The Balanced Scorecard - A Simple Yet Powerful Tool

The balanced scorecard has been around for some time - but in many cases it has not been fully embraced nor implemented properly within organisations.

The balanced scorecard's basic intent is to measure an organisation's progress towards achieving its strategic direction. And perhaps the most significant input into this effective tool can be found in the HR perspective.

Many of you may be familiar with the balanced scorecard idea. It is a very simple approach – which typically means it is often difficult to implement.  But following a disciplined approach, many companies have experienced the benefits from its implementation.  As in anything worthwhile, it takes some time - often many months – for the BSC to demonstrate its full value to an organisation.

What does it do?   It provides executives with a measurement system as to how the organisation is moving towards achieving its strategic goals.  Note that the BSC measures strategy – not necessarily day-to-day operational outputs.

Why measure strategy?  For the obvious reason - to know if the organisation is moving towards its strategic plan. Very few organisations measure strategy.  Often, they make the process of strategic planning just an annual exercise – one for the books, so to speak.

Strategic planning - in a way that term is an oxymoron. Strategy is the result of “divergent thinking” whereas planning requires “convergent thinking”. The BSC measures the “plan” in order to validate the “strategy”.

The BSC system is generally made up of four perspectives, defined as follows:

• Finance: the bottom line typically determines the organisation’s health.
• Customer: the key to financial success with key attributes of satisfaction, loyalty, retention, and acquisition.
• Process: those critical things at which an organisation must excel to deliver value to the customer.
• Learning and Growth: the infrastructure an organisation builds to maintain long term growth and improvement – includes human resources and systems.

The BSC not only balances financial with non-financial measures, but also recognises leading and lagging indicators. Many companies who have successfully implemented the BSC have a better understanding of how the organisation as a whole was working.  They also began to focus on the big picture versus getting mired into day-to-day detail.  What separates it from other measurement systems is that it connects the basic aspects of any business into a single, integrated system.

One may ask if the BSC is just another “flavour of the month” type program. The answer is the same as for any other program.  If it gets leadership support, it will endure.

Adapted from GL Now