Performance Management Solutions

What is The Balanced Scorecard?

The concept of the Balanced Scorecard was introduced by Professor Robert Kaplan and Dr David Norton.

Its purpose was to develop a simple framework for performance measurement and management that reflected both leading and lagging indicators of performance in an organisation, rather than simply the lagging financial performance indicators that have dominated for decades.

Key to this approach is the recognition that performance can be seen from different, yet complimentary perspectives, the financial, customer, internal and learning perspectives being regarded as the "classic" ones used.

Performance against related key performance indicators (KPIs) are highlighted using "traffic lights" to convey a lot of performance management information in a concentrated form.

However, one thing that a Balanced Scorecard should not be is merely a collection of KPIs are what distinguishes a good Scorecard from a mediocre one is the degree of intellectual rigour that has gone into its design.

Strategy deployment

A well-designed Balanced Scorecard helps employees understand the link between their own acions and decisions the strategic direction of the organisation they work for. This is achieved by expressing the strategic direction of the business in terms of Critical Success Factors (CSFs).

Critical Success Factors (CSFs)

A CSF is best described as "the essence of what an organisation has to achieve if it is to be regarded as successful by its peers" - whether performance against such CSFs is good or poor is a "second order" consideration. However, once the CSFs have been identified it becomes invaluable to understand the extent to which a management team perceives that it is performing well against them, or not.

Performance Management

From these CSFs flow the related performance measures and management targets against which performance can be monitored on a routine basis using a Balanced Scorecard.

However, if there is no response to the performance indicated by the measures, then there is no value in such an approach.

It is therefore essential in any scorecard solution that the measurements reported upon result in visible action plans that will then turn the Balanced Scorecard into a true management performance tool.