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Balanced Scorecard (BSC) Measuring the Key Drivers of Your Business |
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By Vadim Kotelnikov, Founder, Ten3 BUSINESS e-COACH - Innovation Unlimited, 1000ventures.com
"What gets measured gets done."
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What is Balanced Scorecard?
The balanced scorecard advocates a top-down approach to
business performance management, starting with business
strategic intent expressed
through the organization down to operationally relevant targets. The focus
with Balance Scorecard approach is on the link and/or influences between it
various components, which include business
strategy, perspectives, objectives, measures, initiatives and milestones
as well as softer contextual information. Why Balanced Scorecard? To survive and prosper in today's world, companies can no longer manage using financial measures alone. You have to track non-financial measures such as speed of response and product quality; externally focused measures, such as customer satisfaction and brand preference; and forward looking measures, such as idea management and employee satisfaction. The Balanced Scorecard is an important tool of your strategic management system. It uses performance measurements within a framework of strategic hypotheses that enables you to learn what works best in your organization. Organizational Balanced Scorecard The organizational balanced scorecard encompasses the organizational mission, vision, core values, critical success factors, objectives, performance measures, targets and improvement actions. This corporate scorecard is communicated and translated into all business unit balanced scorecards, team balanced scorecards and the performance plans of individual employees and their personal balanced scorecards. In connection with this policy deployment, each employee is stimulated to contribute to the shared organizational strategy. A Range of Strategic and Operational Measures
The measures used to manage the performance of a business
comprise a range of strategic measures. The include the following:
Depending on the emphasis placed on different measures in an organization, its information and performance measures can vary between operational fixed (for example, the 99% replenishment rate on the shelves of a Sainsbury's store) and strategic flexible (for example, Microsoft's goal of standards ownership on the information superhighway).2 29 Obstacles To Innovation
A Framework for Designing a Set of Measures The Balanced Scorecard provides a framework for designing a set of measures for activities chosen by you as being the key drivers of your business. By having four distinct perspectives (financial, customer, internal process and innovation and learning) it promotes a more holistic balanced view of any organization. By creating your own measures under each of these headings, no important area would be missed. The Balanced Scorecards itself is just a framework and it doesn't say what the specific measures should be. "That is a matter for people within the organization to decide, and the set of measures for each organization (or even sections within the same organization) will be different. Much of the success of the scorecard depends on how the measures are agreed, the way they are implemented and how they are acted upon. So, the process of designing the scorecard is just as important as the scorecard itself."1
18 Leadership Lessons from Colin Powell
The most important question in
performance evaluation becomes not "How well did you perform your job
since the last time we met?" but "How much did you change it?"....
More Case in Point Citigroup At the heart of the Citigroup's Innovation Initiative was putting the right metrics in place. The Citibank Division already had an Innovation Index in place that measured revenues derived from new products but that was deemed insufficient. The special task force was challenged "to come up with more meaningful top-line metrics that could be used to track progress and could be integrated into the balanced scorecard, and ultimately tied to compensation of senior managers. The team eventually settled on 12 key metrics. They included such things as: new revenue from innovation, success transfer of products from one country or region to another, the number and type of ideas in the pipeline (and expected new revenues), and time from idea to profit."3 Case in Point Using the Best Practice at GE: The Trotter Scorecard Many GE business units employ a tool called the Trotter Matrix to check on their use of best practices. The scorecard was developed by Lloyd Trotter, who ran the Electrical Distribution and Controls side at GE. He listed six desirable attributes for each of his plants and then scored each attribute... More
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