24 balanced scorecards if an instructor takes class

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Balanced Scorecards
If an instructor takes class attendance and assigns grades based on it, students tend to come to
class. If an employer tracks the number of customers employees serve per day, employees
tend to serve more customers. So if “what gets measured happens,” shouldn’t managers take
advantage of “scorecards” to record and track performance results?

Strategic management consultants Robert S. Kaplan and David P. Norton advocate using
the balanced scorecard for management control.
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They say it gives top managers “a
fast, but comprehensive view of the business.” The basic principle is that to do well and to
win, you have to keep score. Like sports teams, organizations tend to perform better when
their members always know the score.
Developing a balanced scorecard for any organization begins with a clarification of the
organization’s mission and vision—what it wants to be and how it wants to be perceived by
its key stakeholders. Next, the following questions are used to develop specific scorecard
goals and measures in four areas:

Financial Performance— “How well do our actions directly contribute to improved
financial performance? To improve financially, how should we appear to our shareholders?”
Sample goals: survive, succeed, and prosper. Sample measures: cash flow, sales growth
and operating income, increased market share, and return on equity.

Customer Satisfaction— “How well do we serve our customers and clients? To achieve
our vision, how should we appear to our customers?” Sample goals: new products,
responsive supply. Sample measures: percentage sales from new products, percentage
on-time deliveries.

Internal Process Improvement— “How well do our activities and processes directly
increase the value we provide our customers and clients? To satisfy our customers and
shareholders, at what internal business processes should we excel?” Sample goals:
manufacturing excellence, design productivity, new product introduction. Sample
measures: cycle times, engineering efficiency, new product time.

Innovation and Learning— “How well are we learning, changing, and improving things
over time? To achieve our vision, how will we sustain our ability to change and improve?”
Sample goals: technology leadership, time to market. Sample measures: time to develop
new technologies, new product introduction time versus competition.
When balanced scorecard measures are taken and routinely recorded for critical managerial
review, Kaplan and Norton expect managers to make better decisions and organizations to
perform better in these four performance areas. Like the financial ratios discussed earlier, the
balanced scorecard is a good fit for executive dashboards and visual displays of business
intelligence. Because, as we keep saying, what gets measured gets done.