BY ROBERT S. KAPLAN & DAVID P. NORTON
The Balanced Scorecard believes that business leaders often times fail to connect the necessary strategy with the appropriate action. The book covers a company’s vision and strategy can be translated into a coherent set of performance measures. The authors believe that when a company has a “balanced scorecard” it is easier to complete goals and continue on the journey to success.
The Balanced Scorecard translates a company's vision and strategy into a coherent set of performance measures. Throughout the book, the authors illustrate the innovative measurement practices from many companies. The bulk of the comprehensive use of the Balanced Scorecard technique is exemplified through case studies of companies that were followed closely for over three years. The case studies include companies such as: Rockwater, Metro Bank, Pioneer Petroleum, National Insurance and Kenyon Stores.
Companies must first learn how to build the scorecard, and then also understand how to make it work for everyone involved. The book cover four basic perspectives:
- Financial Perspective — This is measured by the return on the investment and the economic value that is added
- Customer Perspective — This covers customer satisfaction, retention, market and account share
- Internal Perspective — This is where the company will measure response time, quality control, costs and new product launches
- Learning and Growth Perspective — This area focuses on employee satisfaction and information system availability
Chapter Three covers in detail how the Financial Perspective should operate. The reader is encouraged to link their financial objectives to the strategic planning of the business. The scorecard should tell the story of the strategy, starting with the long-term financial objectives, and linking them to the sequence of actions that must be taken with financial processes, customers, internal processes, and finally, employees and systems to deliver the desired long-run economic performance.
Chapter Four covers the Customer Perspective, and the reader is challenged to really discover who their customers are, and where they fall in the market sector the company has chosen to compete. In order to obtain and sustain a Balanced Scorecard in the Customer Perspective area, managers and executives must go beyond the usual methods of trying to satisfy and delight customers. This is where many companies fail in trying to be “everything for everyone,” which in most cases, translates into being “nothing for anyone.” It is crucial for managers to identify the market segments in their existing and potential customer populations and then focus on what it takes to win them over, and keep them as long term customers.
The Balanced Scorecard contains a wealth of information that will benefit senior leadership and their teams. Once everyone has embraced the concept and ideas behind having a Balanced Scorecard, a company will be on the fast track to fulfill their mission statement and enjoy success.