaries, or other business segments. For upper management, business segment reporting is used to evaluate each segment’s income, expenses, assets, liabilities, etc. to gauge performance, profitability, and risk. Reported to shareholders via an annual report, segmented reporting provides a picture of a public companyâ€™s performance.
A flexible strategic management tool, for profit and nonprofit organizations can adapt and adopt the balanced scorecard implementing their own variation to meet their strategic purposes. Reported in quartiles, the strategic process helps identify important links between financial performance and the underlying customer, internal process, and organizational metrics. With this approach, executive management can articulate and translate strategic vision into actionable steps to drive performance and success. At its core is strategy. Implemented properly, it goes beyond the singular focus of the annual budget. The process aligns measures, actions, and rewards to execute strategic initiatives and the achievement of strategic objectives. As you can see, the scorecard provides an important lens to relevant stakeholder, internal process and operations, and resource measures.
As with the budget process, successful organizations treat strategy as a living and breathing process. Segmented reporting paints additional pictures for management enabling them to drill down into areas. The balance scorecard process captures the entire story of for profit and nonprofit organizations. Combining financial and nonfinancial drivers provide a more complete picture of business operations. Both strategic management tools provide useful information to articulate vision and drive performance and outcomes. If you are solely focused on the budget process, you should consider implementing these effective resources.