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The Balanced Score Card

The Balanced Score Card - BALANCED SCORECARDS Part I...

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BALANCED SCORECARDS Part I: Establishing Balanced Scorecards Released April 2001 Organizations tend to juggle a number of improvement initiatives at the same time, ranging from process mapping to benchmarking to administering customer satisfaction surveys. But they often lack the alignment to cohesively structure these initiatives in a way that addresses an overall strategy. The balanced scorecard, a framework that links business strategies with day-to-day activities, is one solution that has worked wonders for many. "If profits go down, you don't know what's driving profits," said Cynthia Raybourn, an APQC custom engagement specialist. "Measurement is a whole lot more than a yard stick. It doesn't just measure where we are but helps us get to where we want to be. The balanced scorecard is a means of focusing people's attention on desired behaviors and desired results." A balanced scorecard aligns measures with strategies in order to track progress, reinforce accountability, and prioritize improvement opportunities. Unlike a bottom-line analysis, a balanced scorecard integrates four related perspectives: finance, customers, internal processes, and innovation and learning. "Essentially, it's a means of understanding—in an accurate and complete way—the overall performance of an organization," said Raybourn. Raybourn explained that the balanced scorecard is the most popular and widespread framework for developing performance measures. Even so, implementation has proven to be a challenge in most organizations. Part of this difficulty is the scorecard's reliance on fully articulated strategic objectives. Successful implementation breaks down if an organization lacks direction. Furthermore, identifying critical success factors is an involved process. And changing measurements from an emphasis on finance to a more balanced approach with multiple emphases has significant cultural implications, ranging from changes in compensation and career advancement to increased dependence on teamwork. So, like any other culture change initiative, the balanced scorecard process carries a set of challenges to successful implementation. The good news is these challenges can be overcome with a detailed balanced scorecard implementation process. The following is a basic framework upon which an organization can formulate links between its business strategy and day-to-day activities. Step 1: Plan the Project This step is critical to the success of the implementation process. The following activities should be considered by the process sponsor and owners. Confirm the scope of the project and establish a project time line. "A clear sense of the mission, values, and strategic objectives is the single, most critical thing to establish," said Raybourn. Once this has been done, the sponsors and owners determine the scope of the project, which will likely begin with a small number of teams or departments.
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