Using the Balanced Score card as a Strategic Management System

Based on the article Using the Balanced Score card as a Strategic Management System By: Robert S Kaplan & David P Norton Harvard Business Review, July-August 2007

The Balanced Score Card

Customers Internal business processes Learning & Growth

Financial performance

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Implementing the Score card objectives, measures, targets & Initiatives

To achieve our vision, how should we appear to our customers? To satisfy our shareholders and customers, what business processes must we excel at? To achieve our vision, how will we sustain our ability to change & improve? To succeed financially, how should we appear to our shareholders?

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Achieving long term objectives through short term actions

Often the linkage between short term financial measures and long term strategic objectives is weak Because of this weak linkage, strategy implementation often is ineffective Using the balanced score card, companies can strengthen the linkage between long term strategy and short term tactics

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Four processes to link long term objectives with short term actions
Translating the vision Communicating and linking Business planning

Feedback and learning

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Translating the vision

Helps build a consensus around the companys vision and strategy

Helps arrive at an integrated set of objectives and measures that describe the long term drivers of success

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Communicating the linkage

Helps link strategy to departmental and individual objectives This marks a change in approach from evaluating departments by financial performance and tying individual incentives to short term financial goals

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Business Planning
Enables companies to integrate their business and financial plans Helps in aligning diverse initiatives with strategic goals

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Feedback & Learning

Builds capacity for strategic learning Short term results can be monitored closely Strategies can be modified to reflect real time learning

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Possible implementation sequence

Clarify the vision, build consensus Communicate to middle managers Develop business unit score cards Eliminate non strategic investments Launch corporate change programs Review business unit score cards Refine the vision after re-examining cross business issues Communicate the balanced score card to the entire company Establish individual performance objectives Update long range plan and budget

Conduct monthly and quarterly reviews

Conduct annual strategy review Link everyones performance to the balanced scorecard
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Conclusion
Balanced score card can be used to: clarify and update strategy communicate strategy throughout the company align unit and individual goals with the strategy link strategic objectives to long term targets & annual budgets

identify and align strategic initiatives

conduct periodic performance reviews to learn about and improve strategy

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