Using the Balanced Scorecard as a Strategic Management System…
Using the Balanced Scorecard
as a Strategic Management System
Lofty vision and strategy statements don’t translate easily into action at the local level.
Most companies’ operational and management control systems are built around financial measures and targets, which bear little relation to the com- pany’s progress in achieving longterm strategic objectives.
The balanced scorecard, as the embodiment of business unit strategy, should also be communicated upward in the organization
Translating the Vision
The scorecard also highlighted gaps in employees’ skills and in information systems that the bank would have to close in order to deliver the selected value propositions to the targeted customers.
Creating a balanced scorecard forced the bank’s senior managers to arrive at a consensus and then to translate their vi- sion into terms that had meaning to the people who would realize the vision.
Managers using the balanced score- card do not have to rely on short-term financial measures as the sole indicators of the company’s performance.
Communicating and Linking
Communicating and educating
Implementing a strategy begins with educating those who have to execute it.
Mere awareness of corporate goals, however, is not enough to change many people’s behavior. Some- how, the organization’s high-level strategic objectives and measures must be translated into objectives and measures for operating units and individuals.
Linking rewards to performance measures.
Should compensation systems be linked to balanced scorecard measures? Some companies, believing that tying financial compensation to performance is a powerful lever, have moved quickly to establish such a link- age.
To formulate their strategic plans, senior executives go off-site annually and engage for several days in active discussions facilitated by senior planning and development managers or external consultants
Feedback and Learning
Managers should take such disconfirming evidence seriously and reconsider their shared conclusions about market conditions, customer value propositions, competitors’ behavior and internal capabilities.
Toward a New Strategic Management System
he balanced scorecard enables a company to align its management processes and focuses the entire orga- nization on implementing long-term strategy.