Using the Balanced Scorecard
as a Strategic Management System
ability to exploit intangible assets
track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth
link long-term strategic objectives with short-term actions.
Translate the
vision
helps managers build a consensus around the organization’s vision and strategy.
provide useful guides to action at the local level
integrate set of objectives and measures, agreed upon by all senior executives, that describe the long-term drivers of success.
Setting goals
Lofty vision and strategy statements don’t translate easily into action at the local level.
business planning
enables companies to integrate their
business and fi nancial plans.
feedback and
learning
Gives companies the capacity
for what we call strategic learning
supplied a framework and thus a focus for many critical management processes: departmental and individual goal setting, business planning, capital allocations, strategic initiatives, and feedback and learning.
Those processes were uncoordinated and often directed at short-term operational goals.
Translate the Vision
creating a balanced scorecard forced the bank’s senior managers to arrive at a consensus and then to translate their vision into terms that had meaning to the people who would realize the vision.
Communicating and Linking
Broad participation in creating a scorecard takes longer, but it offers several advantages: Information from a larger number of managers is incorporated into the internal objectives; the managers gain a better understanding of the company’s long-term strategic goals; and such broad participation builds a stronger commitment to achieving those goals.
But to align employees’ individual performances with the overall strategy, scorecard users generally engage in three activities
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communicating and educating
setting goals
linking rewards to performance measures.
promotes commitment and accountability to the business’s long-term strategy.
Let’s managers communicate their strategy up and down the organization and link it to departmental and individual objectives
Somehow, the organization’s high-level strategic objectives and measures must be translated into objectives and measures for operating units and individuals
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corporate objectives
measures
targets
The personal scorecard helps to communicate corporate and business unit objectives to the people and teams performing the work, enabling them to translate the objectives into meaningful tasks and targets for themselves. It also lets them keep that information close at hand – in their pockets.
Linkage rewards to performance
measures
linking compensation to the scorecard has helped to align the company with its strategy. “I know of no competitor,” he says, “who has this degree of alignment. It is producing results for us.”
This requirement should motivate people to achieve a more balanced performance across short- and long-term objectives.
Business Planning
“I can continually test my strategy. It’s like performing real-time research.”
single-loop-learning process – single-loop in the sense that the objective remains constant, and any departure from the planned trajectory is seen as a defect to be remedied.
these tools address performance from only one perspective
It communicates a holistic model that links individual efforts and accomplishments to business unit objectives.
It articulates the company’s shared vision, defi ning in clear and operational terms the results that the company, as a team, is trying to achieve
It supplies the
essential strategic feedback system
It facilitates the strategy review that is essential to strategic learning.
Managers should take such disconfi rming evidence seriously and reconsider their shared conclusions about market conditions, customer value propositions, competitors’ behavior and internal capabilities.
Companies are using the scorecard to
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1.- Clarify and update strategy
2.- Communicate strategy throughout the company
3.- Align unit and individual goals with the strategy
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4.- Link strategic objectives to long-term targets and annual budgets
5.- Identify and align strategic initiatives; and conduct periodic performance reviews to learn about and improve strategy.
MARÍA JOSÉ DE SANTOS PÉREZ I.D. 86934
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