Author: Vivienne Scott, Corporate Governance Consultant, Independent Governance Review Group
So, what is the Balanced Scorecard? In short, it’s a management system that enables your organisation to set, track, and achieve its key strategies and objectives.
The critical characteristics that define a Balanced Scorecard are:
- its focus on the strategic agenda of the organisation concerned
- the selection of a small number of data items to monitor
- a mix of financial and non-financial data items
The Balanced Scorecard was developed in the early 1990s by two guys at the Harvard Business School: Robert Kaplan and David Norton. The key problem that Kaplan and Norton identified in the business of the day was that many companies tended to manage their businesses based solely on financial measures. While that may have worked well in the past, the pace of business in today’s world requires more comprehensive measures. Though financial measures are necessary, they can only report what has happened in the past — where a business has been, but not where it is headed. It’s like driving a car by looking in the rearview mirror.
To provide a management system that was better at dealing with today’s business pace and to provide business managers with the information they need to make better decisions, Kaplan and Norton developed the Balanced Scorecard.
This system is also applicable to NFP’s and a key benefit of using a disciplined framework like the Balanced Scorecard is that it gives organisations a way to ‘connect the dots’ between the various components of strategic planning and management, meaning that there will be a visible connection between the projects and programs that people are working on, the measurements being used to track success, the strategic objectives the organisation is trying to accomplish and the mission, vision and strategy of the organisation.
Find out more in this free 30 min webinar on the Balanced Scorecard
Generic Strategy Map
One of the big challenges faced in the design of Balanced Scorecard based performance management systems is deciding what activities and outcomes to monitor. By providing a simple visual representation of the strategic objectives to be focused on, along with additional visual cues in the form of the perspectives and causal arrows, the strategy map has been found useful in enabling discussion within a management team about what objectives to choose, and subsequently to support discussion of the actual performance achieved.
See example below:
To find out more about how to use the Balanced Scorecard system in your organisation please contact Vivienne Scott, Corporate Governance Consultant, by emailing email@example.com