1. Person or firm who created the framework
The Balanced Scorecard was developed by Dr. Robert S. Kaplan and Dr. David P. Norton in the early 1990s.
2. Description of the framework
The Balanced Scorecard is a strategic planning and management system used extensively in business and industry, government, and nonprofit organizations worldwide. It is designed to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals. The framework is built around four main perspectives:
- Financial Perspective: Looks at how well the organization is performing financially. Typical financial goals include measures like return on investment, economic value added, and revenue growth.
- Customer Perspective: Focuses on customer satisfaction and market share in target segments. Measures could include customer satisfaction scores, percentage of sales from new products, or customer retention rates.
- Internal Process Perspective: Examines the internal operational processes critical to delivering value to customers. Measures here might focus on cycle times, quality, employee skills, and productivity.
- Learning and Growth Perspective: Focuses on the intangible drivers of future success such as human capital, organizational capital, and information capital. This includes employee training, organizational culture measures, and access to information.
3. The framework's "secret sauce"
The distinctive aspect of the Balanced Scorecard is its comprehensive view of the organization by not just focusing on financial outcomes but also including customer, business process, and learning and growth perspectives. This holistic approach ensures that the organization is balanced and not optimizing one area at the expense of others.
4. Situations for which the framework is particularly well suited
The Balanced Scorecard is particularly effective in complex organizations where multiple dimensions of performance must be managed simultaneously. It is ideal for situations requiring a clear translation of company vision and strategy into actionable objectives across all levels of the organization, ensuring that all employees understand how their actions contribute to overall success.
5. Practical instructions for using this framework
Step 1: Develop the Strategic Vision and Objectives
Clarify the Vision and Strategy:
- Define the organization’s vision, mission, and strategic objectives.
- Ensure that the strategic objectives are clear, actionable, and measurable.
Communicate the Vision:
- Share the vision and strategic objectives with all employees.
- Use various communication channels to ensure understanding and alignment.
Step 2: Define the Perspectives and Metrics
Identify Key Performance Indicators (KPIs):
- Select KPIs for each of the four perspectives (Financial, Customer, Internal Processes, Learning and Growth).
- Ensure that the KPIs are relevant, measurable, and aligned with strategic objectives.
Develop Performance Measures:
- Define specific metrics for each KPI.
- Establish baseline data and targets for each metric.
Step 3: Implement the Balanced Scorecard
Create a Strategy Map:
- Develop a strategy map that visually links strategic objectives across the four perspectives.
- Show cause-and-effect relationships between different objectives.
Assign Responsibilities:
- Assign ownership of each KPI and metric to specific individuals or teams.
- Ensure that responsibilities are clear and aligned with organizational goals.
Develop Action Plans:
- Create action plans to achieve the targets for each metric.
- Include timelines, resources, and specific actions required.
Step 4: Monitor and Review Performance
Regularly Review Performance:
- Set up a schedule for regular performance reviews (e.g., monthly or quarterly).
- Use performance dashboards to track progress against targets.
Analyze Results:
- Analyze performance data to identify trends, gaps, and areas for improvement.
- Use the insights gained to make informed decisions and adjustments.
Take Corrective Actions:
- Implement corrective actions to address any performance issues.
- Adjust action plans and targets as needed to stay on track.
Step 5: Continuously Improve and Adapt
Foster a Culture of Continuous Improvement:
- Encourage a culture of continuous improvement and learning.
- Solicit feedback from employees on the Balanced Scorecard process and performance.
Update the Balanced Scorecard:
- Periodically review and update the Balanced Scorecard to reflect changes in strategy, market conditions, or organizational priorities.
- Ensure that the Balanced Scorecard remains relevant and aligned with the organization’s vision.
Communicate Successes and Learnings:
- Share successes and learnings with the entire organization.
- Recognize and reward teams and individuals who contribute to achieving strategic objectives.
6. Further Reading
The Balanced Scorecard: Translating Strategy into Action by Dr. Robert S. Kaplan and Dr. David P. Norton
Download the complete Field Guide to Change Managment Frameworks
