What Is The Balanced Scorecard?
Introduced in 1992, in a Harvard Business Review article, the Balanced Scorecard advocated that business strategy must be translated into terms that can be understood and acted upon.
Strategic concepts such as quality, customer satisfaction and growth are clearly defined in the language of measurement.
Successful organizations put strategy at the center of their measurement programs and thereby create strategic enterprise management.
Kaplan and Nortonís research supports that strategy-focused organizations must mobilize around the execution of their strategies.
2004 Bain & Company survey of management practices reported 57% of global companies claimed to be using a Balanced Scorecard.
Fortune magazine cover article opined that an estimated 70% of company strategic failures are the result of poor implementation or bad execution.
Michael Porter [Harvard Business School] describes the foundation of strategy as the activities in which the company decides to excel.
The Porter approach gives rise to the need to conduct hundreds of activities and, consequently, makes the understanding of strategy and its execution the responsibility of everyone in the company.
The Porter approach requires organizational alignment around the strategy.
Organizational alignment can be attained through performance measurement systems.
Strategic management requires not only the traditional short term operating and financial measures but, also, the longer term objectives.
Whatís Needed To Mobilize Effectively?
Build an executive level of understanding and leadership. This team must establish a sense of urgency that can be understood by all levels of the organization. [We are working on a presentation with case studies concerning leadership].
A vision and associated strategy must be clearly described. This is the responsibility of those who are to be the leadership team.
Choose a method to translate strategy into operational and financial terms.
Assess the organization structure to determine whether changes are required for the proper alignment around the strategy. As part of this process, each business unit or organizational bureau should develop a scorecard aligned with the strategies it affects.
Educate to a corporate cultural awareness. While your associates are part of a continuous learning program, the leadership executives must continue to reinforce the media and training communications with their own behavior.
Consider the establishment of personal scorecards. This will differ from the management by objectives ( MBO ) systems in that the scorecard should be focused cross functional, longer term and strategic objectives. At a minimum, consideration of activities that can affect anotherís performance on a strategic objective should be covered in the personal scorecard.
The Harvard Business School (HBS) supported Balanced Scorecard recommends incentive compensation to motivate successful implementation of the strategy and scorecard. [PMC recommends the more flexible approach of Hertzbergís 30 years of research into motivation.]
Broaden the budgeting process to recognize strategic activities may not have direct cost benefit relationships. [Training improves customer care that in turn is measured by reduced complaints and associated costs and potential increases in revenue.]
It is a continuous process. The Scorecards make this possible.