Balanced Scorecard

Leading a successful organization in today’s fast-moving world is like flying a jet fighter: environmental forces fluctuating between extremes, quick reactions required, sudden stresses from every direction.

balanced scorecard performance gauges The more rapid the speed of change and extreme the conditions, the more important it is to have gauges that instantly show critical changes, environmental conditions, system performance, and new threats and opportunities.

Most organizations collect information on customer satisfaction, finance, and employee satisfaction. However, data is typically scattered in MIS, marketing, finance, human resources, sales, and operations, with no integrating force; the proliferation of data can result in executives drowning in a sea of conflicting information of low value. What is the answer?

We have found that a limited, but balanced, set of performance gauges can clarify strategic decision making. Such measures combine together to show well the organization is performing - both long and short-term.

The power of the balanced scorecard approach is in its ability to focus resources and attention on key issues. The gauges must be designed to provide clear answers to six core survival questions:

How are we doing in meeting customers' expectations? (customer dimension)
How well are we developing our human assets? (people dimension)
How are we doing in meeting stockholders' expectations? (financial dimension)
How productively are we operating the enterprise? (operations dimension)
How effectively are we working with key suppliers? (supplier dimension)
How well are we dealing with environmental, community and regulatory issues that may alter the playing field? (environment dimension)

Metrus Group was one of the first to recognize the importance of including external dimensions beyond the customer--recognizing the critical role of social and environmental factors, as well as relationship with the growing network of supplier/partners. (This is described in more detail in Bullseye! Hitting Your Strategic Targets Through High Impact Measurement, W. Schiemann & J. Lingle.)

Benefits of strategic measurement with a balanced scorecard

When combined into a concise report, distributed to the management team and cascaded throughout the organization, a well-designed balanced scorecard:

Simplifies managers’ lives by providing focus and prioritizing actions and resources.
Eliminates information overload by bringing together crucial elements.
Improves communication by providing a common language and reliable information about current organizational strengths and weaknesses. Everyone understands the strategy, their role in helping achieve it, and how their efforts will be measured and rewarded.
Forces the management team to clarify the strategy to a level of specificity at which its implementation can be measured.
Helps managers understand interrelationships by tracking how improvements in one area impact other areas.
Helps focus an organization's attention towards where it is going, rather than backwards towards where it has been, adding future to past and present measures.

Some executives said their balanced scorecards had...

“helped us emphasize a process view of the business, increase motivation, and incorporate client feedback into operations.”
“expanded management's discussion beyond simply gross margin, return on equity, and market share to what was truly important to the organization for our future success.”
“produced a truly strategic set of measures. While managers are willing to share basic financial information, they are protective of their balanced gauges because it defines their strategy.”

One executive noted, “The effect it has had on alignment and teamwork from top to bottom is truly extraordinary.”

Balanced Scorecard Case Study

Keys to balanced scorecard success

The right measures can focus an organization and carry it to success; the wrong measures divert focus and speed decay. To be effective, a balanced set of gauges must capture the essence of an organization's vision and strategy. Likewise, the implementation process must be sound, yet also simple enough to assure consistent follow-through.

Metrus Group's consultants have a unique blend of capabilities in balanced scorecards, strategy refinement, and measurement. We have helped hundreds of clients to measure and evaluate performance from the perspectives of their customers, employees, shareholders and systems.