The balanced scorecard combines an effective measurement system that helps solidify

a company’s strategic objectives with a management system that can help drive
change in key areas such as product, process, customer, and market development. The
scorecard gives managers four different perspectives to choose measures from
(financial, customers, internal processes, and innovation and improvement activities).
The measures of the balanced scorecard helps to focus a company’s strategic vision,
encourages thinking about current and future success, and helps provide a balance
between external and internal measures. This broad view helps managers see what
trade-offs they are making among their key success factors. Looking at the scorecard
measures of a company, which should be different for every company, it should be
clear what that company’s competitive strategy is.

Rockwater, a global engineering and construction company, used the balanced

scorecard to respond to their changing industry.

The measures used by Rockwater included:

1. Financial Perspective

Return-on-Capital Employed,
Cash Flow
Project Profitability,
Profit Forecast Reliability,
Sales Backlog.

2. Customer Perspective

Pricing Index,
Customer Ranking Survey,
Customer Satisfaction Index,
Market Share.

3. Internal Processes

Hours with Customers on New Work,

Tender Success Rate,
Rework,
Safety Incident Index,
Project Performance Index,
Project Closeout Cycle.

4. Innovation and Learning Perspective

 Percentage of Revenue from New Services,
Rate of Improvement Index,
Staff Attitude Survey,
Number of Employee Suggestions,
Revenue per Employee.

The balanced scorecard helped Rockwater’s management implement changes to make

it a leader in its industry.

A few examples of other companies are given to show how each uses the balanced
scorecard differently. Apple Computer uses the balanced scorecard as a planning tool
rather than a control tool. Advanced Micro Devices (AMD) made an easy transition to
the use of the balanced scorecard because it already had a clearly defined mission and
performance measures. The balanced scorecard helped AMD bring everything
together in a more coherent fashion but did not cause any major changes. The
examples are used to illustrate that the balanced scorecard is most successful when
used to drive change.

Building a Balanced Scorecard

In a separate section an outline is provided for building a balanced scorecard. A

typical process has the following steps:

1. Preparation

2. Interviews: First Round

3. Executive Workshop: First Round

4.Interviews: Second Round

5. Executive Workshop: Second Round

6. Executive Workshop: Third Round

7. Implementation

8. Periodic Reviews