...CMR 073 D Linking the Balanced Scorecard to Strategy O N Robert S. Kaplan David P. Norton O S T everal years ago, we introduced the concept of a “Balanced Scorecard” for motivating and measuring business unit performance.1 The Scorecard, with four perspectives—financial, customer, internal business processes, and learning and growth—provided a balanced picture of current operating performance as well as the drivers of future performance (see Exhibit 1). Can Business Operate with a Balanced Scorecard? CO Some argue that managers cannot operate with multiple measurements of business-unit performance. While they recognize that aggregate financial measures (such as operating income, return on investment, and economic value added) are not perfect by themselves, they claim that financial measures at least are well understood and provide clear, unambiguous, and objective goals on which all organizational participants can focus. Such people feel that multiple measures—some financial and some non-financial—are confusing and lead to ambiguous, often conflicting, signals about what the organization values. PY We disagree. Imagine entering the cockpit of a jet airplane and observing that there is only a single instrument. How would you feel about flying on that plane after the following discussion with the pilot: Reprinted by permission of Harvard Business School Press. Adapted from The Balanced Scorecard by Robert S. Kaplan and David...
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...HBR | January–February 1996 Using the Balanced Scorecard as a Strategic Management System Editor’s Note: In 1992, Robert S. Kaplan and David P. Norton’s concept of the balanced scorecard revolutionized conventional thinking about performance metrics. By going beyond traditional measures of financial performance, the concept has given a generation of managers a better understanding of how their companies are really doing. These nonfinancial metrics are so valuable mainly because they predict future financial performance rather than simply report what’s already happened. This article, first published in 1996, describes how the balanced scorecard can help senior managers systematically link current actions with tomorrow’s goals, focusing on that place where, in the words of the authors, “the rubber meets the sky.” by Robert S. Kaplan and David P. Norton A | transform themselves for competition that is based on information, their ability to exploit intangible assets has become far more decisive than their ability to invest in and manage physical assets. Several years ago, in recognition of this change, we introduced a concept we called the balanced scorecard. The balanced scorecard supplemented traditional financial measures with criteria that measured performance from three additional perspectives – those of customers, internal business processes, and learning and growth. (See the exhibit “Translating Vision and Strategy: Four Perspectives.”) It therefore enabled companies...
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...www.hbrreprints.org BEST OF HBR Using the Balanced Scorecard as a Strategic Management System by Robert S. Kaplan and David P Norton . • Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Using the Balanced Scorecard as a Strategic Management System 14 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications Reprint R0707M BEST OF HBR Using the Balanced Scorecard as a Strategic Management System The Idea in Brief The Idea in Practice Why do budgets often bear little direct relation to a company’s long-term strategic objectives? Because they don’t take enough into consideration. A balanced scorecard augments traditional financial measures with benchmarks for performance in three key nonfinancial areas: The balanced scorecard relies on four processes to bind short-term activities to long-term objectives: • a company’s relationship with its customers • its key internal processes • its learning and growth. COPYRIGHT © 2005 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. When performance measures for these areas are added to the financial metrics, the result is not only a broader perspective on the company’s health and activities, it’s also a powerful organizing framework. A sophisticated instrument panel for coordinating ...
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...result has been poor execution of the strategic plan throughout the entire organization. And the sad fact of the matter is that execution of the strategic plan is everybody’s business, not just upper level management. Upper level management creates the strategy, but execution takes place from the bottom up. Chapter 1 So why do strategic plans fail? According to the Balanced Scorecard Collaborative, there are four barriers to strategic implementation: 1. Vision Barrier – No one in the organization understands the strategies of the organization. 2. People Barrier – Most people have objectives that are not linked to the strategy of the organization. 3. Resource Barrier – Time, energy, and money are not allocated to those things that are critical to the organization. For example, budgets are not linked to strategy, resulting in wasted resources. 4. Management Barrier – Management spends too little time on strategy and too much time on short-term tactical decision-making. Only 5% of the workforce understands their company strategy. Only 25% of managers have incentives linked to strategy. 60% of organizations don’t link budgets to strategy. 86% of executive teams spend less than one hour per month discussing strategy....
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...he balanced scorecard is a strategic performance measurement system developed by Robert S. Kaplan and David P. Norton to help organizations achieve breakthrough results by embedding strategy at the heart of the organization. Developed 12 years ago, the concept was significantly different from any existing performance measurement system and generated considerable excitement. A variety of applications and variations of the balanced scorecard have emerged since its inception. It was received and used so enthusiastically and effectively that the Harvard Business Review labeled it in 1997 as one of the 75 most influential ideas of the 20th Century. 1 Early on, a navigation metaphor was used to illustrate the need for additional performance measures. Over time, the navigation metaphor expanded to include the process of strategic mapping and decisions about where to lead your company. This article outlines the evolution of the balanced scorecard. BALANCEDSCORECARD: THEINCEPTION In 1990, the Nolan Norton Institute, the research arm of KPMG, sponsored a one-year, multi-company study on the future of performance measurement. David Norton, CEO of Nolan Norton, was the study leader, and Robert Kaplan served as an academic consultant. The 12 companies that formed the original study group believed that the exclusive reliance on financial performance metrics alone was causing their companies to do the wrong things. Many of the activities that create organizational value...
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...Conceptual Foundations of the Balanced Scorecard The Balanced Scorecard was established by David Norton and Robert Kaplan. They believed that if organizations want to improve intangible assets’ management, they must integrate them into their management systems. The Balanced Scorecard was structured by Balanced Scorecard for performance measurement, strategic objectives and strategy maps, the strategy management system, and future opportunities. The roots of the Balanced Scorecard are profitability, market share, productivity, product leadership, public responsibility, personnel development, employee attitudes, and balance between short-range and long-range objectives. The first GE metric represents the financial perspective; the second GE metric represents customer perspective; the metrics three to five represent the process perspective; the metrics six and seven represent the growth perspective, and the eight GE metric represents the essence of the Balanced Scorecard, which encourage managers to balance the short term and long term goals. However, the GE corporate project was not able to ingrain into the management. Many GE units were convicted of price-fixing schemes because organizations pressure short term goals led them to be succumbed long term goal and their public responsibilities. Robert Anthony identified three different types of systems: strategic planning, management control, and operation control in the mid-1960s. Strategic planning is the process of deciding...
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...Balanced scorecard From Wikipedia, the free encyclopedia Jump to: navigation, search Part of a series on Strategy | Strategy | | Major dimensions[hide] * Strategy • Strategic management * Military strategy • Strategic thinking * Strategic planning • Game theory | Thought leaders[hide] * Michael Porter • Henry Mintzberg * Bruce Henderson • Gary Hamel * Jim Collins • Liddell Hart * Carl Von Clausewitz • Sun Tzu | Concepts[hide] * Competitive advantage • Experience curve * Value chain • Portfolio theory * Core competency • Generic strategies | Frameworks & Tools[hide] * SWOT • Five Forces * Balanced scorecard • Strategy map * PEST analysis • Growth–share matrix | * v * t * e | The balanced scorecard (BSC) is a strategy performance management tool - a semi-standard structured report, supported by design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.[1] The critical characteristics that define a Balanced Scorecard are[2] * its focus on the strategic agenda of the organisation concerned * the selection of a small number of data items to monitor * a mix of financial and non-financial data items. Contents [hide] * 1 Use * 2 History * 3 Characteristics * 4 Design * 4.1 First Generation Balanced Scorecard * 4.2 Second Generation Balanced...
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...Balanced Scorecard at St. Elsewhere Hospital 1. What is the Balanced Scorecard/What is its purpose? - The Balanced Scorecard provides a framework for strategic management by transforming a company’s strategic goals into an integrated collection of objectives and performance indicators. The performance indicators are grouped into four perspectives which include: Financial, Customer, Internal Business Process, and Learning & Growth. Objectives are then formed within each of these perspectives and measures are chosen to create a scorecard that promotes the company’s strategy. The objects and performance measures within each perspective must be linked together. This overall process allows a company’s overall strategy to be transparent to all employees within the organization. 2. Describe each of the four perspectives of the Balanced Scorecard? - Financial Perspective: These are usually associated with profitability. Typical measures could include operating profit, return on assets, and individual product line or customer profit margins. However many other financial measures can be used as they usually differ depending on what industry you are in. - Customer Perspective: These measures include customer satisfaction, customer retention, and new customer acquisition which in turn indicated how well a company is providing value. Understanding what customers value is a big part of this perspective. - Internal Business Process Perspective: In this perspective...
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...Organizational Change Plan – Part I The definition of organizational success is critical, though extremely difficult to define. Sharma (2009) states, “The success of any organization is reflected upon by its performance which is in turn highly dependent upon its strategies” (p. 7). To identify a strategy of successful performance, it is important to have an understanding of the desired the level of performance. With regard to individual performance and performance evaluation metrics, my current work unit is lacking and struggles to report accurate data for how an employee performance evaluation relates to units of service as well as error percentage. In the current state, there is not a single system solution to collect data therefore causing a painstakingly manual process to collect any form of data metrics. This organizational change proposal will identify the need to develop a comprehensive strategy of employee evaluation using the balanced scorecard approach. This performance management strategy will define the necessary performance tools for a successful implementation while ensuring the performance evaluations defined by the strategic goals governed by the institution. Need for Balanced Scorecard Identified According to the current job description, the sole responsibility of work unit staff is for the review of submitted laboratory samples, requisitions, and pathology reports for accurate and timely accessioning of patient and testing information into the Pathology...
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...of the Employee supports the Voice of the Business. At the same time the Voice of the Business supports the Voice of the Customer because better productivity leads to more timely and accurate deliveries. The delivery measurement systems measured the performance of the Voice of the Customers. The balanced scorecard system has some distinct advantages that make it suitable for improving performance. The first is that it is focused on getting results. This is why the approach in case of US Postal Services produced positive results. The second advantage is that linking employee interests in a service industry to business processes, and to customer satisfaction are strong drivers of success. These lead to improved financial results. Another important reason why balanced scorecard is useful is that it helps convert the business strategy into action. Most importantly, it communicates the plan, involves the organization, and places responsibility. On the other hand the balanced scorecard approach has some drawbacks. There are metrics, which the US Postal Services has generated for Voice of the Employee; the Voice of the Business, the Voice of the Customer and financials but the balanced...
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...Measuring Business Excellence Performance measurement tools: the Balanced Scorecard and the EFQM Excellence Model S. WongrassameeJ.E.L. SimmonsP.D. Gardiner Article information: To cite this document: S. WongrassameeJ.E.L. SimmonsP.D. Gardiner, (2003),"Performance measurement tools: the Balanced Scorecard and the EFQM Excellence Model", Measuring Business Excellence, Vol. 7 Iss 1 pp. 14 - 29 Permanent link to this document: http://dx.doi.org/10.1108/13683040310466690 Downloaded on: 14 April 2015, At: 10:28 (PT) References: this document contains references to 27 other documents. To copy this document: permissions@emeraldinsight.com The fulltext of this document has been downloaded 13506 times since 2006* Users who downloaded this article also downloaded: Joaquín Gómez Gómez, Micaela Martínez Costa, Ángel R. Martínez Lorente, (2011),"A critical evaluation of the EFQM model", International Journal of Quality & Reliability Management, Vol. 28 Iss 5 pp. 484-502 http://dx.doi.org/10.1108/02656711111132544 Downloaded by MIDDLESEX UNIVERSITY At 10:28 14 April 2015 (PT) Michael Trevor Hides, John Davies, Sue Jackson, (2004),"Implementation of EFQM excellence model self-assessment in the UK higher education sector – lessons learned from other sectors", The TQM Magazine, Vol. 16 Iss 3 pp. 194-201 http:// dx.doi.org/10.1108/09544780410532936 Andy Neely, Mike Gregory, Ken Platts, (1995),"Performance measurement system design: A literature review and research agenda", International...
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...2-23-2006 Using the Balanced Scorecard to Achieve Sustained IT-Business Alignment: A Case Study Qing Hu Florida Atlantic University, qhu@fau C. Derrick Huang Florida Atlantic University, dhuang@fau Follow this and additional works at: http://aisel.aisnet.org/cais Recommended Citation Hu, Qing and Huang, C. Derrick (2006) "Using the Balanced Scorecard to Achieve Sustained IT-Business Alignment: A Case Study," Communications of the Association for Information Systems: Vol. 17, Article 8. Available at: http://aisel.aisnet.org/cais/vol17/iss1/8 This material is brought to you by the Journals at AIS Electronic Library (AISeL). It has been accepted for inclusion in Communications of the Association for Information Systems by an authorized administrator of AIS Electronic Library (AISeL). For more information, please contact elibrary@aisnet.org. Communications of the Association for Information Systems (Volume 17 2006) 181- 204 181 USING THE BALANCED SCORECARD TO ACHIEVE SUSTAINED IT-BUSINESS ALIGNMENT: A CASE STUDY Qing Hu C. Derrick Huang Department of Information Technology & Operations Management Florida Atlantic University qhu@fau.edu ABSTRACT High levels of investments in IT and related products and services by firms over the last several decades produced only mixed results. Research shows that one of the most significant determinants of successful IT investments is the alignment between IT and the competitive strategies of a firm. Yet it is...
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...group | Inventory control | Inventory management | Inventory turn to 36 | Just in time inventory | Increase profit | Net income | Increase by 20% | Reduce variable cost and increase revenue | (Kaplan, R. S. (2010) “Financial outcomes are separated causally and temporally from improving employees’ capabilities. The complex linkages make it difficult if not impossible to place a financial value on an asset such as workforce capabilities or employee morale, much less to measures changes from period to period in such a financial value” (p. 9). Customer Perspective: How does our organization appear to customers to achieve our goals? In order to meet goals of growth then our objectives need to be linked. The goal of linking increased customer acquisitions, customer satisfaction and customer retention which will in turn increase market share and growth. Objective | Measures | Targets | Initiatives | Increase...
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...Welcome: the third issue [2] Top picks in… Balanced Scorecard [3] Database search guide: Lexis-Nexis [4] Some recent acquisitions Welcome: the third issue We decided to devote our third issue to the Balanced Scorecard measurement system due to the information demands we had received about this subject during the last term. Additionally, as a new development, we have introduced a chapter on "how to use databases". In this issue you'll find a search guide for the Lexis -Nexis database. Hope you enjoy it! Top picks in … Balanced Scorecard "The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise." The Balanced Scorecard Institute. What is the Balanced Scorecard? [on line]. (1998) Web page, URL . [Consulting May 6, 2002] Resources on the Net … The Balanced Scorecard Institute http://www.balancedscorecard.org/ The Balanced Scorecard Institute is an independent, nonprofit source of information about applications of the balanced scorecard approach to management in government and other nonprofit organizations. What is the Balanced Scorecard? http://www.balancedscorecard.org/basics/bsc1...
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...Improving Government Performance Using the Balanced Scorecard to Plan and Manage Strategically Howard Rohm President and CEO, the Balanced Scorecard Institute Are programs, services, and staff aligned around a shared vision of the future? Do government leaders have a clear strategy for delivering cost-effective services for citizens and other stakeholders, and is that strategy communicated with clarity, both internally and externally? Do you have a disciplined way of choosing priorities among competing programs and services, under tighter and more stringent budgets? How are you keeping score and communicating progress toward the vision? If you need to make hard choices among competing programs and services for tight budget dollars, if you are looking to increase program and service effectiveness and improve operational efficiency and performance, and if you need to become a more strategy focused organization then a balanced scorecard may be the best planning and management framework for your organization. This article describes how to build a strategy-based balanced scorecard system, and shares some lessons learned from developing strategy-based scorecard systems in dozens of government and nonprofit organizations in 22 countries and from training over 5000 people from 150 organizations. “Balanced scorecard” means different things to different people. Balanced scorecards have evolved over the past decade from dashboard systems that simply measure financial and non-financial...
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