The Balanced Scorecard

by Tony Gill

Enabling the Strategy Focussed Organization

Kaplan & Norton introduced the idea of the Balanced Scorecard in the early 1990s as a means of shifting management attention from purely financial performance metrics to a more balanced set of performance metrics. Measures for finance together with customers, internal business processes and learning & innovation embody the four perspectives of the Balanced Scorecard.

What Kaplan & Norton have witnessed over the past 10 years is the shift of the Balanced Scorecard from a performance measurement framework to an integrated management system for strategy implementation – the strategy focussed organization. A key output of such a management system is the strategy map – a cause and effect set of relationships for achieving strategic objectives.

We believe that the strategy map needs to be complimented with a resource map which has its origins in strategy dynamics. Kaplan and Norton support this view indirectly in Chapter 12 - Feedback and Learning - of their book The Strategy Focused Organization.

Almost all financial measures are lag measures – there is nothing you can do about them. A well constructed strategy map needs to contain a set of lead indicators linked to current strategies that provide clues on future financial performance. Changing actions to influence these lead measures is likely to result in achieving future desired outcomes – financial for the private sector and customers/stakeholders for public sector and not-for-profit sector organizations. Changing actions or more specfically behaviours takes us into the area of change management supported ideally by project management.

Additionally, the possibility for strategic learning provided by the linking of measures is one aspect of the balanced scorecard that is considered new in many organizations. The Scorecard provides an effective way of communicating priorities to everyone in the organization. As a business model, it also enables all employees to see and understand how their work relates to the business and its success as a whole. See Introducing the Balanced Scorecard.

Essential Reading:
Translating Strategy into Action The Balanced Scorecard by Robert S. Kaplan and David P. Norton published by Harvard Business School Press 1996

The Strategy Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment by Robert S. Kaplan and David P. Norton published by Harvard Business School Press 2001.

 

 

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