Balanced scorecard
Achieving the organization's overall objective requires identifying the various financial and nonfinancial objectives, and recognizing the cause-and-effect relationships among them. In this strategy map, the organization's overall objective of "Achieving Our Vision: Be Revered as the Hothouse for World-Changing Creative Ideas that Transform Our Client's Businesses, Brands, and Reputations" influences the interrelated objectives of the Financial, Client (or customer), Product and Process (or internal processes), and People and Culture (or workforce learning and development) perspectives.
The Financial objectives govern the Client, and Product and Process objectives. Achieving the two main Financial goals—"Double EPS" and "Build Corporate Brand Equity"—requires meeting subordinate goals in the Financial perspective as well as in the other perspectives.
To fulfill the Financial goal, "Double EPS," the organization must achieve the Financial aim, "Reduce Costs." The organization reduces costs by meeting the Product and Process goals, "Work Smarter Across the Network," and "Financial Discipline (Eliminate Inefficiencies)."
Achieving the financial goal, "Double EPS," will also require meeting the financial goal, "Grow Revenues." In order to grow revenues, the organization must fulfill the Product and Process goal, "Focus Business Development (New Clients and Assignment)," and meet the Client goal, "Create Permanently Infatuated Clients (PICs)." The organization can create PICs by fulfilling the Product and Process objectives, "Work Smarter Across the Network," "Identify and Implement Appropriate Communication Services," and "Excel at Account Management and Create Great Ads."
Realizing the second main Financial goal, "Build Corporate Brand Equity" requires creating PICs and achieving the Product and Process goal, "Win Global Fame for Our Idea Leadership."
In order to accomplish the overall objective, the organization must meet these goals, as well as the People and Culture Goal, "One Team, One Dream: Create a rewarding, stimulating environment where nothing is impossible." The strategy map guides the organization towards keeping these demands in perspective.
Introduced in 1992 by Harvard Business School professor Robert Kaplan and Dr. David Norton, a management consulting firm head, the Balanced Scorecard (BSC) system recognizes that financial performance is just one part of the larger picture of organizational performance. The system seeks to balance a company's financial "perspective" with three nonfinancial "perspectives": customer, internal processes, and workforce learning and development. Companies that implement the BSC methodology develop and use two powerful tools:
- Strategy map: A one-page document, a strategy map graphically depicts executives' theory of the organization's strategy and the cause-and-effect relationships among the four scorecard perspectives. It shows the strategic objectives of each perspective and how they will affect performance on objectives in other perspectives. Many companies develop a corporate-level strategy map as well as strategy maps for each division, unit, and department. These lower-level maps contain objectives supporting the high-level map.
An example of a strategy map is as follows:
Image adapted from Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes.
- Scorecard: The scorecard contains the metrics, targets, and actual performance data for each objective on the strategy map. Companies have a corporate-level scorecard that links down to lower-level business and support unit scorecards. Organizations often automate their scorecards with special software: When unit managers input data into their scorecards, the data are automatically aggregated into the high-level scorecard to show overall company performance. Software also allows managers to distribute and analyze reports easily.
Adopted by corporations, not-for-profit organizations, and public-sector entities (including government agencies, municipalities, and military forces), the BSC has become widely used for strategy execution.