The Power of the Scorecard
The Balanced Scorecard implies a performance measurement system. However, as Kaplan & Norton have pointed out, the Balanced Scorecard is a management system, not a performance measurement system. The reason is due to the fact that the Scorecard deals with strategies, the real source of increased values for an organization. The problem is that most organizations fail to successfully implement their strategies.
Most people within an organization are way too focused on tasks and activities with little or no focus on strategizing. Even upper level managers fail to spend sufficient time on strategizing. According to one study, executive managers spend less than 50% of their time on strategic planning type activities. When you poll workers within an organization, you will find that less than 10% have any understanding of the organization's strategies. Is it no wonder that most organizations fail to create value through strategizing.
Enter the Balanced Scorecard. The Balanced Scorecard transforms an organization into a knowledge driven organization. Strategies are now communicated throughout the entire organization in a very precise and specific metric format. This allows people to easily identify with the strategies of the organization. Everything is now linked together, working from the same plan as opposed to scattered pockets of knowledge working in all directions. When you embed everyone into one system, the organization can respond quickly to changes in the marketplace. And since strategy is everyone's business, you have a tool for communicating strategy in terms that people can relate to. Balanced Scorecards unlock and release many of the solutions that people have for meeting strategic goals and objectives. This is why Balanced Scorecards are so powerful in helping an organization create higher values.
A case in point often cited by Kaplan & Norton is that of Mobil Oil. In 1993, Mobil adopted the Balanced Scorecard as a tool for integrating and communicating its strategies. Mobil's performance was ranked dead last in 1993. Two years later, Mobil launched its strategies in conjunction with the Balanced Scorecard. By 1996, Mobil Oil had reached record performance. This performance was repeated in 1997 and once again in 1998. As long as organizations have the ability to develop good solid strategies, the Balanced Scorecard can be the tool for implementation. If you want to create higher values, you must engage in strategizing and once of the best ways to implement strategies is through the Balanced Scorecard.
Written by: Matt H. Evans, CPA, CMA, CFM | Email: firstname.lastname@example.org | Phone: 1-877-807-8756