Balanced Scorecard: Management not Measurement
The Balanced Scorecard is a strategic performance management tool designed for managing strategic performance and not only as a measurement and reporting tool. Kaplan and Norton suggest that the process of strategic performance management consists of four critical processes:
- Clarifying and translating the vision and strategy
- Communicating and linking the strategic objectives and measures.
- Planning and setting targets, and aligning strategic initiatives
- Enhancing strategic feedback and learning
Clarifying and Translating the Vision and Strategy
The process of identifying the strategic objectives and visualising them in a Strategy Map is the starting point for any Balanced Scorecard implementation. Consensus needs to be achieved among senior leaders in an organisation about the key objectives and they way they interrelate. There are often iterations between identifying objectives and mapping them into causal maps as a Strategy Map ensures that all objectives and measures are linked to overall deliverables and isolated objectives or ‘pet projects’ are avoided.
Communicating and Linking the Strategic Objectives and Measures
Communicating the overall vision in form of Strategy Maps with associated KPIs throughout the entire organisation means that objectives are much better understood and local objective and targets can be placed into the overall strategic context. A two-way communication system should be put in place to encourage dialogue between the business units and executive management in order to engage people in the strategy process and to allow feedback.
Planning and Target Setting, and Aligning Strategic Initiatives
Targets should be established for each of the objectives and measured by the KPIs. The target setting process is best done in the context of the strategic initiatives and projects that are linked to each of the strategic objectives. Targets should take into account causal-and-effect lag times and should be stretching but achievable.
Enhancing Strategic Feedback and Learning
In the final stage of the management process, the Balanced Scorecard is integrated into a strategic learning process. Together with Kaplan and Norton I agree that this process is the most important aspect of the entire scorecard management process. It is important to put processes in place which enable managers to learn from their performance information and improve their future decision making. In addition, Strategy Maps and KPIs should be used to challenge and test the business model in order to refine and improve it over time to continuously improve performance.