- May 08, 2013 Bain & Company guide
A Balanced Scorecard defines what management means by "performance" and measures whether management is achieving desired results. The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised. These measures typically include the following categories of performance:
- Financial performance (revenues, earnings, return on capital, cash flow)
- Customer value performance (market share, customer satisfaction measures, customer loyalty)
- Internal business process performance (productivity rates, quality measures, timeliness)
- Innovation performance (percent of revenue from new products, employee suggestions, rate of improvement index)
- Employee performance (morale, knowledge, turnover, use of best demonstrated practices)
Usage and effectiveness among survey respondents
What Balanced Scorecards do:
- Articulate the business's vision and strategy
- Identify the performance categories that best link the business's vision and strategy to its results (e.g., financial performance, operations, innovation, employee performance)
- Establish objectives that support the business's vision and strategy
- Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets
- Ensure companywide acceptance of the measures
- Create appropriate budgeting, tracking, communication, and reward systems
- Collect and analyze performance data and compare actual results with desired performance
- Take action to close unfavorable gaps
Companies use Balanced Scorecards to:
- Clarify or update a business's strategy
- Link strategic objectives to long-term targets and annual budgets
- Track the key elements of the business strategy
- Incorporate strategic objectives into resource allocation processes
- Facilitate organizational change
- Compare performance of geographically diverse business units
- Increase companywide understanding of the corporate vision and strategy
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Epstein, Marc, and Jean-François Manzoni. "Implementing Corporate Strategy: From Tableaux de Bord to Balanced Scorecards." European Management Journal , April 1998, pp. 190-203.
"Harvard Business Review Balanced Scorecard Report." Harvard Business Review, 2002 to present (bimonthly).
Kaplan, Robert S., and David P. Norton. Alignment: Using the Balanced Scorecard to Create Corporate Synergies. Harvard Business School Press, 2006.
Kaplan, Robert S., and David P. Norton. "The Balanced Scorecard: Measures That Drive Performance." Harvard Business Review, July 2005, pp. 71-79.
Kaplan, Robert S., and David P. Norton. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Harvard Business School Press, 2000.
Kaplan, Robert S., and David P. Norton. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business School Press, 2004.
Niven, Paul R. Balanced Scorecard Diagnostics: Maintaining Maximum Performance. John Wiley & Sons, 2005.
Niven, Paul R. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, 2d ed. John Wiley & Sons, 2006.