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Who Uses the Balanced Scorecard (BSC)?BSCs are used extensively in business and industry, government, and nonprofit organizations worldwide. More than half of major companies in the US, Europe, and Asia are using the BSC, with use growing in those areas as well as in the Middle East and Africa. A recent global study by Bain & Co listed balanced scorecard fifth on its top ten most widely used management tools around the world. BSC has also been selected by the editors of Harvard Business Review as one of the most influential business ideas of the past 75 years. What Are Balanced Scorecard Perspectives?
The BSC suggests that we examine an organization from four different perspectives to help develop objectives, measures (KPIs), targets, and initiatives relative to those views.
What Are Strategic Objectives?Strategic Objectives are the actions we must implement into our daily activities in order to see improvement in our strategies. They break down abstract concepts like mission and vision into actionable steps.
What Is a Strategy Map?One of the most powerful elements in the BSC methodology is the use of strategy mapping to visualize and communicate how value is created by the organization. A strategy map is a simple graphic that shows a logical, cause-and-effect connection between strategic objectives (shown as ovals on the map). What Are Performance Measures (KPIs)?For each objective on the strategy map, at least one measure or Key Performance Indicator (KPI) will be identified and tracked over time. KPIs indicate progress toward a desirable outcome. Strategic KPIs monitor the implementation and effectiveness of an organization’s strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency.
What Are Strategic Initiatives?Strategic Initiatives are projects (new or existing) that are designed to help the organization achieve Strategic Objectives and have significant organization-wide impact. They are managed formally like any other project, meaning they are explicitly defined in terms of owner, schedule, resources needed, action steps, progress, and expected results. Some Strategic Initiatives are short-term (taking only a few days to implement) while others can take years to fully implement. Strategic Project Management is the process of managing projects to achieve strategic success.
 What is Cascading?Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3). Cascading strategy focuses the entire organization on strategy and creating line-of-sight between the work people do and high level desired results. As the management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. This alignment step is critical to becoming a strategy-focused organization. BSC Automation and Performance AnalysisOnce a scorecard has been developed and implemented, performance management software can be used to get the right performance information to the right people. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. The Balanced Scorecard Institute formally recommends the QuickScore Performance Information SystemTM developed by Spider Strategies and co-marketed by the Institute.
Balanced Scorecard HistoryThe Balanced Scorecard was originally developed by Dr. Robert Kaplan of Harvard University and Dr. David Norton as a framework for measuring organizational performance using a more balanced set of performance measures. Traditionally companies used only short-term financial performance as the measure of success. The “balanced scorecard” added additional non-financial strategic measures to the mix in order to better focus on long-term success. The system has evolved over the years and is now considered a fully integrated strategic management system. This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton and built on work by Art Schneiderman at Analog Devices. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to ‘balance’ the financial perspective. Kaplan and Norton describe the innovation of the balanced scorecard as follows: “The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. 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.” What are the 4 perspectives of a balanced scorecard?The four perspectives of a balanced scorecard are learning and growth, business processes, customer perspectives, and financial data. These four areas, which are also called legs, make up a company's vision and strategy.
Which of the following is not part of the balanced scorecard process?The correct answer is b) External control perspective. The four perspective of a balanced scorecard are: Financial Perspective—adding value for shareholders.
What are measures in a balanced scorecard?The balanced scorecard requires specific measures of what customers get—in terms of time, quality, performance and service, and cost. 2. Internal business perspective. Focus on the core competencies, processes, decisions, and actions that have the greatest impact on customer satisfaction.
Which of the following is not a characteristic of the balanced scorecard?It also includes performance measures that are related to the internal processes. Further, it does not include the measures of customer performance. But the presentation of cause-and-effect linkages between the different strategic objectives is not covered by the balanced scorecard. Hence it is the correct option.
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