How to Use a Balanced Scorecard as a Strategic Management System

Performance measurement is a balancing act.

The balanced scorecard is a concept first developed by Dr. Robert Kaplan of Harvard Business School and Dr. David Norton. This performance measurement tool was designed to add a non-financial perspective to traditional finance-based performance measures to give managers a more balanced view of an organization's performance. While financial metrics may provide executives with an accurate view of an organization's performance, the balanced scorecard has the added value of providing information on how to improve performance in nine basic steps.

Things You'll Need

• Sticky notes
• Pens

Instructions

1. 

   Identify an organization's strengths and weaknesses.

   Assess an organization's mission, vision and other factors which may impact performance. Begin with a focused workshop, including employees at all levels and complete a strengths, weakness, opportunities and threat (SWOT) analysis. Identify the organization's strengths, weaknesses, opportunities and threats. Hand out sticky notes and pens to employees and have them brainstorm ideas, writing one idea on each note. Stick these notes to the wall so the group may use this information to prepare a change management plan for the organization.

2. 

   Develop a strategic plan.

   Develop the change management plan into a strategic plan, including strategic results, themes and perspectives. In the workshop group, determine which themes the organization should focus on to give more attention to customer needs. Divide and categorize the sticky notes into separate strategic themes.

3. 

   Determine the strategic intent.

   Define the organization's strategic intent based on the strategic elements developed in steps 1 and 2. Strategic intent provides clarity into the performance measures an organization should focus on going forward.

4. 

   Create a strategy map.

   Formalize the cause and effect linkages of the strategic objectives in a strategy map. Determine how an organization provides value for all of its stakeholders. Develop a strategy map to show how the different projects employees are working upon are linked and how each person can affect the performance of the organization as a whole.

5. 

   Decide how to meaures results.

   Develop performance measures for each of the strategic objectives. Determine how to measure whether a particular objective is being completed. Identify targets for each objective, as well as benchmarking data which may be used to verify performance.

6. 

   Assign tasks to specific employees.

   Develop strategic initiatives which will support the strategic objectives. Develop an accountability plan to establish ownership for each objective. Assign tasks to specific employees and work groups and document the responsibilities for future reference.

7. 

   Automate processes.

   Automate processes so that performance information may be distributed to the right team members at the right time. Purchase and implement performance measurement software that will help transform various corporate data into performance information that can be accessed easily for use by decision makers within the organization.

8. 

   Translate high level plans into lower level scorecards.

   Translate high level strategic objectives into lower level scorecards. While an initial strategic management plan should be developed at the upper echelons of the organization, lower level business units can also apply these same strategies at the operational level. Cascading top level strategic objectives down the work stream into the lower levels is the key to achieving organizational alignment between departments.

9. 

   Evaluate your completed scorecard.

   Evaluate the completed scorecard. Determine whether strategies are working and whether the organization is measuring the right things in order to meet its goals. Evaluating the scorecard should be done on an ongoing basis to combat any changes in environment. Adjust the scorecard as needed.

References

• Balanced Scorecard Institute: Steps to Success
• Balanced Scorecard Basics: Balanced Scorecard