Balanced
scorecard is a measurement based management system developed by
Kaplan & Norton. These describe it as follows:
"The
balanced scorecard retains traditional financial measures.
But financial measures tell the story of past events, an adequate
story for industrial age companies for which investments
in long-term capabilities and customer relationships were not
critical for success. These financial measures are inadequate,
however, for guiding and evaluating the journey that information
age companies must make to create future value through investment
in customers, suppliers, employees, processes, technology,
and innovation."
Ok,
so balanced scorecard is a management system that goes beyond
just the financial measures and introduces measurements in other
areas, such as, learning and growth, customer focus and business
processes.
But
how can we introduce this system? Here's a good 8 step guide I have
adapted from an article at BetterManagement.com:
1.
Senior Management Team Training (SMT). - The first step is
to train and motivate the SMT so they drive it through the
organisation. Unless they have the necessary commitment
to the project this will most definitely fail. A good idea
is to visit organisations that have introduced the system already.
2.
Focus on the Critical Success Factors. - These are the areas
"that determine the organisational health and vitality".
In the first stages, don't spend too much time debating
the different perspectives and just choose at least one CSF from
each of the following areas: financial, customer, internal business
processes, learning and growth, staff satisfaction and community.
Further down the road you will be in a much better position to
fine tune this.
3.
Follow the 10-80-10 rule. - You should have three sets of
indicators: key results indicators (KRI) that give you a clear
overall picture and tells you when things are going wrong,
but don't tell you where. To achieve this we introduce the performance
indicators (PI) and the key performance indicators (KPI). We must
be selective and only have 10 KRIs, 10 KPIs and anything upto
80 PIs.
4.
Select a small KPI team. - look for young talent that have
excellent presentation and communication skills, good knowledge
of the organisation and the sector and then team them up with
an external facilitator.
5.
Just do it! - It's never going to be right the first time,
so avoid the search for excellence and work on introducing
the system quickly. There will be time in the future for improvements.
6.
Use existing systems in the first year. - There will be a
lot of chopping and changing in the initial stages and
there is much that can be done without introducing expensive software.
So, leave the sophisticated IT systems until you know what
you are looking for.
7.
Make available indicators to all. - A resource that
makes it easy to access the performance indicators will aid the
quest for efficiency.
8.
Rename the system. - Balanced scorecard is not the most appropriate
name, scorecard has negative connotations. Look for a more encouraging
name such as General Performance System (GPS) or even a name that
has no real meaning but makes it more personal to your company.
In
our now very dynamic and changing world, the balanced scorecard
management system allows companies to be warned promptly
of problems and where they are occurring. This aids companies
to react quickly, which is becoming more vital to achieve success
everyday.
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