knowquestion :: Stephen Bounds

The Balanced Scorecard is a common tool used to measure the success of a strategy. It is normally a whole-of-organisation tool, but can also be used to articulate how progress will be measured for an individual strategy.

Balanced scorecards emphasize the idea that if you can't measure it, you can't manage it. A typical Balanced Scorecard consists of four stages:

• articulating your strategy
• communicating that strategy and linking it to relatively objective measures which clearly reflect your progress (or lack thereof) towards achieving the strategy
• setting targets for individuals to inspire them to reach higher on those measures, or KPIs
• feedback and learning to monitor the effectiveness of the Scorecard

Balanced Scorecards are useful in a wide range of scenarios because they encourage people to go beyond mere financial measures of performance. The four key areas of measurement that should be addressed in any Balanced Scorecard are:

• financial perspectives (linking strategic objectives to financial success)
• customer perspectives (identifying customer segments and devising measurements to measure satisfaction against each segment)
• internal business processes (measuring the success of specific business processes designed to achieve strategic goals)
• organisational learning and growth (typically measuring employee satisfaction, retention and productivity)

There are many valid ways to lay out a Balanced Scorecard. Here are some examples:

If you want to go beyond the concept of a Balanced Scorecard, Joe Firestone has proposed enhancing the Balanced Scorecard into what he calls an Adaptive Scorecard. This emphasises the need to separately measure "intelligence performance measures" (i.e. creative learning) from "operational performance measures" (i.e. routine learning and execution).

Original version published on 3 November 2008.