Balanced Scorecard Strategy For Dummies

Charles Hannabarger, Frederick Buchman, Peter Economy

• Publisher: For Dummies
• Year: 2011
• ISBN:
  9781118051498
• Edition: 1
• Topic: Business
• Subtopic: Processo decisionale
• Index: Business

A practical, easy-to-understand guide to Balanced Scorecard for busy business leaders

The Balanced Scorecard method is an analysis technique designed to translate an organization's mission and vision statement and overall business strategies into specific, quantifiable goals, and to monitor the organization's performance in achieving these goals. Much less technology driven then other analysis approaches, it analyzes an organization's overall performance in four regards: financial analysis, customer service, productivity and internal analysis, and employee growth and satisfaction. Balanced Scorecard Strategy For Dummies breaks down the basics of Balanced Scorecard in simple language with practical, Dummies-style guidance on getting it done. This book covers all the basics of Balanced Scorecard for busy executives and managers-and does it without the high price tag of most professional level Balanced Scorecard guides.

Part I

The ABC’s of Balanced Scorecard

In this chapter . . .

Balanced scorecards have become not only popular within companies both large and small, they have become essential to measuring and managing the what’s and how’s of business. Having a basic understanding of the four legs for balanced scorecards — the customer leg, the financial leg, the internal business processes leg, and the knowledge and growth leg — is the first step in establishing your balanced scorecard strategy for your organization. After we cover the basics, we consider the best approaches to understanding your needs and making plans for implementing your own balanced scorecards.

Chapter 1

Goals, Scores, and the Balanced Scorecard

In This Chapter

Defining Balanced Scorecard and the issues surrounding it

Forming the four legs of a Balanced Scorecard

Incorporating dashboards to get continuous feedback for success

An old saying goes something like this: If you’re not keeping score, you’re just practicing. If you ask us, truer words were never spoken — especially in today’s topsy-turvy business world. To make (and keep) your business a success, you need to not only keep score, but also predict your score in advance by setting goals and then achieving them on a consistent basis. And we’re not talking about easy-to-achieve goals and scores. No! We’re talking about goals that stretch your imagination and push your creativity and ingenuity to the limits — as well as the creativity and ingenuity of your employees.

Can you imagine what the people working at NASA in the 1960s thought when they were asked to build a rocket and space capsule that would transport Americans to the moon — in less than ten years? We can imagine them wondering exactly how in the heck they would pull it off, but never doubting that they would. NASA put a massive stretch goal before them, and they achieved it. Balanced Scorecard Strategy is the tool that will allow your company to set and achieve stretch goals.

In this chapter, we give you an initial peek at Balanced Scorecard, preview its four legs, and offer a glimpse of how you can ensure that your company’s scorecard stays balanced.

Getting Familiar with Balanced Scorecard

What’s a Balanced Scorecard? Glad you asked, because in this section you’ll get your first glimpse at what a Balanced Scorecard is and how it works. You’ll see that scorecards aren’t rocket science, but they do require some good business structure, analysis, and planning in order to get it right.

Just what is Balanced Scorecard, anyway?

To better understand what a Balanced Scorecard is, maybe you should first learn where it came from and why. The Balanced Scorecard was first developed in the early 1990s by two guys at the Harvard Business School: Robert Kaplan and David Norton. The key problem that Kaplan and Norton identified in today’s business was that many companies had the tendency to manage their businesses based solely upon financial measures. While that may have worked well in the past, the pace of business in today’s world requires better and more comprehensive measures. Though financial measures are necessary, they can only report what has happened in the past — where your business has been — and they are not able to report where it is headed: It’s like trying to drive your car by looking in the rear view mirror.

In order to provide a management system that was better at dealing with today’s pace of business and to provide business managers with the information they need so that they can make better decisions, Kaplan and Norton developed the Balanced Scorecard. Note that we said that the Balanced Scorecard is a management system — not a measurement system. Yes, measurement is a key aspect of the Balanced Scorecard, but it is much more than just measurement: it is a means to setting and achieving the strategic goals and objectives for your organization.

So, what is the Balanced Scorecard? In short, it’s a management system that enables your organization to set, track and achieve its key business strategies and objectives. Once the business strategies are developed, they are deployed and tracked through what we call the Four Legs of the Balanced Scorecard. These four legs are made up of four distinct business perspectives: The Customer Leg, the Financial Leg, the Internal Business Process Leg, and the Knowledge, Education, and Growth Leg.

Leaning on the four legs of the scorecard

Your Balanced Scorecard Strategy relies upon four different yet integrated perspectives: The Customer Leg, the Financial Leg, the Internal Business Process Leg, and the Knowledge, Education, and Growth Leg. These four legs of the Balanced Scorecard are necessary for today’s business executives and managers to be able to plan, implement and achieve their business strategies. The four legs will make the difference between whether your business succeeds or fails. The following list takes a closer look at the four legs:

Customer scorecard: Measures your customers’ satisfaction and their performance requirements — for your organization and what it delivers, whether it be products or services.

Financial scorecard: Tracks your financial requirements and performance.

Internal Business Process scorecard: Measures your critical-to- customer process requirements and measures.

Knowledge, Education, and Growth scorecard: Focuses on how you train and educate your employees, gain and capture your knowledge, and how you use it to maintain a competitive edge within your markets.

Achieving Organizational Balance

When reflecting on the many companies we’ve worked with (and we’ve worked with a lot!), we notice that many organizations tend to be unbalanced — that is, they focus only on two legs of the Balanced Scorecard: their financial measures (see Part III) and their internal business process performance (see Part IV). As a result, they miss the mark in measuring and tracking other critical parts of their businesses — things like their customers (see Part II) and their internal knowledge and growth (see Part V).

These four elements, or legs, have to be m...