Balanced Scorecard , fact or fiction?

Balanced scorecard

Kaplan and Norton's organizational performance management tool

In the beginning there was darkness. We went to work, did our job (well or otherwise) and went home - day in and day out. We did not have to worry about targets, annual assessments, metric-driven incentives, etc. Aahh… life was simple back then.

Then there came light. Bosses everywhere cast envious eyes towards our transatlantic cousins whose ambition was to increase production and efficiency year-by-year. Like eager younger siblings we trailed behind them on the (sometimes) thorny path to enlightenment.

Early Metric-Driven Incentives - MDIs - were (generally) focused on the financial aspects of an organization by either claiming to increase profit margins or reduce costs. They were not always successful, for instance driving down costs could sometimes be at the expense of quality, staff (lost expertise) or even losing some of your customer base.

Two eminent doctors (Robert S Kaplan and David P Norton) evolved their Balanced Scorecard system from early MDIs and jointly produced their (apparently) ground-breaking book in 1996. Many other 'gurus' have jumped on the Balanced Scorecard wagon and produced a plethora of books all purporting to be the ‘Definitive' book on Balanced Scorecards. Amazon.com shows over 4,000 books listed under Balanced Scorecards, so take your pick - and your chances!

Balanced scorecard - definition

What exactly is a Balanced Scorecard? A definition often quoted is: 'A strategic planning and management system used to align business activities to the vision statement of an organization'. More cynically, and in some cases realistically, a Balanced Scorecard attempts to translate the sometimes vague, pious hopes of a company's vision/mission statement into the practicalities of managing the business better at every level.

A Balanced Scorecard approach is to take a holistic view of an organization and co-ordinate MDIs so that efficiencies are experienced by all departments and in a joined-up fashion.

To embark on the Balanced Scorecard path an organization first must know (and understand) the following:

· The company's mission statement

· The company's strategic plan/vision

Then

· The financial status of the organization

· How the organization is currently structured and operating

· The level of expertise of their employees

· Customer satisfaction level

The following table indicates what areas may be looked at for improvement (the areas are not exhaustive and are often company-specific):

Department	Areas
Finance	Return On Investment Cash Flow Return on Capital Employed Financial Results (Quarterly/Yearly)
Internal Business Processes	Number of activities per function Duplicate activities across functions Process alignment (is the right process in the right department?) Process bottlenecks Process automation
Learning & Growth	Is there the correct level of expertise for the job? Employee turnover Job satisfaction Training/Learning opportunities
Customer	Delivery performance to customer Quality performance for customer Customer satisfaction rate Customer percentage of market Customer retention rate