What is Balanced Scorecard ?

The balanced scorecard is a strategic planning and management system that is widely applicable to organizations regardless of size or type of business. The system, extensively used in business and industry, government, and nonprofit organizations worldwide, provides a method of aligning business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organization performance against strategic goals. It was originated by Robert Kaplan and David Norton of Harvard University in about 1990 and detailed in a series of Harvard Business Review articles and subsequent books, but the roots of the balanced scorecard are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, an instrument panel or dashboard of performance measures) in the early part of the 20th century in France. Additional details on the balanced scorecard can be found here.

Because the balanced scorecard is a generic term, it means different things to different people, and in practice, there are wide variations in both understanding and implementation. To some, the balanced scorecard is a simple dashboard of performance measures, while to others it is a comprehensive planning and management system covering the whole organization and designed to focus efforts on organization strategy and, more importantly, on performance and results.

The balanced scorecard has evolved from its early use as a simple performance measurement framework for non-financial performance measures to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.

What are the benefits of the balanced scorecard approach? 

The benefits of the balanced scorecard have been identified by many organizations:

  • Improved organization alignment Improved communications, both internally and externally
  • Linked strategy and operations
  • More emphasis on strategy and organizational results Integrated strategic planning and management
What challenges will I encounter trying to develop and deploy a balanced scorecard system? 

There are several major challenges to developing and sustaining the balanced scorecard:

  • Engaged leadership
  • Maintaining momentum
  • Measuring what matters
  • Not using a disciplined framework to build the system
  • Mistakenly thinking a scorecard system is a short-term project (it’s not….it’s a journey)
  • Not involving a cross-section of the organization in developing the system
  • Not thinking strategically enough
  • Not incentivizing desired behavior changes
Isn't the balanced scorecard just the latest management fad that will soon pass away?
The "buzz word" may change, but not the underlying concepts, which are here to stay for a long time -- thinking strategically, measuring performance, evaluating results, feedback -- these are fundamental concepts in management that have been around a long time and will be here in the future. So managers who learn the methods of the balanced scorecard will be in a better position to lead in the future. They will have the right skills to think, plan and assess the success of their organizations -- these skills will be valuable for the foreseeable future.
I am a program manager. What's in it for me? 
The balanced scorecard is intended as a strategic system for planning and managing a whole portfolio of programs within an organization. However, as a manager of one or more such programs, the balanced scorecard can help you. It raises the visibility of program performance -- not only in traditional on-time, on-budget terms, but also in terms of its strategic significance to the desired outcomes of the whole organization. So, if you know that you are working on a program that is vital and strategic, the balanced scorecard and its measurements can help you to defend your program. Also, since strategy is everyone's job, you can use the balanced scorecard's strategic map to guide the direction of your program to maximize outcome performance. As the de facto expert in your program's definition of performance, you have the right to define what metrics will be used to measure your program's performance -- in many cases, these metrics cannot be dictated from above. You also have the authority and responsibility to measure your own program's performance.

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