No legitimate enterprise denies the value of a strategic plan and yet very few are ever successfully executed for failure to follow through…why? Implementation, it turns out, is vastly more difficult than crafting the plan and as Peter Drucker explains, managing a process requires measuring progress within that process and making adjustments along the way. Execution is about management and it is what separates excellent organizations from those that aren’t.
The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more ‘balanced’ view of organizational performance.
These tools transform an organization’s strategic plan from an attractive but passive document into the “marching orders” for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. More than efficiency it promotes effectiveness, ensuring the right things, and not the wrong things, are being done well. It enables executives to truly execute their strategies.
This approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. 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. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.
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.”
Call us to learn why nations, government operations, non-profits, and business and industry are praising the effectiveness of this system.