The Balanced Scorecard

The Balanced Scorecard continues to grow in popularity as a tool for supporting the
implementation of strategy. The Hackett Group found that of the nearly 2000 global companies
it surveyed had implemented, or planned to implement, the Balanced Scorecard. The real issue
though isnt how many companies are using this approach but, rather, whether they are using it
properly (Norton and Russell, 2005, p. 3).
To design the Balanced Scorecard for your small business you need to have first crafted your
vision, mission, values, and strategic objectives. The Balanced Scorecard is the set of
measures you created to measure the achievement of the vision and strategic objectives as
you serve your mission.
The Balanced Scorecard is often seen in two different formats. The first format (which is the one
you will use for this week) is a table that includes the measures in the four primary categories of
the Scorecard:
1.

Financial (representing the increase in shareholder value).

2.

Customer (representing the increase in customer value).

3.

Operations or process (representing the increase in the value of internal processes.

4.

Learning and Growth (representing the increase in employee and organization value).

In this format there is always a measure which is defined (e.g., profit margin), and then there is
a metric that is identified to assess the measure (e.g., percentage of profit margin or
percentage increase in profit margin). Finally, there is a target set for the metric (e.g., a 20%
profit margin or an increase of 5% in profit margin). The Balanced Scorecard shows the
targets for the metrics for each calendar year during the plan. For example, the year one profit
margin may be 18%, year two could be 20%, year three at 22%, year 4 at 26%, and year 6 at
30%. A sample Balanced Scorecard is shown below.

Sample Balanced Scorecard

Scorecard
Four
Balanced
Areas for
Measures

Financial

Customer

Operation
or
Process

Learning
and
growth

Targets
Strategic
Objective

Measure

Metric

Year 1

Year
2

Year
3

Improve return on
capital investments

ROIC

5%

5%

5%

Improve the overall

profit margin of the
company

Margin

4%

5%

6%

Bring in more
revenues from
each customer

Revenue/
customer

5%

5%

5%

Increase in number
of customers
served in current
markets

Market share

2%

3%

5%

Improves
productivity in
product areas

Reduce the time to

bring new products
to markets

Product
development
cycle time

5%

10%

5%

Improve the
sales process to
add value to the
customer

Improve the
effectiveness of the
sales process

New process
developed
and in place

In 6
months

NA

NA

Improve
capabilities
needed to
improve
productivity

Retain people at
top 50% of
performance curve

Retention
rate of top
talent

>90%

>90% >90%

Change the
behaviors of
leaders and
employees to
those need to
support the new

Begin to change
culture to realize
new plan

Climate
survey
question
results on
target

100%

100% 100%

Improve
profitability

Grow the
business by
focusing on
customers

strategy

In some cases there are perspectives other than the four areas shown above. Others
might include measures for the community, the government, or even the environment. The
important point is that there should be a set of measures for any stakeholder that is
essential to the realization of the plan.

Reference
Norton, D. & Russell, R. (2005). Balanced scorecard report. Harvard Business School
Publishing. Retrieved from
http://reporting.talent20.co.za/Harvard/HMM10/strategy_execution/resources/b0505a.
pdf