Balanced Scorecard
The Balanced Scorecard is a strategic management tool that helps organizations monitor and manage performance across multiple perspectives, such as financial, customer, internal processes, and learning and growth. It provides a framework for setting objectives, measuring progress, and aligning strategic initiatives to ensure the organization's long-term success.
8 Key excerpts on "Balanced Scorecard"
eBook - ePubManagement Accounting and Control
Tools and Concepts in a Central European Context
- Michel Charifzadeh, Andreas Taschner(Authors)
- 2020(Publication Date)
- Wiley-VCH(Publisher)
...The Balanced Scorecard is (1) a multi‐dimensional system of financial and non‐financial measures; (2) it links objectives of a firm with measures; (3) it thereby establishes a link between performance measurement and strategy; (4) it has to be adapted to the organization's specific needs. ▪ The Balanced Scorecard has four perspectives that are considered strategically important. The learning and growth perspective measures a company's ability to innovate, improve, and learn. The internal business process perspective focuses on critical components of the internal value chain to offer goods or services. The customer perspective reflects on the business's abilities to provide superior value for the customer. The financial perspective, finally, measures how performance in the other three perspectives eventually translates into financial performance. ▪ The heart of the Balanced Scorecard is the linking of objectives and performance measures with strategy. This is done through cause‐and‐effect links, representing hypotheses of if‐then statements between objectives across the four perspectives. ▪ The visualization of the cause‐and‐effect hypotheses is called a strategy map. The strategy map is the graphical depiction of the strategy; that is, the managers' plan to reach financial success. ▪ The Balanced Scorecard is fundamentally different from traditional performance measure‐ ment systems. It links the measures with strategy, it continuously tests the strategy, and it can be used as a tool for communicating the strategy. Also, it features a balanced approach of a limited number of quantitative and qualitative measures and it is open for customization. ▪ The development of a Balanced Scorecard can be done in five steps. First, the strategic objectives have to be defined along the perspectives, representing the strategy of the business. Then, the strategy map is set up. Next, measures have to be defined for each strategic objective...
eBook - ePubBalanced Scorecard Step-by-Step
Maximizing Performance and Maintaining Results
- Paul R. Niven(Author)
- 2010(Publication Date)
- Wiley(Publisher)
...The Balanced Scorecard provides a mechanism for monitoring, evaluating, and fully exploiting these critical drivers of success. • Successfully implementing strategy is another key issue facing the enterprise. Four barriers to strategy implementation exist for most organizations: a vision barrier, people barrier, resource barrier, and management barrier. • The Balanced Scorecard balances the historical accuracy and integrity of financial numbers with the drivers of future success. The framework enforces a discipline around strategy implementation by challenging executives to carefully translate their strategies into objectives, measures, targets, and initiatives in four balanced perspectives: Customer, Internal Processes, Learning and Growth, and Financial. • A Strategy Map is a one-page graphical representation of what the organization must do well in each of the four perspectives if it hopes to execute its strategy. Strategy Maps are comprised of objectives and serve as a powerful communication tool for all of a company’s many stakeholders. • While originally designed in 1990 as a measurement system, the Balanced Scorecard has evolved into a strategic management system for those organizations that fully utilize its many capabilities. Linking the Balanced Scorecard to key management processes, such as budgeting, compensation, and alignment, helps overcome the barriers to implementing strategy. • Strategy Maps of objectives and Balanced Scorecards of measures can be used to tell the organization’s strategic story by utilizing the concept of cause and effect—demonstrating relationships among objectives and measures throughout the four perspectives. Complex cause-and-effect modeling is not a prerequisite to gaining the many benefits offered by the Balanced Scorecard. Notes 1 From the presentation delivered by Robert S. Kaplan, “Creating Strategy-Focused Public Sector Organizations,” September 2004. 2 David P. Norton and Randall H...
- Naresh Makhijani, James Creelman(Authors)
- 2011(Publication Date)
- Wiley(Publisher)
...This scorecard included performance measures relating to customer delivery times, quality, and cycle times for manufacturing processes, and effectiveness of new product development, as well as financial measures. The study group considered Analog's approach a promising start for a new balanced measurement system, and adopted the term scorecard. Consequently, on the basis of this research program, Kaplan and Norton formulated the first-generation Balanced Scorecard. A Balanced Measurement System Positioned at this stage as a measurement system, the classic Balanced Scorecard set out to capture performance from four perspectives: one financial and three nonfinancial: customer, internal process, and learning and innovation (subsequently redefined as learning and growth when Kaplan and Norton realized that innovation correctly belonged within the internal process perspective). Figure 2.1 shows a schematic of the Balanced Scorecard, illustrating how it supports a central vision and strategy. Around this hub is built the four perspectives with their own strategic objectives, measures, targets, and initiatives. Figure 2.1 A schematic of the Balanced Scorecard The Emergence of the Strategy Map Although organizations gained substantial value from the first-generation Balanced Scorecard, some early adopters, including CIGNA Property & Casualty and Mobil Oil, found that the Balanced Scorecard worked best not when used simply as an extension of the financial measurement system, but when it was hardwired to strategy and deployed as a strategic implementation system. What they found to be missing was a mechanism for showing the cause-and-effect relationship among the strategic objectives from the four perspectives...
eBook - ePub- Charles Hannabarger, Frederick Buchman, Peter Economy(Authors)
- 2011(Publication Date)
- For Dummies(Publisher)
...Note that we said that the Balanced Scorecard is a management system — not a measurement system. Yes, measurement is a key aspect of the Balanced Scorecard, but it is much more than just measurement: it is a means to setting and achieving the strategic goals and objectives for your organization. So, what is the Balanced Scorecard? In short, it’s a management system that enables your organization to set, track and achieve its key business strategies and objectives. Once the business strategies are developed, they are deployed and tracked through what we call the Four Legs of the Balanced Scorecard. These four legs are made up of four distinct business perspectives: The Customer Leg, the Financial Leg, the Internal Business Process Leg, and the Knowledge, Education, and Growth Leg. Leaning on the four legs of the scorecard Your Balanced Scorecard Strategy relies upon four different yet integrated perspectives: The Customer Leg, the Financial Leg, the Internal Business Process Leg, and the Knowledge, Education, and Growth Leg. These four legs of the Balanced Scorecard are necessary for today’s business executives and managers to be able to plan, implement and achieve their business strategies. The four legs will make the difference between whether your business succeeds or fails...
- Su Mi Dahlgaard-Park(Author)
- 2015(Publication Date)
- SAGE Publications, Inc(Publisher)
...Balanced Scorecard Balanced Scorecard 27 31 Balanced Scorecard The Balanced Scorecard was introduced by Robert S. Kaplan and David P. Nortonin the beginning of the 1990s as a performance measurement system. The basicprinciple behind this measurement system is that corporate executives shouldfocus on financial as well as nonfinancial performance measures, derivedfrom strategy and organized into four perspectives. The improved measurementsystem developed into an integrated strategic management system; and, inaddition to linking measures to company vision and strategy, measures werelinked to each other following a series of cause-and-effectrelationships. In the mid-1990s, as more organizations gained experience with the balancedscorecard, the so-called strategy map was developed as a template foroutlining companies’ strategies and developing critical success criteria andperformance measures. Finally, around 2005, five principles of astrategy-focused organization fully integrated the Balanced Scorecard into astrategic management system involving the use of Balanced Scorecards forgoal setting, compensation, resource allocation, planning and budgeting, andstrategic feedback and learning. Thus, the early image of the balancedscorecard serving the CEO like a control panel serves an aircraft pilot hasexpanded to include mechanisms to alter the course of action as well. Thisentry explains the development and implementation of the Balanced Scorecardand compares and contrasts the Balanced Scorecard with two popularmanagement theories. The Strategy Map and Selection of Measures in theScorecard The development of a Balanced Scorecard does not start with selectingmetrics but, rather, with an understanding of the strategy, as companieswith different strategies are likely to have different critical successfactors...
eBook - ePubBalanced Scorecard
Step-by-Step for Government and Nonprofit Agencies
- Paul R. Niven(Author)
- 2011(Publication Date)
- Wiley(Publisher)
...In my work with many organizations, and in conducting Scorecard best-practices research, I see this tool as three things: a communication tool, a measurement system, and a strategic management system. In the following sections, we’ll examine each of these Scorecard uses, but first let’s consider the four perspectives of performance, perhaps the most fundamental aspects of the Balanced Scorecard (see Exhibit 1.5). Balanced Scorecard Perspectives The etymology of the word perspective is from the Latin perspectus “to look through” or “see clearly,” which is precisely what we aim to do with a Balanced Scorecard—examine the strategy, making it clearer through the lens of different viewpoints. For any strategy to be effective, it must contain descriptions of financial aspirations, markets served, processes to be conquered, and of course the people who will steadily and skillfully guide the ship to success. Thus, when measuring our progress, it would make little sense to focus on just one aspect of the strategy when in fact, as Leonardo da Vinci reminds us “Everything is connected to everything else.” 17 To compose an accurate picture of strategy execution, it must be painted in the full palette of perspectives that comprise it. Therefore, when developing a Balanced Scorecard we use the following four: Customer, Internal Processes, Employee Learning and Growth, and Financial. Exhibit 1.5 What is the Balanced Scorecard? When building your Balanced Scorecard, or later when it is up and running, you may slip and casually remark on the four “quadrants” or four “areas,” but as colloquial and seemingly inconsequential as this slip appears, I believe it has serious ramifications. Take for example the word quadrant. The Oxford dictionary begins its definition by describing it as a quarter of a circle’s circumference. The word reflects the number four and in that sense is almost limiting to the flexible approach inherent in the Scorecard...
eBook - ePubThe Business of Influence
Reframing Marketing and PR for the Digital Age
- Philip Sheldrake(Author)
- 2011(Publication Date)
- Wiley(Publisher)
...In designing Balanced Scorecards, therefore, an organization must measure the critical few parameters that represent its strategy for long-term value creation. … Without a comprehensive description of strategy, executives cannot easily communicate the strategy among themselves or to their employees. Without a shared understanding of the strategy, executives cannot create alignment around it. And, without alignment, executives cannot implement their new strategies … And they summarize the purpose of strategy maps at the end of the second chapter: The strategy map provides the visual framework for integrating the organization’s objectives in the four perspectives of a Balanced Scorecard. It illustrates the cause-and-effect relationships that link desired outcomes in the customer and financial perspectives to outstanding performance in critical internal processes – operations management, customer management, innovation, and regulatory and social processes. These critical processes create and deliver the organization’s value proposition to targeted customers and also promote the organization’s productivity objectives in the financial perspective...
- Mark Anthony Camilleri, Mark Anthony Camilleri(Authors)
- 2021(Publication Date)
- Emerald Publishing Limited(Publisher)
...(2017). Strategy map concepts in a Balanced Scorecard cockpit improve performance. European Journal of Operational Research, 258 (2), 664–676. https://doi.org/http://dx.doi.org/10.1016/j.ejor.2016.09.026 Hubbard, G. (2009). Measuring organizational performance: Beyond the triple bottom line. Business Strategy and the Environment, 18 (December 2006), 177–191. https://doi.org/10.1002/Bse.564 Ireland, R. D., Hoskisson, R., & Hitt, M. (2008). Understanding business strategy: Concepts and cases. Toronto: Nelson Education. Johnson, E. N., Reckers, P. M. J., & Bartlett, G. D. (2014). Influences of timeline and perceived strategy effectiveness on Balanced Scorecard performance evaluation judgments. Journal of Management Accounting Research, 26 (1), 165–184. https://doi.org/10.2308/jmar-50639 Kaplan, R. S. (2001). Strategic performance measurement and management in nonprofit organizations. Nonprofit Management & Leadership, 11 (3), 354. https://doi.org/10.1002/nml.11308 Kaplan, R. S. (2009). Conceptual foundations of the Balanced Scorecard. In C. S. Chapman, A. G. Hopwood, & M. D. Shields (Eds.), Handbook of management accounting research (Vol. 3, pp. 1253–1269). Oxford: Elsevier. Kaplan, R. S. (2010). Leading change with the strategy execution system. Harvard Business Publishing, 12 (6), 1–16. Kaplan, R. S. (2012). The Balanced Scorecard: Comments on Balanced Scorecard commentaries. Journal of Accounting & Organizational Change, 8 (4), 539–545. Kaplan, R. S., Davenport, T. H., & Robert, N. P. D. K. S. (2001). The strategy-focused organization: How Balanced Scorecard companies thrive in the new business environment. Boston, MA: Harvard Business Press. Kaplan, R. S., & Norton, D. P. (1992). The Balanced Scorecard – Measures that drive performance. Harvard Business Review, 70, 71–79. Kaplan, R. S., & Norton, D. P. (1996a). Knowing the score. Financial Executive, 6 (December), 30–33. Kaplan, R. S., & Norton, D. P. (1996b). The Balanced Scorecard: Translating strategy into action...
