Using the Balanced Scorecard to Measure Strategic Objectives

This is the second article in a series on implementing the Balanced Scorecard in your organization.

Most organizations are looking for ways to employ meaningful strategies to drive their day-to-day operations. Implementing the Balanced Scorecard is a realistic way to define goals and strategies that will make your organization successful and implement practices that drive those strategies throughout the ranks of the organization.

As described in our first article, Introduction to the Balanced Scorecard, the Balanced Scorecard is a way to measure and improve all aspects of the organization using four unique perspectives. It is “balanced” in the sense that all perspectives are measured and analyzed, not just the financial perspective.

An organizational strategy is decomposed into metrics in each of the following four areas:

                              • Financial
                              • Internal Business Processes 
                              • Learning and Growing
                              • Customer Service 

Non-profit and public sector leaders may choose to use a strategic objective related to their organizational mission in place (or in addition to) the Financial perspective.

None of the perspectives outweighs the others in the Balanced Scorecard, because it takes all of the perspectives to forge a successful organization. 

How can you implement the Balanced Scorecard within your organization? 

 

Carefully Define the Strategic Objectives

The strategy is the defining force that drives all the tactics implemented within an organization. Setting a strategy not only defines what actions the company is going to take, but it also serves as a motivating factor for the workers charged with implementing those strategies. 

According to a recent Harvard Business School working paper, Conceptual Foundations of the Balanced Scorecard, Robert Kaplan states that

“Many companies now write their strategic objectives in quotes to reflect the voice of their customers and employees. For example, one medium-sized community bank that was shifting from its traditional product push strategy to one that emphasized developing complete financial solutions for its targeted customers expressed its customer objectives as:

“Understand me and give me the right information and advice”

“Give me convenient access to the right products”

“Appreciate me and get things done easily, quickly, and right”.”

 

Identify Key Metrics to Support the Objectives

Once you have developed solid strategic objectives addressing all four Balanced Scorecard perspectives, the next step is to identify key metrics. 

For each strategic objective, identify at least one metric to track that objective. The most effective metrics will be those that are specific and actionable.

“Improving customer satisfaction” may be measured from a survey, but what does the employee need to do to improve customer satisfaction? Does this mean speaking to more customers each day, resolving more issues per day, or perhaps making just one customer happy each day? When employees know they are charged with resolving as many customer issues as possible during their first contact, they know where and how to focus their efforts to make this happen. 

Senior vice president John Parolisi with Balfour Beatty, a $2.4 billion construction firm based in Dallas, Texas, uses many scorecards to manage different aspects of the business. Each of his scorecards includes between two and four objectives, and lists one to three metrics per objective. Each scorecard features between two and twelve metrics, addressing issues such as their customer satisfaction surveys, how much employee turnover the company is experiencing, and how well the company is meeting their on-time delivery goals.

By defining these strategies and implementing Balanced Scorecard, Parolisi is able to focus on running the business, not micromanaging it. But it begins with identifying the key metrics that need to be tracked for inevitable success. 

The process of defining strategic objectives and identifying actionable, specific metrics to support those objectives may be a daunting task. However, many organizations have implemented the Balanced Scorecard and are reaping the benefits of well-planned measures of organizational performance.

To continue the discussion on implementing the Balanced Scorecard in your organization, contact us.

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