The Balanced Scorecard

The Balanced Scorecard Institute is a well-respected organization that has a popular method for measuring organizational effectiveness. I’m going to work on building its lessons into my office.

The basic idea behind the Balanced Scorecard comes from its creators, Drs. Robert Kaplan and David Norton: “If you can’t measure it, you can’t manage it.” According to them:

Fnancial measures tell the story of past events…These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.”

Basically, the Balanced Scorecard, instead of trying to measure past success, tries to evaluate your organization’s fundementals — the fundamentals that will lead to sustained success. Those are: learning and growth (typically the Human Resources component); financial; customer; and internal business processes.

That’s all well and good, but I like to compare theories to leading companies and see if there isn’t another, better approach. So I looked at Apple. Apple, it turns out, does use the Balanced Scorecard. According to Neeraj Kumari in a piece published in the European Journal of Business and Management, Apple uses the scorecard as a device to plan long-term performance. Here’s how:

For financial measurement, Apple measures shareholder value; for customer measurement it uses market share and customer satisfaction; for internal process measurement it measures core competencies; and for learning and growth it measures employee attitudes. At the time of this post I will have instituted three of these four same measurements, the only one I will need is a metric for financial measurement, which will likely have to be Return on Investment (RoI). So after reading this I’m feeling pretty good.

I also want to understand which to prioritize, if necessary. Here is how Apple prioritizes these metrics, according to Mr. Kumari:

  1. First, and most important, is customer satisfaction;
  2. Second most important is core competencies;
  3. Third is employee commitment and alignment;
  4. Fourth is market share;
  5. Last is shareholder value.

Very interesting. If you also found this to be intriguing, I highly recommend reading the rest of Mr. Kumari’s piece.

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Glen B. Alleman

Balanced Scorecard is a powerful tool for defining the needed capabilities of a system, a project, or a process. But many times the actual implementation of the BSC is either too high level or mired in details. Here’s guidance developed over many implementations of BSC that may help anyone wanting to apply this approach, http://slidesha.re/g0i0as

Pat Fiorenza

Great post – remember learning all about this in grad school, important tool for agencies to consider. But as Glen mentioned, needs to be implemented correctly. Thanks for sharing!