The Balanced Scorecard methodology is one of the simplest yet powerful ways to achieve to make the vision and mission of an organization actionable. The Balanced Scorecard provides the framework for an organization to move from deciding to live their strategy, to doing it. The scorecard describes the strategy, breaking it down into its component parts through the objectives and measures chosen in each of the four perspectives.
Unlike traditional performance measurement systems which have financial controls at their core, the Balanced Scorecard begins with an organization’s strategy. The Balanced Scorecard is ideally created through a shared understanding and translation of the organization’s strategy into objectives, measures, targets, and initiatives in each of the four scorecard perspectives.
A balanced scorecard measures your organization’s health from four different perspectives
Focuses on monitoring the three areas of ‘capital’ (Human, Informational and organizational) to ensure success. This perspective looks at your overall corporate culture.
Focuses on identifying and monitoring measures in operations management, customer management, innovation, regulatory and social clusters to ensure value for your customers and shareholders.
Focuses on the people who actually buy your products and services. Who are our customers? What do those customers expect or demand from us? What is our value proposition in serving our customers?
Focuses on objectives and measures relating to a company’s effectiveness in delivering shareholder value, growing revenue, and enhancing productivity.
The translation of vision and strategy forces the executive team to specifically determine what is meant by sometimes imprecise terms contained in the strategy, For example: “world class”, “top-tier service” and “targeted customers”. Through the process of developing the scorecard an executive group may determine “world class” translates to may be zero manufacturing defects.
All employees can now focus their energies and day-today activities toward the crystal-clear goal of zero defects rather than wondering about and debating the definition of “world class”. Using the Balanced Scorecard as a framework for translating the strategy organizations can create a new language of measurement that serves to guide all employees’ actions toward the achievement of the stated direction.