Balanced Scorecard

The Balanced Scorecard provides a clear and unambiguous method for delivering strategy through specific related objectives and clear measurable targets.

It is particularly helpful in communicating how strategy will be achieved throughout your organisation.

All organisations have a basket of financial and non-financial measures which are intended to influence management behaviour and underpin performance.

The Balanced Scorecard, developed by Kaplan and Norton at Harvard Business School is a prescriptive framework that focuses on shareholder, customer, internal process and learning requirements of a business in order to create a system of linked objectives, measures, targets and initiatives which collectively describe the strategy of an organisation and how that strategy can be achieved.

Occasionally, there are other areas equally important to the business, such as Environmental goals, or Research and Development goals, which are added. The important thing is to create a directional map for your business.

Measurement motivates when it is used to communicate, rather than to control. The Balanced Scorecard emphasises that

• Financial and non-financial measures must be part of an information system for all employees at all levels
• Front line employees must understand the financial impact of their decisions and actions
• Senior Managers must understand the long term drivers of financial success

A balanced management system is a governance system that uses the Balanced Scorecard as a centre-piece in order to communicate an organisations strategy, create strategic linkage throughout the organisation, develop business planning, and provide feedback and learning against the company’s strategy.

The Balanced Scorecard fundamentally complements financial measurement of past performance with measures that reflect the drivers of future performance, and thus enables effective decisions.

It does require a whole-hearted commitment on the part of senior managers to implement and work with the framework, using the resulting management information to actively drive performance improvement.