How to use the Balanced Scorecard

The Balanced Scorecard is a concept helping you translate strategy into action. the Balanced Scorecard starts from the company vision and strategies, from here critical success factors are defined. Measures are constructed that aid target setting and performance measurement in areas critical to the strategies.

Implementation of the scorecard generally begins at the corporate level, but is usefull at all levels of an organization. The scorecard is not only an executive information system for corporate management but should form the basis for promoting behavioural change in the organisation to conform with the vision and strategy. Often this means pushing the scorecard methodology down through the organisation.

Create a Balanced Scorecard:

You have to identify a vision. Where is the organization going?

Define perspectives, which means you have to ask what do we have to do well in each perspective.

Identify the Critical Success Factors - when enough is enough, and when not.

Thereafter ask how do we measure that everything is going the expected way?

Now it is necessary think of the evaluation of your Scorecard. Consider how to secure that the right things are measured.

By identifying strategies you tell how you will get there.

Based on this work you should create action plans and plan reporting and operation of the Scorecard.

How will the Balanced Scorecard be managed? Which persons should have reports and what should they look like?

1. The Customer Perspective

Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

2. The Financial Perspective

As with the traditional methodologies, measuring need financial data. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

3. Processes Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements and fulfills the mission. These metrics have to be carefully designed by those who know these processes most intimately; with missions being unique this definition can not entirely be developed by outside consultants. In addition to the strategic management process, two kinds of business processes may be identified: 1) mission-oriented processes, and 2) support processes. Mission-oriented processes are business-related special functions, and many unique problems are encountered in these processes. The support processes are more repetitive in nature, and hence easier to measure and benchmark using generic metrics.

4. The Innovation Perspective

This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. The importance of learning and growth has to be considered. A knowledge-worker organization often find themselves unable to hire new technical workers and at the same time is showing a decline in training of existing employees. This is a leading indicator of 'brain drain' that must be reversed. People are the only repository of knowledge - they are the main resource. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization.

Project management has been in the management culture for decades, and thousands of managers are routinely capable of amazingly complex achievements. People trained only in project management may have difficulty in figuring out how to accomplish the Balanced Scorecard, simply because it is such a different kind of management paradigm. And many project managers may have never seen or cosidered any other way to get things done.

Often there is a long-established tradition of on-the-job training and experience for young people to learn and be mentored by experienced project managers. Many guidebooks, manuals, software programs, and other means have been devised to aid the project manager. One of the key practical difficulties is to figure out how to get the process started in the first place. If this is not a project, where does one begin? What kind of plan is appropriate for deployment of the balanced scorecard system? Until we have reached that point where balancing scorecards is just the way and a proper knowledge base is build - we have to learn from others.

If we want to ride a rotating merry-go-round, we had better not attempt to just hop on. We will probably get hurt - and won't get on. The situation is similar with the Balanced Scorecard. To get on the merry-go-round, we have to accelerate in the same direction for awhile, then hop on when our speed equals that of the circular floor. In other words, there needs to be a ramp-up phase, where everyone "comes up to speed." This includes training or retraining of project managers, and probably focused deployment of pilot efforts before attempting to cover an entire large agency. Sustained, patient leadership will be needed before the payoff is attained.

Responsible persons and actions plans to reach the measure targets are defined. You can easily create a Scorecard, but to create a manageable scorecard is a completely different thing!

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the Balanced Scorecard
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