Balance Your Balanced Scorecard
Published March 2002, Quality Progress Magazine (Updated 4-03) By Robin Lawton
A balanced scorecard is a management decision tool. It is intended to be a framework for linking strategy with operational performance measures. In practice, it is an integrated report, usually showing diverse areas of performance an organization most values. This is a departure from traditional performance measurement tools such as financial reports, sales reports, production reports and customer survey reports. Each of those reports focuses on performance along a single dimension. This is akin to the blind man understanding the attributes of an elephant in terms of the trunk or tail he is holding.
The term “balance” suggests that objectives and measures along different dimensions, assembled together on one sheet or screen, offer a multi-dimensional and qualitatively better view of organizational success. As popularized by Kaplan and Norton, the right measures address performance regarding the management of finances, processes, customers and employee development. A well-designed scorecard should not exceed twenty measures, all connected to strategic objectives. It helps management (if not line employees) make good, fast decisions on what to improve or celebrate. The purpose is to understand what the whole elephant looks like so you can put food where its mouth is.
Sounds like Common Sense 101. So what is wrong with this picture? In theory, nothing. In practice, many organizations are still not seeing the whole elephant. Like most organizational change models, evolutionary improvement has certainly occurred. But it remains incomplete. For example, managing customers (via our positioning, image, crisis handling and so on) is not synonymous with satisfying them. Scorecards today often focus entirely on subjects of internal interest. The customers’ interest areas continue to be inadequately integrated into the grand scheme.
The popularity of scorecards reflects a general growth of interest in performance measurement and improvement tools. This is a positive trend. The better integrated our measures are, the more holistic our improvement efforts tend to be. Let’s look at how we can enhance the use of measures for the benefit of both customers and the enterprise. First, examine the three cases on measurement practices to avoid.
If you would like to download the rest of the article please click below.
Balance Your Balanced Scorecard with Discussion Guide