Balanced Scorecard
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The balanced scorecard, originally popularised by Kaplan and Norton, has become synonymous with a systematic approach to implement strategy. It can be used as a framework to translate the organisation's vision, mission, values and strategic goals into the everyday outputs, measures and targets of the people doing the work.
Many strategic plans do not work well because they are not implemented. The workforces of many companies go about their daily business activities unaware of the fact that the company even has a business plan. As a result, there is no relationship between the plans and the workers' activities.
Unfortunately, many businesses lack a mechanism or system to translate their abstract visions and plans into measurable outputs, so that every person in the organisation knows exactly what outputs they are expected to produce and how those outputs are to be measured. This would ensure that everybody knows exactly what they have to do on Monday morning in order to achieve results. This module outlines the balanced scorecard process to hierarchically and mathematically connect the organisation's vision to the daily actions of the people doing the work. It is a process to implement strategy.
The starting point would be the identification of the business unit, and the development of the business unit's strategic plan. This would involve the development of a vision, mission, strategy, outputs, measures, targets and feedback systems for the business unit. These are then cascaded down the business unit in such a way that it is localised, meaningful, understood and owned by every team in the business unit. The cascading process ensures alignment and linkage between the business units strategic goals and the outputs, measures, targets and action plans of the people doing the work.
Such a process enables resource allocations, annual budgets and strategic decisions all to be driven by the strategy. Performance reviews can be used to monitor individual performance which in turn monitors organisational performance. Reward systems can be designed to reward organisational performance achievement. The vital link between performance management and strategic goals can be made. The performance management system becomes a process to implement strategy.
Building the Balanced Scorecard: The Process
- Identify an autonomous business unit
- Develop a strategic plan
- Identify stakeholders
- Develop outputs, measures and targets
- Weight the targets
- Identify the information requirements
- Implementation