Implementing the balanced scorecard

Do you believe in the concept of the balanced scorecard as a tool to implement strategy and optimize stakeholder and customer satisfaction? Do you, nonetheless, fail to implement it successfully at all levels in your organization? Almost all my clients tell me that is the case in their organizations. Very few have even attempted to cascade it below the most senior levels, where like all essential components of team performance, it is most effective.

The balanced scorecard, originally popularised by Kaplan and Norton, has become synonymous with a systematic approach to implementing the strategy.

It can be used as a framework to translate the organization’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 well 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.

In short, the balanced scorecard is a structured way of building a performance measurement system that links outputs, measures, and targets directly to strategy as well as total stakeholder and customer satisfaction.

This is how we do it:

Firstly, we identify the stakeholders, the next step is to find out exactly what the stakeholders’ expectations are. It should be emphasized that all stakeholders care about the welfare of the entire organization. So while stakeholders are identified with particular outputs, they are all generally concerned with the overall optimization of the organization as a total system.

The step of weighting the targets enables the strategic goals to be balanced and clarified so as to achieve the overall aim of optimizing the business system to achieve total stakeholder satisfaction. This will ensure that the needs of one stakeholder are not optimized at the expense of other stakeholders.

The priority order of the targets set will assist in the assigning of weighting, as the high priority targets, which are now in line with the strategic goals of the business unit, must get the highest weighting. Distribute 100 points against the targets set. Avoid the temptation of giving one target an inordinately high weighting because of a pressing short-term need. Rather, give priority to the satisfaction of stakeholder needs and strategic goals when assigning weightings.

Reducing the balanced scorecard to one number is also useful for the purposes of performance appraisal, performance management, and reward systems.

A clear understanding of the outputs, measures, and targets and how those targets are to be weighted provides a specific blueprint of what performance information should be fed back to ensure stakeholder expectations are being satisfied.

There are far more workers than managers. As a result, a manager’s attention tends to be focused on outstanding performers. The high-performers receive a lot of positive attention, poor performers receive a lot of negative attention, and the vast and silent majority of people at the workforce level are ignored. This can lead to apathy, cynicism, and alienation at the crucial point in the output chain where value is being added.

In the creation of workforce culture and the implementation of performance systems, the target should be the silent majority rather than the positive and negative minorities. In other words, be satisfied with systems that meet the needs of 80% of the target group, rather than 100%. The extra benefits to be gained from satisfying the last 20% may not be worth the effort.

Have a look at our Balanced Scorecard publication for more information.