it in numbers, you know something about it; but when you cannot
measure it, when you cannot express it in numbers, your
knowledge is of a meager and unsatisfactory kind.
—William Thompson (Lord Kelvin), 1824–1907
Points to remember:
1. It was discovered in 1990 by Robert Kaplan, a professor at Harvard University, and David Norton, a consultant also from the Boston area and since then it is adopted by nearly half of the Fortune 1000 organizations.
2. It solves two majors problem
- Effective organizational performance management
- Successful strategy implementation
3. Financial measurements are not enough to
- Forecast the future financial performance (Lehman Brother’s case)
- Valuate of customers,employees, their relationships and information
- Think in long term value creation
- Give feedback at various levels of organization
What we need is a method of balancing the accuracy and integrity of our financial measures with the drivers of future financial performance of the organization.
4. The strategy story
- Most discussed and debated topic on the business landscape
- Implementation of strategy is more difficult and cause of failure than strategy
- Strategy is not communicated and aligned to employees at various levels
Balanced Scorecard is the tool that answers both challenges.
What Is a Balanced Scorecard?
- Carefully selected set of measures derived from an organization’s strategy
- We might call financial measures lag indicators. They are outcomes of actions previously taken. The Balanced Scorecard complements these lag indicators with the drivers of future economic performance, or lead indicators.
- Four perspectives:
- Customer satisfaction, customer loyalty, market share, and customer acquisition
Internal Process Perspective
- Identify and excel the key processes the firm must execute at in order to continue adding value for customers
Learning and Growth Perspective
- Employee skills, employee
- satisfaction, availability of information, and alignment could all have a place
- profitability, revenue growth and economic value added
We will discuss details in further posts.
- (Harward Business Review Article)
- BALANCED SCORECARD STEP-BY-STEP