The Balanced Scorecard as a Strategic Management System
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Summary and analysis of the HBR article by Kaplan and Norton
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The Balanced Scorecard as a Strategic Management System
Hinweis der Redaktion
- Concept of balanced scorecard 1992 Kaplan and Norton Revolutionized performance metrics Goes beyond traditional measures of financial performance Managers have a better understanding of how companies are really doing.
- 1. Further analyze your operational strategy. If you were to ask your team members and co-workers whether they could properly describe the operational strategy in their department, chances are you’d be met with a few blank stares. So how does scorecarding remedy this? Envision your company’s operations as a map. The cardinal directions are the objectives, measurements, initiatives, and goals. Without these directions, your map would be obsolete. With them, your team members can find their way out of the strategic jungle and on to the next level of success. 2. Grow your bottom line by looking at other metrics. Traditional reporting fails to take other internal or external perspectives (aside from finance) into account. The Balanced Scorecard recognizes that finance is only one ‘leg’ of organizational performance; internal processes, customers, and innovation make up the other three. Analysis of these four metrics allows you to translate strategy into actions and initiatives. 3. Align your strategy and your tasks. By aligning your tasks and strategies (also known as strategy mapping), you will keep your team focused on important goals only. Once you’ve culled any unnecessary initiatives or tasks, you’ll be able to single out the ones that will contribute toward your mission. 4. Change what you do so it aligns with your mission. Companies using the Balanced Scorecard are able to identify the factors that are hurting their business and outline a strategic change that will bring them better results. By listing out what you’re doing now and how that will differ in the future, you will have a better chance at redirecting your company toward success.
- TREND
- Problem with Traditional Management Systems: don’t link a company’s short-term activities to its long-term goals.
- Why the disconnect between short term activities and long term objectives.
- 1. Translating the Vision: Helps managers reach a consensus on the company’s vision and strategy. Defines integrated set of objectives and measures that describe long-term drivers of success. Closes the gap between mission statement and employees’ knowledge of how day to day actions contribute to the company’s vision. Example: A project manager called his CEO saying “I want you to know I believe in the mission statement. I act in accordance with the MS. I’m here with a customer , what am I supposed to do? The first process clearly defines the vision, closes the gap between the vision and day-to-day actions, and identifies what actions contribute to the strategy. 2. Communicating and Linking Allows strategy to become a tool for everyone as scorecard is shared up and down the organization, and eventually, outside of the organization to shareholders. High-level strategic objectives and measures can then be translated into objectives and measures appropriate to each group. Aligns individual performance with overall strategy given that scorecard users usually engage in: communicating and educating, setting goals, and linking rewards to performance measures. Eliminates the shortcoming of traditional objective performance rewards, and allows managers to not only subjectively reward employees, but also to defend those subjective rewards. This process helps in communicating throughout the company- up and down- and outside the company to shareholders; setting goals; and linking rewards to individual performance measures. 3. Business Planning Enables companies to integrate business strategy and budgeting. As part of this process, executives agree on performance measures for the 4 scorecard perspectives, identify the most influential “drivers” of the desired outcomes, and set milestones for gauging progress. When specific goals are set for balanced scorecard measures, managers can undertake only those initiatives that move them toward long-term strategic objectives. By forcing managers to focus on specific initiatives, the balanced scorecard aligns action with strategy. (Identifying projects and investments that don’t This process aligns budgets and actions of strategy, sets long term objectives and targets, key initiatives to achieve those targets, and sets measures and milestones for the short term. 4. Feedback and Learning Balanced scorecard supplies a mechanism for strategic feedback and review. Gives on-demand tool to evaluate whether the strategy is working and why or why not. Fosters learning often missing in companies: ability to reflect on inferences and adjust theories about cause-and-effect relationships. Single-loop-learning process: objective remains constant, and any departure from the planned trajectory is seen as a defect to be remediated. In quickly changing environments where strategies may lose validity as business conditions change, double-loop-learning occurs: learning that produces a change in people’s assumptions and theories about cause and effect relationships. Three key elements essential to strategic learning and feedback: Articulates the vision in operational terms Supplies essential strategic feedback system Facilitates strategy review that is essential to strategic learning Three key elements of this process: articulates clear vision, supplies strategic feedback on demand, and facilitates strategy review. CONCLUSION: BSC ADDRESSES THE SHORTCOMINGS OF THE TRADITIONAL MANAGEMENT APPROACH.
- Companies are using the balanced scorecard to: Clarify and update strategy communicate strategy throughout company Align unit and individual goals with strategy Link strategic objectives to long-term targets and budget Identify and align strategic initiatives Conduct periodic performance reviews to improve strategy THE BSC ENABLES A COMPANY TO ALIGN ITS MANAGEMENT PROCESSES AND FOCUS THE ENTIRE ORGANIZATION ON IMPLEMENTING LONG-TERM STRATEGY.
- THESE COMPANIES HAVE ALL ADOPTED THE BSC APPROACH.
- NATIONAL MARROW DONOR PROGRAM/BE THE MATCH REGISTRY FULL CASE STUDY CAN BE FOUND HERE: http://www.theinstitutepress.com/uploads/7/0/0/1/7001740/nmdp_case_study_cr7_october_2013.pdf VISION: 10,000 TRANSPLANTS PER YEAR BY 2015 PROBLEM: FOCUSED ON ACTIVITIES AND PROJECTS RATHER THAN IMPACTS EVALUATED 3 POSSIBLE STRATEGIC MANAGEMENT FRAMEWORK TOOLS: TQM, BSC, AND LEAN & SIX SIGMA. THEY CHOSE BSC BECAUSE IT GIVES CONTEXT TO TQM AND LEAN SIX SIGMA EFFORTS.
- They USED A 9 STEP TO SUCCESS APPROACH THROUGH BSC INSTITUTE ASSESMENT STRATEGY STRATEGIC OPBJECTIVES STRATEGY MAPPING PERFORMANCE MEASURES STRATEGIC INITIATIVES PERFORMANCE ANALYSIS ALIGNMENT EVALUATION SOUND FAMILIAR? IN THE FIRST STEP, THEY DECIDED THAT A SPECIFIC VISION WAS NOT NEEDED. BUT, THEY NEEDED AN OVERARCHING MEASURABLE GOAL TO PROVIDE VISION FOCUS. ::EXTRA:: THEY INTEND TO ACHIVE THE 10K GOAL BY USING 4 STRATEGIC THEMES: -GLOBAL ACCESS AND ACCEPTANCE -STAKEHOLDER EXPERIENCE -RESEARCH AND INNOVATION -ORGANIZATIONAL EXCELLENCE
- ULTIMATELY, THEIR STRATEGIC PLAN IS DESIGNED AROUND IDENTIFYING AND REMOVING ALL BARRIERS TO SUCCESFUL TRANSPLANTS. THROUGH BSC THEY HAVE REDUCED BARRIERS, INCREASED AWARENESS THROUGH PHYSICIAN EDUCATION, INCREASED BRAND AWARENESS, IMPROVED SURVIVAL OUTCOMES, AND ANNUAL BUDGET CYCLE IS NOW TIED DIRECTLY TO THOSE EFFORTS AND INITIATIVES THAT CLEARLY SUPPORT ONE OR MORE VISION OBJECTIVE MOST RECENT STATS 2013: 5,800 BUT THEY REALIZED THE STRATEGY WAS TOO FOCUSED AND THAT’S WHY THE RE-DESIGNED THEIR VISION.
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