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What Are Balanced Scorecards?

Editor's Note: Take a look at our featured best practice, Strategy Map (20-slide PowerPoint presentation). A Strategy Map is a diagram that conveys the primary strategic goals being pursued by an organization. It is a strategic part of the Balanced Scorecard (BSC) framework to describe strategies for value creation. More specifically, a Strategy Map describes how our organization creates value by [read more]

Also, if you are interested in becoming an expert on Performance Management, take a look at Flevy's Performance Management Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

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balanced_scorecardBalanced Scorecards tell you the knowledge, skills and systems that your employees will need (learning and growth) to innovate and build the right strategic capabilities and efficiencies (internal processes) that deliver specific value to the market (customer) which will eventually lead to higher shareholder value (financial). –Robert Kaplan & David Norton

In 1990, Art Schneiderman participated in a research study by Robert S. Kaplan and David P. Norton, and during this study described his work on Balanced Scorecards. Subsequently, Kaplan and Norton included anonymous details of this use of Balanced Scorecard in their 1992 article “The Balanced Scorecard – Measures that Drive Performance,” Harvard Business Review, February 1992.

While traditional goal setting often focuses on financial, and thus lagging, measures, the Balanced Scorecard approach broadens the scope of indicators to include leading performance indicators from the following four key areas or perspectives.

Financial

  • How do you want to look to your shareholders?
  • Indicators focus on whether your strategic and operational plan contributes to your top-line, bottom-line and/or market share.

Customer

  • How do you want to look to your Customers?
  • Indicators focus on the specific measures that matter the most to your Customers.

Internal Business Processes

  • At which internal processes and capabilities do you want to excel?
  • Indicators focus on internal operations that enable Customer satisfaction, growth and profitability.

Learning and Growth

  • What skills and competencies do you need to implement your strategic and operational plan?
  • Indicators focus on your organization’s ability to innovate, improve and execute.

Emphasizing these four key areas, the Balanced Scorecard approach not only monitors present performance (lagging indicators), but also leading indicators about how well the organization is positioned to perform and compete well in the future.

The Balanced Scorecard is a strategic planning and performance management system that is used extensively in business, government, and nonprofit organizations to align business activities to the vision and strategy of the organization.

Some of the benefits of utilizing Balanced Scorecards as part of the strategy development and deployment process are:

  • Help the management team focus on the execution of their business strategy.
  • Focus and align an organization towards common goals and objectives.
  • Enable an organization to understand the relationship between measures and performance.
  • Improve communication of organizational priorities across an organization.
  • Help employees to understand and focus on organizational priorities and realize relevant results.
  • Reduce the number of metrics to the few vital key performance indicators.
  • Strengthen and formalizing the project selection process to focus on key capabilities and enablers.

Operational Excellence Consulting uses a three phase approach to facilitate the effective development and deployment of Balanced Scorecards and to ensure that the resulting scorecards adequately reflect an organization’s strategic initiatives, objectives and goals.

Please review our presentation material Operational Excellence – Balanced Scorecard Deployment for more details about Balanced Scorecards and how you can deploy them in your organization effectively.

30-slide PowerPoint presentation
The Balanced Scorecard (BSC), developed by Robert Kaplan and David Norton, is a Strategic Performance Management System. It is a semi-standard structured report, supported by proven design methods and automation tools, that can be used by managers to keep track of the execution of activities by the [read more]

Want to Achieve Excellence in Performance Management?

Gain the knowledge and develop the expertise to become an expert in Performance Management. Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

Performance Management (also known as Strategic Performance Management, Performance Measurement, Business Performance Management, Enterprise Performance Management, or Corporate Performance Management) is a strategic management approach for monitoring how a business is performing. It describes the methodologies, metrics, processes, systems, and software that are used for monitoring and managing the business performance of an organization.

As Peter Drucker famously said, "If you can't measure it, you can't improve it."

Having a structured and robust Strategic Performance Management system (e.g. the Balanced Scorecard) is critical to the sustainable success of any organization; and affects all areas of our organization.

Learn about our Performance Management Best Practice Frameworks here.

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About Frank Adler

Frank Adler co-founded Operational Excellence Consulting (OEC) in 2009 to follow his passion for Operational Excellence and to be able to work with individuals and organizations that share this passion. He has over 20 years of international executive leadership experience in General Management, multi-site Operations & Supply Chain Management, Quality & Customer Support Management, and Operational Excellence & Lean Six Sigma. View more of OEC's materials on Flevy here, including training guides and free downloads.

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