Using the Balanced Scorecard as a Strategic Management System…
Using the Balanced Scorecard
as a Strategic Management System
Managers should take such disconfi rming evidence seriously and reconsider their shared conclusions about market conditions, customer value propositions, competitors’ behavior and internal capabilities.
It facilitates the strategy review that is essential to strategic learning.
It supplies the
essential strategic feedback system
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 communicates a holistic model that links individual efforts and accomplishments to business unit objectives.
these tools address performance from only one perspective
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.
“I can continually test my strategy. It’s like performing real-time research.”
Linkage rewards to performance
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.
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.
Communicating and Linking
Let’s managers communicate their strategy up and down the organization and link it to departmental and individual objectives
promotes commitment and accountability to the business’s long-term strategy.
But to align employees’ individual performances with the overall strategy, scorecard users generally engage in three activities
linking rewards to performance measures.
communicating and educating
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.
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.
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.
Gives companies the capacity
for what we call strategic learning
enables companies to integrate their
business and fi nancial plans.
Lofty vision and strategy statements don’t translate easily into action at the local level.
Somehow, the organization’s high-level strategic objectives and measures must be translated into objectives and measures for operating units and individuals
integrate set of objectives and measures, agreed upon by all senior executives, that describe the long-term drivers of success.
provide useful guides to action at the local level
helps managers build a consensus around the organization’s vision and strategy.
link long-term strategic objectives with short-term actions.
track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth
ability to exploit intangible assets
Companies are using the scorecard to
5.- Identify and align strategic initiatives; and conduct periodic performance reviews to learn about and improve strategy.
4.- Link strategic objectives to long-term targets and annual budgets
3.- Align unit and individual goals with the strategy
2.- Communicate strategy throughout the company
1.- Clarify and update strategy
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